<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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)
</TABLE>
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
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
THE AES CORPORATION
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)
------------------------
COPIES TO:
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PHILIP D. BEAUMONT, ESQ. DAVID J. FRIEDMAN, ESQ.
CHADBOURNE & PARKE LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
30 ROCKEFELLER PLAZA 919 THIRD AVENUE
NEW YORK, NEW YORK 10112 NEW YORK, NEW YORK 10022
(212) 408-5100 (212) 735-3000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
promptly as practicable after this Registration Statement is declared effective
and upon consummation of the transactions described in the enclosed Proxy
Statement/Prospectus.
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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<CAPTION>
================================================================================================================
AMOUNT PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED(1) REGISTERED(2) PRICE PER SHARE(3) OFFERING PRICE(3) FEE(4)
- ----------------------------------------------------------------------------------------------------------------
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Common Stock, par value $.01 per
share(5)............................... 2,548,693 shares $63.79 $162,589,137 $49,270
================================================================================================================
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(1) This Registration Statement relates to securities of the Registrant into
which shares of Class A common stock, par value $.01 per share ("AES Chigen
Class A Common Stock"), of AES China Generating Co. Ltd., a Bermuda company
("AES Chigen"), may be converted in the amalgamation of AES Acquisition Co.
Ltd., a Bermuda company ("AES Sub") and wholly-owned subsidiary of The AES
Corporation, a Delaware corporation ("AES"), with AES Chigen (the
"Amalgamation").
(2) Consists of 2,369,667 shares of AES Common Stock issuable upon the
conversion pursuant to the Amalgamation of currently outstanding shares of
AES Chigen Class A Common Stock and up to 179,026 shares of AES Common Stock
issuable upon the exercise of AES Chigen options that are outstanding and
unexercised at the date hereof.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c) of the Securities Act of 1933, as
amended (the "Securities Act"), based on the product of (i) $18 1/2 (the
average of the high and low prices of AES Chigen Class A Common Stock on
February 25, 1997 on the NASDAQ/National Market System) times (ii) 8,788,602
(the number of shares of AES Chigen Class A Common Stock outstanding and
such shares as are reserved for issuance upon the exercise of options to
purchase AES Chigen Class B Common Stock on February 25, 1997).
(4) Pursuant to Rule 457(b) of the Securities Act of 1933, as amended, the
calculated fee of $49,270 has been reduced by the fee of $22,819 which was
already paid with respect to this transaction by AES Chigen on December 20,
1996 pursuant to Section 14(g) of the Securities Exchange Act of 1934, as
amended, upon the filing of AES Chigen's Preliminary Proxy Statement;
accordingly $26,451 is paid herewith.
(5) This Registration Statement also relates to an indeterminate number of
shares of AES Common Stock that may be issued upon stock splits, stock
dividends or similar transactions in accordance with Rule 416 under the
Securities Act.
------------------------
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 THAT 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 THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
AES CHINA GENERATING CO. LTD.
3/F (W), GOLDEN BRIDGE PLAZA
NO. 1(A) JIANGUOMENWAI AVENUE
BEIJING 100020, PEOPLE'S REPUBLIC OF CHINA
NOTICE OF SPECIAL CLASS MEETING OF HOLDERS
OF CLASS A COMMON STOCK AND
SPECIAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 31, 1997
To Our Shareholders:
Notice is hereby given that a Special Class Meeting of Holders of Class A
Common Stock (the "Class A Meeting") of AES China Generating Co. Ltd., a Bermuda
company ("AES Chigen"), and a Special General Meeting of the Shareholders (the
"Special Meeting") of AES Chigen, will be held at 1001 North 19th Street,
Arlington, Virginia 22209, on March 31, 1997. The Class A Meeting will commence
at 1 p.m., local time, and the Special Meeting will commence immediately after
the conclusion of the Class A Meeting. The Class A Meeting and the Special
Meeting, and any adjournments or postponements thereof, are being held for the
following purpose:
To consider and vote upon the adoption and approval of the Amended and
Restated Agreement and Plan of Amalgamation dated as of November 12,
1996 (the "Amalgamation Agreement") among AES Chigen, The AES
Corporation, a Delaware corporation ("AES"), and AES Acquisition Co.
Ltd., a Bermuda company and a wholly-owned subsidiary of AES ("AES
Sub"), pursuant to which AES Sub will amalgamate with and into AES
Chigen (the "Amalgamation"), and each share of AES Chigen Class A
Common Stock outstanding immediately prior to the Amalgamation will be
canceled in consideration of the right to receive a fraction of a
share of Common Stock, par value $0.01 per share, of AES, determined
as provided in the Amalgamation Agreement.
The Board of Directors of AES Chigen has determined that the Amalgamation
is in the best interests of the holders of Class A Common Stock. For purposes of
sec.106 of the Companies Act 1981 of Bermuda, as amended, it has been determined
that the fair value of the AES Chigen Class A Common Stock is $13.05 which is
the minimum value per share to be received by holders of AES Chigen Class A
Stock in the Amalgamation. Holders of AES Chigen Class A Common Stock who do not
vote in favor of the Amalgamation will have the right to seek an appraisal of
the fair value of their shares in connection with the completion of the
Amalgamation. See "Rights of Dissenting Shareholders" in the accompanying Proxy
Statement/Prospectus.
Holders of Class A Common Stock and shareholders of record at the close of
business on February 18, 1997 will be entitled to notice of, and to vote at, the
Class A Meeting and the Special Meeting, respectively, and any adjournments or
postponements thereof. Whether or not you plan to attend, please sign, date and
return the enclosed proxy in the postage-paid envelope provided. The prompt
return of your proxy will assist us in preparing for the Class A Meeting and the
Special Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Jeffery A. Safford
Vice President,
Chief Financial Officer
and Secretary
February [ ], 1997
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE CLASS A MEETING OR
THE SPECIAL MEETING, PLEASE SIGN, DATE AND RETURN THE ENCLOSED
PROXY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
THE BOARD OF DIRECTORS OF AES CHINA GENERATING CO. LTD.
UNANIMOUSLY RECOMMENDS THAT HOLDERS OF THE AES CHIGEN CLASS A
COMMON STOCK AND THE SHAREHOLDERS VOTE TO APPROVE AND
ADOPT THE AMALGAMATION AGREEMENT.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR 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.
PROXY STATEMENT/PROSPECTUS
ISSUED FEBRUARY , 1997
AES CHINA GENERATING CO. LTD.
PROXY STATEMENT FOR
SPECIAL CLASS MEETING OF HOLDERS OF AES CHIGEN CLASS A COMMON STOCK AND
SPECIAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 31, 1997
THE AES CORPORATION
PROSPECTUS
2,548,693 SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE
------------------------
This Proxy Statement/Prospectus is being furnished in connection with the
solicitation of proxies by the Board of Directors of AES China Generating Co.
Ltd., a Bermuda company ("AES Chigen"), from holders of record as of the close
of business on February 18, 1997 (the "Record Date") of the outstanding shares
of Class A Common Stock, par value $0.01 per share, of AES Chigen ("AES Chigen
Class A Common Stock") for use at a special class meeting of holders of AES
Chigen Class A Common Stock (the "Class A Meeting") and a special general
meeting of AES Chigen's shareholders (the "Special Meeting"), each to be held on
March 31, 1997 at the time and place and for the purposes specified in the
accompanying notice and at any adjournments of the Class A Meeting or Special
Meeting.
At the Class A Meeting and the Special Meeting, shareholders will be asked
to consider and vote upon the following proposal (the "Amalgamation Proposal"):
the adoption and approval of the Amended and Restated Agreement and
Plan of Amalgamation dated as of November 12, 1996 (the "Amalgamation
Agreement") among AES Chigen, The AES Corporation, a Delaware
corporation ("AES"), and AES Acquisition Co. Ltd., a Bermuda company
and wholly-owned subsidiary of AES ("AES Sub"), pursuant to which AES
Sub will amalgamate with and into AES Chigen (the "Amalgamation"),
and each share of AES Chigen Class A Common Stock outstanding
immediately prior to the Amalgamation will be canceled in
consideration of the right to receive a fraction of a share of Common
Stock, par value $0.01 per share, of AES ("AES Common Stock"),
determined as provided in the Amalgamation Agreement.
The failure of the shareholders to approve the Amalgamation Proposal will
result in the abandonment by AES Chigen of the Amalgamation and all of the
transactions related thereto as described in this Proxy Statement/Prospectus.
The obligations of AES Chigen and AES to consummate the Amalgamation are
subject to the satisfaction or waiver of certain conditions. For a description
of such conditions, see "Description of the Amalgamation Agreement --
Conditions".
This Proxy Statement/Prospectus also constitutes a prospectus of AES with
respect to the AES Common Stock to be distributed to the shareholders of AES
Chigen. Application will be made to list the shares of AES Common Stock to be
issued in the Amalgamation on the New York Stock Exchange (the "NYSE").
All information in this Proxy Statement/Prospectus relating to AES Chigen
has been supplied by AES Chigen and all information relating to AES and AES Sub
has been supplied by AES. The Amalgamation Agreement contains certain covenants
of AES Chigen and AES with respect to the information contained in this Proxy
Statement/Prospectus. See "Description of the Amalgamation Agreement".
This Proxy Statement/Prospectus, the attached notice of the Class A Meeting
and the Special Meeting, and the enclosed form of proxy were first mailed to AES
Chigen's shareholders on or about March , 1997.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS OF AES CHIGEN CLASS A COMMON STOCK IN CONNECTION
WITH THEIR
CONSIDERATION OF THE AMALGAMATION.
------------------------
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 PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<PAGE> 4
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY AES, AES
CHIGEN OR ANY AFFILIATE THEREOF. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS AT ANY TIME NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. NO ACTION HAS BEEN OR WILL BE TAKEN
IN ANY JURISDICTION BY AES OR ANY AFFILIATE THEREOF THAT WOULD PERMIT A PUBLIC
OFFERING OF THE SECURITIES OFFERED HEREBY OR POSSESSION OR DISTRIBUTION OF THIS
PROXY STATEMENT/PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS
REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO WHOSE POSSESSION THIS
PROXY STATEMENT/PROSPECTUS COMES ARE REQUIRED BY AES AND ITS AFFILIATES TO
INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THE OFFERING OF
THE SECURITIES OFFERED HEREBY AND THE DISTRIBUTION OF THIS PROXY
STATEMENT/PROSPECTUS.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange Commission
(the "Commission") by AES (File No. 0-19281) pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), are incorporated by reference in
this Proxy Statement/Prospectus:
(a) AES's Annual Report on Form 10-K for the year ended December 31, 1995
(which incorporates by reference certain information from AES's Proxy Statement
for the 1996 Annual Meeting of Stockholders and AES's 1995 Annual Report to
Stockholders);
(b) AES's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996;
(c) AES's Current Reports on Form 8-K filed on February 8, 1996, February
28, 1996, June 12, 1996, July 2, 1996, November 13, 1996, January 30, 1997 and
February 18, 1997;
(d) The description of the AES Common Stock contained in AES's Registration
Statement on Form 8-A (Registration No. 0-19281), filed with the Commission on
October 9, 1996, as amended by Amendment No. 1 on Form 8-A/A to AES's
Registration Statement on Form 8-A filed with the Commission on October 10,
1996; and
(e) AES's consolidated financial statements for the year ended December 31,
1995 contained in the Final Supplemental Prospectus in connection with AES's
Registration Statement on Form S-3 (Registration No. 333-01286) and AES's
Registration Statement on Form S-3 (Registration No. 333-07041) filed pursuant
to Rule 424(b) under the Securities Act of 1933, as amended (the "Securities
Act"), on June 12, 1996.
The following documents filed with the Commission by AES Chigen (File No.
0-23148) pursuant to the Exchange Act are incorporated by reference in this
Proxy Statement/Prospectus:
(a) AES Chigen's Annual Report on Form 10-K for the fiscal year ended
November 30, 1995 (which incorporates by reference certain information from AES
Chigen's Proxy Statement relating to the 1996 Annual General Meeting of
Shareholders and AES Chigen's 1995 Annual Report to Shareholders), as
iii
<PAGE> 5
amended by Amendment No. 1 on Form 10-K/A to AES Chigen's Annual Report on Form
10-K for the fiscal year ended November 30, 1995;
(b) AES Chigen's Quarterly Reports on Form 10-Q for the quarters ended
February 29, 1996, May 31, 1996 and August 31, 1996 and Amendments on Form
10-Q/A to AES Chigen's Quarterly Reports on Form 10-Q for the quarters ended May
31, 1996 and August 31, 1996; and
(c) AES Chigen's Current Reports on Form 8-K dated October 2, 1996,
November 12, 1996 and February 5, 1997.
All documents and reports filed by AES and AES Chigen pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Proxy Statement/Prospectus and prior to the Class A Meeting and the Special
Meeting shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be a part hereof from the respective dates of the
filing of such documents or reports. 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 Proxy
Statement/Prospectus and the Registration Statement on Form S-4 (together with
any amendments thereto, the "Registration Statement") of which it is a part to
the extent that a statement contained herein or in any other subsequently filed
document which also is, or is deemed to be, incorporated by reference herein,
modifies or supersedes such earlier statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement/Prospectus or such Registration
Statement.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON
WRITTEN OR ORAL REQUEST, IN THE CASE OF DOCUMENTS RELATING TO AES, TO THE AES
CORPORATION, 1001 NORTH 19TH STREET, ARLINGTON, VIRGINIA 22209, (703) 522-1315,
ATTENTION: SECRETARY, OR, IN THE CASE OF DOCUMENTS RELATING TO AES CHIGEN, TO
AES CHINA GENERATING CO. LTD., 9/F., ALLIED CAPITAL RESOURCES BUILDING, 32-38
ICE HOUSE STREET, CENTRAL, HONG KONG, (852) 2842-5111, ATTENTION: SECRETARY. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE NO
LATER THAN FIVE DAYS PRIOR TO THE DATE OF THE CLASS A MEETING AND THE SPECIAL
MEETING.
AVAILABLE INFORMATION
AES and AES Chigen are subject to the informational requirements of the
Exchange Act and in accordance therewith file reports, proxy and information
statements and other information with the Commission. The reports, proxy and
information statements and other information filed by AES and AES Chigen with
the Commission can 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 its
principal offices at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. AES material may also be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005. AES Chigen 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. The Commission also
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission (AES and AES Chigen became subject to electronic filing
requirements in May 1996). The address of the Commission's home page on the
Internet is http://www.sec.gov.
AES has filed with the Commission a Registration Statement under the
Securities Act with respect to the AES Common Stock to be offered in the
Amalgamation. This Proxy Statement/Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits thereto,
certain parts of which have been omitted in accordance with the rules and
regulations of the Commission. Statements
iv
<PAGE> 6
contained in this Proxy Statement/Prospectus or in any document incorporated in
this Proxy Statement/Prospectus by reference as to the contents of any contract
or other document referred to herein or therein are not necessarily complete,
and in each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or such other
document, each such statement being qualified in all respects by such reference.
The Registration Statement and the exhibits thereto can be inspected and copied
at the public reference facilities and regional and other offices referred to
above.
EXCHANGE RATES
References in this Proxy Statement/Prospectus to "Renminbi," "Y" and "RMBY"
are to Renminbi yuan, the lawful currency of the People's Republic of China (the
"PRC") and references to "US dollars," "$" and "US$" are to United States
dollars. Translations of amounts from Renminbi to US dollars are solely for the
convenience of the reader. Unless otherwise indicated, any amounts translated
from Renminbi to US dollars in this Proxy Statement/Prospectus are translated at
the rate of US$1.00 to RMBY 8.3317, the noon buying rate in The City of New York
for cable transfers of Renminbi yuan per US$1.00 as certified for customs
purposes by the Federal Reserve Bank of New York ("Noon Buying Rate") on
September 30, 1996. Such translations may differ from translations of amounts
which appear in other disclosure documents of AES and AES Chigen which used
amounts translated at a different exchange rate. No representation is made that
the Renminbi or US dollar amounts referred to herein could have been or could be
converted into US dollars or Renminbi, as the case may be, at any particular
rate or at all. See "Risk Factors -- AES Chigen Risk Factors -- Risks Pertaining
to the PRC -- Restrictions on Foreign Currency Convertibility and Remittance
Abroad."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
AES. Certain statements under the captions "Summary", "Risk Factors -- AES
Risk Factors," "The Companies -- Business of AES" and "Opinion of the Special
Committee's Financial Advisor" and elsewhere in this Proxy Statement/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 "AES Risk Factors" and
those discussed elsewhere in AES's filings with the Commission: 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 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 Proxy Statement/Prospectus.
See "Risk Factors -- AES Risk Factors."
AES CHIGEN. Certain statements under the captions "Summary", "Risk
Factors -- AES Chigen Risk Factors," "The Companies -- Business of AES Chigen"
and "Opinion of the Special Committee's Financial Advisor" and elsewhere in this
Proxy Statement/Prospectus constitute "forward-looking statements" within the
meaning of the 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 Chigen, 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: political and economic considerations,
restrictions on foreign currency convertibility and remittance abroad, exchange
rate fluctuations and developing legal system, in each case pertaining to the
PRC; holding company structure of AES Chigen; regulation and restrictions;
tariffs; governmental approval processes; environmental matters; construction,
operating and fuel risks; load growth, dispatch and transmission constraints;
reliance on and creditworthiness of PRC counterparties; conflict of interest of
contracting parties; control by and reliance on AES; limitations resulting from
the Amalgamation and adherence to the AES principles; and other factors
referenced in this Proxy Statement/Prospectus. See "Risk Factors -- AES Chigen
Risk Factors."
v
<PAGE> 7
TABLE OF CONTENTS
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Incorporation of Certain Documents by Reference....................................... iii
Available Information................................................................. iv
Exchange Rates........................................................................ v
Special Note Regarding Forward-Looking Statements..................................... v
Table of Contents..................................................................... vi
Summary............................................................................... 1
Risk Factors.......................................................................... 13
The Class A Meeting and the Special Meeting........................................... 23
The Amalgamation...................................................................... 25
Background.......................................................................... 25
Reasons for the Amalgamation........................................................ 28
Terms of the Amalgamation........................................................... 29
Recommendations of the Boards of Directors.......................................... 30
Opinion of the Special Committee's Financial Advisor................................ 32
Accounting Treatment................................................................ 37
Procedures for Cancellation of AES Chigen Class A Common Stock and Issuance of AES
Common Stock..................................................................... 37
Treatment of Stock Options.......................................................... 39
Resale Restrictions................................................................. 39
Description of the Amalgamation Agreement............................................. 39
The Amalgamation.................................................................... 39
The Amalgamation Consideration...................................................... 40
Directors, Executive Officers and Organizational Documents.......................... 41
Representations and Warranties...................................................... 41
No Solicitation..................................................................... 42
Access to Information............................................................... 43
Cooperation and Reasonable Efforts.................................................. 43
NYSE Listing Application............................................................ 44
Conditions.......................................................................... 44
Employee Benefits Matters........................................................... 45
Termination......................................................................... 46
Amendment, Extension and Waiver..................................................... 46
Indemnification; Insurance.......................................................... 47
Termination of Certain Agreements................................................... 47
Certain Definitions................................................................. 47
Rights of Dissenting Shareholders..................................................... 48
Material Tax Consequences............................................................. 49
Fees and Expenses..................................................................... 51
Regulatory Approvals.................................................................. 51
The Companies......................................................................... 52
Business of AES..................................................................... 52
Business of AES Chigen.............................................................. 53
Recent Developments................................................................... 67
The AES Corporation Selected Consolidated Financial Data.............................. 71
The AES Corporation Security Ownership of Certain Beneficial Owners and Management.... 72
AES Chigen Selected Financial Data.................................................... 74
AES Chigen Security Ownership of Certain Beneficial Owners and Management............. 75
Description of AES Capital Stock...................................................... 78
AES Chigen's Relationship with AES.................................................... 80
Comparison of Shareholders' and Stockholders' Rights.................................. 83
Shareholder Proposals................................................................. 88
Legal Matters......................................................................... 89
Experts............................................................................... 89
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vi
<PAGE> 8
SUMMARY
The following is a summary of certain information contained elsewhere or
incorporated by reference in this Proxy Statement/Prospectus and its Appendices.
Reference is made to, and this Summary is qualified in its entirety by, the more
detailed information contained or incorporated by reference in this Proxy
Statement/Prospectus. As used herein, "AES" means The AES Corporation and its
consolidated subsidiaries, unless the context otherwise requires. As used
herein, "AES Chigen" means AES China Generating Co. Ltd. and its consolidated
subsidiaries, unless the context otherwise requires. Unless otherwise defined
herein, capitalized terms used in this Summary have the respective meanings
ascribed to them elsewhere in this Proxy Statement/Prospectus.
All information concerning AES Chigen included in this Proxy
Statement/Prospectus, the Appendices hereto and the documents incorporated
herein by reference has been furnished by AES Chigen and all information
concerning AES (excluding information concerning AES Chigen) included in this
Proxy Statement/Prospectus, the Appendices hereto and the documents incorporated
herein by reference has been furnished by AES. Unless otherwise defined herein,
capitalized terms used in this summary shall have the respective meanings
ascribed to them elsewhere in this Proxy Statement/Prospectus. SHAREHOLDERS ARE
URGED TO READ THIS PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY.
------------------------
Although AES does not have any knowledge that would indicate that any of
the information which has been furnished by others is inaccurate or untrue in
any material respect, no assurance can be given that facts or events of which it
is unaware exist that may affect the significance or accuracy of the information
furnished.
------------------------
THE AES CORPORATION
With a presence in over 35 countries, AES is a global power company
committed to supplying electricity to customers world-wide in a socially
responsible way. AES, based in Arlington, Virginia, markets power principally
from electric generating facilities that it develops, owns and operates. AES was
one of the original entrants in the independent power market and today is one of
the world's largest global power companies, based on net equity ownership of
generating capacity (in megawatts) in operation or under construction.
Over the last six years, AES has experienced significant growth. This
growth has resulted primarily from the development and construction of new
plants ("greenfield development") and also from the acquisition of existing
plants, primarily through competitively bid privatization initiatives outside
the United States.
In part, AES's strategy in helping meet the world's need for electricity is
to participate in competitive power generation markets as they develop either by
greenfield development or by acquiring and operating existing facilities in
these markets.
Other elements of AES's strategy include:
- Supplying energy to customers at the lowest cost possible, taking into
account factors such as reliability and environmental performance.
- Constructing or acquiring projects of a relatively large size (generally
larger than 100 megawatts).
- Entering into power sales contracts with electric utilities or other
customers with credit strength.
AES 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, AES prefers to operate all
facilities which it develops or acquires; however, there can be no assurance
that AES will have operating control of all of its facilities in the future.
1
<PAGE> 9
AES, a corporation organized under the laws of Delaware, was formed in
1981. The principal office of AES is located at 1001 North 19th Street,
Arlington, Virginia 22209, and its telephone number is (703) 522-1315.
AES ACQUISITION CO. LTD.
AES Sub is a Bermuda company and a wholly-owned subsidiary of AES formed on
November 22, 1996 solely for the purpose of consummating the Amalgamation and
the other transactions contemplated by the Amalgamation Agreement. AES Sub has
no assets or business and has not carried out any activities to date other than
activities incident to its formation and in connection with the Amalgamation and
the other transactions contemplated by the Amalgamation Agreement. The principal
executive offices of AES Sub are the same as those of AES.
AES CHINA GENERATING CO. LTD.
AES Chigen is a leading independent power generation company in China and
one of the few international developers that has successfully completed the
development of electric power projects in the country. AES Chigen was founded in
December 1993 by AES to serve as the exclusive vehicle for AES to develop,
acquire, finance, construct, own and operate electric power generation
facilities in the PRC. AES currently holds approximately 48% of the equity
capital of AES Chigen and AES, as the holder of all of the AES Chigen Class B
Common Stock, has the right to elect one half of the Board of Directors of AES
Chigen. Thus, AES may be deemed to control the management and operation of AES
Chigen. AES does not, however, have control of AES Chigen in respect of approval
of the Amalgamation; pursuant to the Stock Purchase and Shareholder's Agreement,
AES was required to obtain the consent of the Class A Directors of AES Chigen
prior to entering into the Amalgamation Agreement. See "AES Chigen's
Relationship with AES -- Stock Purchase and Shareholder's Agreement." In
addition, approval of the holders of AES Chigen Class A Common Stock is
required.
To respond to significant opportunities in China, AES, through a
wholly-owned subsidiary, opened an office in Hong Kong in early 1993. Following
the incorporation of AES Chigen, AES purchased shares of AES Chigen Class B
Common Stock for $50.0 million and, in early 1994, AES Chigen completed an
initial public offering of shares of its Class A Common Stock, which provided
AES Chigen with net proceeds, after underwriting commissions and discounts, of
$151.9 million.
Since commencing business, AES Chigen has committed $259.6 million and as
of January 31, 1997 has invested $165.7 million in eight power projects in
operation or under construction in the PRC having an aggregate nameplate
capacity of approximately 818 MW (approximately 422 MW of which is attributable
to AES Chigen's interests in certain joint venture enterprises). These joint
ventures' projects include coal, oil and natural gas-fired and hydropower plants
located in six different provinces in China.
AES Chigen plans to build upon its position as a leading independent power
producer in the PRC through the continued development of and investment in
electric power projects. AES Chigen has signed joint venture contracts and is in
various stages of negotiation to develop three additional power projects with an
aggregate nameplate capacity of approximately 2,900 MW (approximately 805 MW of
which is attributable to the Company's interests in the proposed project
companies). For a discussion of certain restraints on AES Chigen's future
funding and development of projects after the Amalgamation is effective, see
"AES Chigen's Relationship with AES -- Material Effects of the Amalgamation."
AES Chigen's principal offices are located at 3/F (W), Golden Bridge Plaza,
No. 1(A) Jianguomenwai Avenue, Beijing 100020, People's Republic of China. AES
Chigen's telephone number is (8610) 6508-9619.
THE CLASS A MEETING AND THE SPECIAL MEETING
DATE, TIME AND PLACE OF THE CLASS A MEETING AND THE SPECIAL MEETING. The
Class A Meeting and the Special Meeting will be held at 1001 North 19th Street,
Arlington, Virginia 22209, on March 31, 1997. The
2
<PAGE> 10
Class A Meeting will commence at 1 p.m., local time, and the Special Meeting
will commence immediately after the conclusion of the Class A Meeting.
PURPOSE OF THE CLASS A MEETING AND THE SPECIAL MEETING. At the Class A
Meeting, the holders of AES Chigen Class A Common Stock will be asked to
consider and vote upon the Amalgamation Proposal. At the Special Meeting, AES
Chigen's shareholders will be asked to consider and vote upon the Amalgamation
Proposal.
RECORD DATE; OUTSTANDING SHARES; QUORUM REQUIRED. Only holders of record
of AES Chigen Class A Common Stock at the close of business on February 18, 1997
are entitled to notice of and to vote at the Class A Meeting. Only holders of
record of each class of AES Chigen Common Stock at the close of business on
February 18, 1997 are entitled to notice of and to vote at the Special Meeting.
There were 8,171,268 shares of AES Chigen Class A Common Stock and 7,500,000
shares of AES Chigen Class B Common Stock outstanding at the close of business
on February 18, 1997. Holders of each class of AES Chigen Common Stock are
entitled to one vote per share. A quorum for the Class A Meeting consists of a
minimum of two holders of AES Chigen Class A Common Stock present in person or
by proxy and representing in excess of 50% of the total issued shares of the AES
Chigen Class A Common Stock. A quorum for the Special Meeting consists of a
minimum of two shareholders present in person or by proxy and representing in
excess of 50% of the total issued shares of AES Chigen Common Stock.
VOTE REQUIRED. The affirmative vote of the holders of a majority of the
outstanding shares of each class voting as a separate class, and at least a
majority of all shares regardless of class represented and entitled to be voted
at a meeting of shareholders at which a quorum is present, is required for the
approval of the Amalgamation Agreement and the Amalgamation.
As of February 1, 1997, the directors and executive officers of AES and AES
Chigen owned an aggregate of 9,100 shares (or less than 1%) of AES Chigen Class
A Common Stock entitled to vote at the Special Meeting and the Class A Meeting.
All directors and executive officers entitled to vote intend to vote their
shares in favor of the Amalgamation Proposal. AES owns all of the shares of AES
Chigen Class B Common Stock. AES has agreed in the Amalgamation Agreement to
vote all the outstanding shares of AES Chigen Class B Common Stock in favor of
the Amalgamation Proposal. AES will do so by written consent in lieu of a
special meeting of the Class B shareholders and will vote such shares in favor
of adoption and approval of the Amalgamation Proposal at the Special Meeting.
THE AMALGAMATION
At the Effective Time (as defined in "-- Effective Time of Amalgamation;
Closing Date"), and upon the terms and subject to the conditions set forth in
the Amalgamation Agreement, AES Sub will be amalgamated with and into AES
Chigen, in accordance with the Companies Act 1981 of Bermuda, as amended (the
"Companies Act"). At and after the Effective Time, AES Chigen will continue in
the form of the amalgamated company (the "Amalgamated Company") and will operate
under the name AES China Generating Co. Ltd.
EXCHANGE RATIO. If the Amalgamation Proposal is approved and the
Amalgamation is consummated, each issued and outstanding share of AES Chigen
Class A Common Stock will be canceled in consideration of the right to receive
AES Common Stock in the ratio of 0.2900 of a share of AES Common Stock;
provided, that should the average closing price of AES Common Stock on the NYSE
(with fractions expressed as a decimal rounded to the nearest one
ten-thousandth) over the 15 consecutive trading day period ending at the close
of trading on the third trading day immediately prior to the date of the Special
Meeting (the "Average Closing Price") be less than $45.00, shares of AES Chigen
Class A Common Stock will be canceled in consideration of the right to receive a
fraction of a share of AES Common Stock (expressed as a decimal rounded to the
nearest one ten-thousandth) as is determined by dividing $13.05 by the Average
Closing Price (the "Exchange Ratio" or the "Amalgamation Consideration"). AES
has the right not to consummate the Amalgamation if the Exchange Ratio, as so
determined, is greater than 0.3100. Fractional shares of AES Common Stock will
not be issuable in connection with the Amalgamation. AES Chigen shareholders
will
3
<PAGE> 11
receive cash, without interest, in lieu of fractional shares of AES Common
Stock. See "Description of the Amalgamation Agreement -- The Amalgamation
Consideration."
The following table indicates the Exchange Ratio assuming various Average
Closing Prices, with the resulting value to be received for each share of AES
Chigen Class A Common Stock:
<TABLE>
<CAPTION>
VALUE TO BE RECEIVED FOR
AVERAGE CLOSING PRICE OF EACH SHARE OF AES CHIGEN
AES COMMON STOCK EXCHANGE RATIO CLASS A COMMON STOCK
- ------------------------ -------------- ------------------------
<C> <S> <C>
$ 42 1/8 0.3098 (1) $13.05
$ 43 0.3035 $13.05
$ 44 0.2966 $13.05
$ 45 0.29 $13.05
$ 46 0.29 $13.34
$ 47 0.29 $13.63
$ 48 0.29 $13.92
$ 49 0.29 $14.21
$ 50 0.29 $14.50
$ 51 0.29 $14.79
$ 52 0.29 $15.08
$ 53 0.29 $15.37
$ 54 0.29 $15.66
$ 55 0.29 $15.95
$ 56 0.29 $16.24
$ 57 0.29 $16.53
$ 58 0.29 $16.82
$ 59 0.29 $17.11
$ 60 0.29 $17.40
$ 61 0.29 $17.69
$ 62 0.29 $17.98
$ 63 0.29 $18.27
$ 64 0.29 $18.56
$ 65 0.29 $18.85
$ 66 0.29 $19.14
$ 67 0.29 $19.43
$ 68 0.29 $19.72
$ 69 0.29 $20.01
$ 70(2) 0.29 $20.30
</TABLE>
- ---------------
(1) AES will have the right not to consummate the Amalgamation if the Exchange
Ratio is greater than 0.3100.
(2) For each additional one dollar increase in the Average Closing Price of AES
Common Stock, the value to be received for each share of AES Chigen Class A
Common Stock increases by $0.29.
EFFECTIVE TIME OF AMALGAMATION; CLOSING DATE. The Amalgamation will become
effective at such time as a certificate of amalgamation (the "Certificate of
Amalgamation") is duly issued by the Bermuda Registrar of Companies (the time
the Amalgamation becomes effective being the "Effective Time"). The closing of
the Amalgamation will take place at 10:00 a.m. on a date to be specified by AES
or AES Sub, which may be on, but will be no later than the third business day
after, the day on which there shall have been satisfaction or waiver of the
conditions to the obligations of the parties contained in the Amalgamation
Agreement (the "Closing Date"), unless another date or place is agreed to in
writing. See "Description of the Amalgamation Agreement -- Conditions."
4
<PAGE> 12
CONDITIONS TO CONSUMMATION OF THE AMALGAMATION. The respective obligations
of AES, AES Sub and AES Chigen to consummate the Amalgamation are subject to the
satisfaction of various conditions, including among others, approval and
adoption of the Amalgamation Agreement and the transactions contemplated thereby
by the requisite votes of shareholders of AES Chigen, the absence of any order,
executive order, stay, decree, judgment or injunction, or statute, rule or
regulation which makes illegal or otherwise prohibits the Amalgamation, the
effectiveness of the Registration Statement and the absence of any stop order
suspending the effectiveness of the Registration Statement, and evidence that
the shares of AES Common Stock registered thereby shall be listed on the NYSE at
the Effective Time. AES's and AES Sub's obligations are further subject to,
among other conditions, the absence of any Material Adverse Change in respect of
AES Chigen, the Exchange Ratio not exceeding 0.3100 and the number of shares of
AES Chigen Class A Common Stock held by persons who do not vote in favor of the
Amalgamation and who comply with Bermuda law concerning the right of holders to
dissent and require an appraisal not exceeding 10% of the total issued and
outstanding shares of AES Chigen Class A Common Stock. AES Chigen's obligations
are further subject to, among other conditions, its financial advisor not having
withdrawn its opinion. See "Description of the Amalgamation
Agreement -- Conditions" and "Recent Developments -- Certain Litigation in
Respect of the Amalgamation."
ACCOUNTING TREATMENT. The Amalgamation will be accounted for as a purchase
under generally accepted accounting principles.
REGULATORY APPROVALS. AES and AES Chigen are aware of no U.S. federal,
state or local government permits, licenses or regulatory approvals material to
their respective businesses that must be obtained for consummation of the
Amalgamation, other than compliance with federal and state securities laws. The
Amalgamation is not subject to the pre-merger notification provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). AES, AES Sub and AES Chigen have each agreed to use their best efforts to
obtain any other regulatory approvals.
AES and AES Chigen are aware of no PRC national or local laws, regulations,
permits, licenses or regulatory approvals that a foreign company must obtain for
consummation of an amalgamation in which AES Chigen is the surviving entity.
REASONS FOR THE AMALGAMATION.
The Board of Directors of AES approved the Amalgamation because the Board
believes it will enhance the potential for future development and financing of
power projects in the PRC by AES, through AES Chigen or other subsidiaries or
affiliates of AES. The Amalgamation will allow AES Chigen, or any other
subsidiary or affiliate of AES pursuing business opportunities in the China
power market, to (i) direct its business strategy more appropriately toward
sustainable long-term performance, with less emphasis paid to short-term
earnings performance, (ii) reduce administrative and operating costs, (iii)
enhance AES Chigen's business performance through utilization of greater
resources available to the combined companies, and (iv) use AES Common Stock as
part of its compensation program to attract and retain qualified people at AES
Chigen.
In addition, the Board of AES believes the Amalgamation will significantly
improve the liquidity for AES Chigen shareholders arising from low trading
volumes in AES Chigen Class A Common Stock, while reducing the share price
volatility associated with operating AES Chigen as a public company focused
solely on a developing market such as the PRC.
The Amalgamation will allow AES Chigen's shareholders to continue to share
in a portion of the potential long-term gains in AES Chigen through the
ownership of AES Common Stock following the Amalgamation, while diversifying
their investment through ownership of common stock of AES, which invests in a
variety of countries, and which has a more mature business.
5
<PAGE> 13
RECOMMENDATION OF THE BOARD OF DIRECTORS.
A Special Committee of the Board of Directors of AES Chigen (the "Special
Committee") comprised of the directors elected by the holders of the AES Chigen
Class A Common Stock (a) has determined that the Amalgamation is in the best
interests of AES Chigen and the holders of the AES Chigen Class A Common Stock
and has recommended that the AES Chigen Board of Directors approve and adopt the
Amalgamation Agreement and approve the transactions contemplated thereby and (b)
has recommended that the AES Chigen Board of Directors recommend to the holders
of the AES Chigen Class A Common Stock that they approve and adopt the
Amalgamation Agreement.
The Board of Directors of AES Chigen, based on the recommendation of the
Special Committee, has determined that the Amalgamation is in the best interests
of AES Chigen and its shareholders and has approved and adopted the Amalgamation
Agreement and approved the transactions contemplated thereby and directed that
the Amalgamation Agreement and the Amalgamation be submitted to a vote of the
shareholders of AES Chigen.
OPINION OF THE SPECIAL COMMITTEE'S FINANCIAL ADVISOR.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") has
delivered an opinion to the Special Committee dated as of November 12, 1996
stating that, as of the date of its opinion, the proposed consideration to be
received by the holders of the AES Chigen Class A Common Stock in the
Amalgamation is fair to such holders from a financial point of view. A copy of
this opinion, which sets forth certain assumptions, qualifications and
limitations is attached as Appendix B hereto and should be read in its entirety.
See "The Amalgamation -- Opinion of the Special Committee's Financial Advisor."
CERTAIN LITIGATION IN RESPECT OF THE AMALGAMATION.
A lawsuit has been filed in the Court of Chancery of the State of Delaware
against AES claiming a breach of fiduciary duty by AES as a controlling
shareholder of AES Chigen and seeking, among other things, to enjoin AES from
consummating the Amalgamation. AES Chigen is not a defendant in the lawsuit. AES
has informed AES Chigen that it believes that it has meritorious defenses to the
lawsuit and intends to defend against it vigorously. The parties to the
Amalgamation Agreement intend to proceed with the Amalgamation, subject to
receipt of shareholder approval and the satisfaction of the other conditions
contained in the Amalgamation Agreement, unless enjoined. See "Recent
Developments -- Certain Litigation in Respect of the Amalgamation."
MATERIAL PROVISIONS OF THE AMALGAMATION AGREEMENT
REPRESENTATIONS AND WARRANTIES. The Amalgamation Agreement contains
various representations and warranties of AES, AES Sub and AES Chigen. See
"Description of the Amalgamation Agreement -- Representations and Warranties."
NO SOLICITATION. The Amalgamation Agreement provides that the Board of
Directors of AES Chigen will not solicit, initiate or participate in
negotiations regarding a "Takeover Proposal" unless the failure so to act would
be inconsistent with its fiduciary duties to AES Chigen or to the holders of AES
Chigen Class A Common Stock. The Amalgamation Agreement provides that AES Chigen
shall promptly notify AES of any Takeover Proposal, the material terms of such
Takeover Proposal and the identity of the person making such Takeover Proposal,
and shall keep AES fully informed of the status and details of any such Takeover
Proposal. See "Description of the Amalgamation Agreement -- No Solicitation."
TERMINATION. The Amalgamation Agreement may be terminated and the
Amalgamation and the other transactions contemplated thereby may be abandoned at
any time prior to the Effective Time, whether before or after approval of the
Amalgamation Agreement by shareholders, by mutual written consent of AES and AES
Chigen or by either party (i) if as a result of the failure, occurrence or
existence of any of the conditions set forth in the Amalgamation Agreement the
Amalgamation shall not have occurred on or before April 30, 1997 (provided,
however, that this right to terminate the Amalgamation Agreement is not
available to any
6
<PAGE> 14
party whose failure to perform any of its obligations under the Amalgamation
Agreement results in the failure, occurrence or existence of any such condition)
or (ii) if any Governmental Entity shall have issued an Order permanently
enjoining, restraining or otherwise prohibiting the Amalgamation and such Order
shall have become final and nonappealable. AES and AES Chigen each have certain
further rights to terminate the Amalgamation Agreement as set forth in
"Description of the Amalgamation Agreement -- Termination."
FEES AND EXPENSES OF THE AMALGAMATION. Under the Amalgamation Agreement,
except as provided below, all fees and expenses incurred in connection with the
Amalgamation, the Amalgamation Agreement and the transactions contemplated
thereby shall be paid by the party incurring such fees or expenses, whether or
not the Amalgamation is consummated. However, AES Chigen shall pay, or cause to
be paid, to AES all of AES's out-of-pocket expenses in an amount up to but not
to exceed $750,000 (the "Expenses") upon demand if (i) AES terminates the
Amalgamation Agreement as a result of the Special Committee's approval or
recommendation of a Takeover Proposal, (ii) AES Chigen terminates the
Amalgamation Agreement and enters into an agreement with respect to a Takeover
Proposal or (iii) prior to the termination of the Amalgamation Agreement (other
than by AES Chigen as a result of a material, incurable breach by AES), a
Takeover Proposal shall have been made, and within one year of such termination,
AES Chigen enters into an agreement with respect to, approves or recommends or
takes any action to facilitate, such Takeover Proposal.
DISSENTERS' RIGHTS. Any holder of shares of AES Chigen Class A Common
Stock who does not vote in favor of the Amalgamation and who is not satisfied
that he or she has been offered the fair value of his or her shares may within
one month of the giving of the notice of the Class A Meeting and the Special
Meeting apply to the Supreme Court of Bermuda to appraise the fair value of such
holder's shares. There is no right of appeal from an appraisal by the Court.
Such shareholder will receive the value appraised by the Court only if the
Amalgamation is completed. See "Rights of Dissenting Shareholders" and "The
Class A Meeting and the Special Meeting."
RESALE RESTRICTIONS. All shares of AES Common Stock received by AES Chigen
shareholders in the Amalgamation will be freely transferable, except that shares
of AES Common Stock received by persons who are deemed to be "affiliates" (as
such term is defined under Rule 145 of the Securities Act) of AES Chigen at the
time of the Class A Meeting and the Special Meeting may be resold by them only
in certain permitted circumstances. See "The Amalgamation -- Resale
Restrictions."
MATERIAL TAX CONSEQUENCES
It is expected that the Amalgamation will constitute a reorganization
within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986,
as amended (the "Code"). Assuming that the Amalgamation so qualifies and that
certain proposed Passive Foreign Investment Company regulations are applicable
(see "Material Tax Consequences -- United States Federal Income
Taxation -- Possible Application of Passive Foreign Investment Company Rules"),
a U.S. holder of AES Chigen Class A Common Stock will not recognize gain or loss
upon the exchange (except with respect to cash received in lieu of a fractional
share of AES Common Stock). See "Material Tax Consequences -- United States
Federal Income Taxation."
COMPARISON OF SHAREHOLDER AND STOCKHOLDER RIGHTS
Upon consummation of the Amalgamation, holders of AES Chigen Class A Common
Stock immediately prior to the Effective Time will become stockholders of AES.
Various differences exist between the rights of shareholders of AES Chigen and
the rights of stockholders of AES. These differences result from differences
between Bermuda and Delaware law and differences between the organizational
documents of AES and AES Chigen. See "Comparison of Shareholders' and
Stockholders' Rights."
7
<PAGE> 15
COMPARATIVE MARKET PRICES AND DIVIDENDS
AES Common Stock is listed and principally traded on the NYSE Composite
Transaction reporting system (Symbol: AES). Until October 15, 1996, the AES
Common Stock was quoted and principally traded on NASDAQ NMS (Symbol: AESC). AES
Chigen Class A Common Stock is quoted and principally traded on NASDAQ NMS
(Symbol: CHGNF). The following tables set forth (i) the high and low sales
prices per share of AES Common Stock as reported on the NYSE Composite
Transaction reporting system for the period from October 16, 1996 to February
27, 1997 and as quoted on NASDAQ NMS for the period from January 1, 1994 to
October 15, 1996 and (ii) the high and low sales prices per share of AES Chigen
Class A Common Stock as quoted on NASDAQ NMS. Neither company declared or paid
any cash dividends during the periods indicated. See "Description of AES Capital
Stock." The fiscal year for AES ends on December 31 of each year. The fiscal
year for AES Chigen ends on November 30 of each year. On November 11, 1996, the
last full trading day prior to the public announcement of the Amalgamation, the
closing sale price per share was $46 for the AES Common Stock, as reported on
the NYSE Composite Transaction reporting system, and $13 3/4 for the AES Chigen
Class A Common Stock, as quoted on NASDAQ NMS. On February 27, 1997, the most
recent date prior to printing this Proxy Statement/Prospectus for which
information is available, the closing sale price per share was $64 3/4 for the
AES Common Stock and $17 5/8 for the AES Chigen Class A Common Stock.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT REPORTS AND QUOTATIONS FOR
THE AES COMMON STOCK AND THE AES CHIGEN CLASS A COMMON STOCK
AES COMMON STOCK
<TABLE>
<CAPTION>
STOCK PRICE
------------
HIGH LOW
---- ---
<S> <C> <C>
1995:
First Quarter........................................................ 19 3/4 16
Second Quarter....................................................... 19 1/4 16
Third Quarter........................................................ 21 5/8 18 1/2
Fourth Quarter....................................................... 24 18 3/4
1996:
First Quarter........................................................ 25 1/4 21
Second Quarter....................................................... 29 5/8 22 1/4
Third Quarter........................................................ 40 1/2 27 7/8
Fourth Quarter
From October 1, 1996 to October 15, 1996*......................... 45 3/4 39 1/4
From October 16, 1996 to December 31, 1996**...................... 50 1/8 40 3/8
1997:
First Quarter (through and including February 27, 1997)**............ 68 1/4 44 3/4
</TABLE>
On December 7, 1993, the Board of Directors of AES authorized a
three-for-two split, effected in the form of a stock dividend, payable to
stockholders of record on January 15, 1994. In addition, on February 17, 1994,
AES declared a 3% stock dividend, payable to stockholders of record on March 10,
1994. Accordingly, all stock prices have been restated to reflect the split and
the 3% stock dividend.
- ---------------
* All stock prices from and including January 1, 1994 to and including October
15, 1996 were quoted on NASDAQ NMS.
** All stock prices from and including October 16, 1996 to and including
February 27, 1997 were reported on the NYSE Composite Transaction reporting
system.
8
<PAGE> 16
AES CHIGEN CLASS A COMMON STOCK
<TABLE>
<CAPTION>
STOCK PRICE
------------
HIGH LOW
---- ---
<S> <C> <C>
1995:
First Fiscal Quarter*................................................ 10 3/4 8 1/4
Second Fiscal Quarter................................................ 9 1/4 8
Third Fiscal Quarter................................................. 10 3/4 8
Fourth Fiscal Quarter................................................ 10 1/8 8 1/8
1996:
First Fiscal Quarter................................................. 9 1/4 7 1/2
Second Fiscal Quarter................................................ 10 1/2 8 3/8
Third Fiscal Quarter................................................. 10 5/8 8 5/8
Fourth Fiscal Quarter................................................ 14 8 1/2
1997:
First Fiscal Quarter (through and including February 27, 1997)....... 19 1/2 12 1/4
</TABLE>
No dividends have been paid on AES Chigen Class A Common Stock.
- ---------------
* AES Chigen's fiscal year begins on December 1 and ends on November 30 of each
calendar year.
9
<PAGE> 17
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data and
combined pro forma per share data for the AES Common Stock and the AES Chigen
Class A Common Stock on an unaudited pro forma basis after giving effect to the
Amalgamation as a purchase, assuming that the Exchange Ratio is 0.2900 (the
ratio calculated as if the Average Closing Price was not less than $45.00 per
share) and that approximately 2.4 million shares of AES Common Stock are issued
in the Amalgamation. This data should be read in conjunction with the selected
historical financial data and the separate historical financial statements of
AES and AES Chigen and notes thereto, included elsewhere or incorporated by
reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
AT OR FOR THE NINE
MONTHS ENDED DURING
FISCAL YEAR 1995(1) FISCAL YEAR 1996(2)
------------------------- -------------------------
HISTORICAL PRO FORMA(3) HISTORICAL PRO FORMA(3)
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
NET INCOME PER SHARE:
AES (per share of AES Common Stock)............. $ 1.41 $ 1.38 $ 1.16 $ 1.14
AES Chigen (per share of AES Chigen Common
Stock/share equivalent)...................... 0.12 0.40 0.12 0.33
CASH DIVIDENDS PER SHARE:
AES (per share of AES Common Stock)............. -- -- -- --
AES Chigen (per share of AES Chigen Common
Stock/share equivalent)...................... -- -- -- --
BOOK VALUE PER SHARE:
AES (per share of AES Common Stock)............. 7.34 9.16 8.94 10.66
AES Chigen (per share of AES Chigen Common
Stock/share equivalent)...................... 11.87 2.66 12.03 3.09
</TABLE>
- ---------------
(1) The 1995 fiscal year ended on December 31, 1995 for AES and on November 30,
1995 for AES Chigen.
(2) The nine months ended during fiscal year 1996 was as of September 30, 1996
for AES and August 31, 1996 for AES Chigen.
(3) The pro forma net income per share information assumes 100% ownership of AES
Chigen by AES and an additional 2.4 million shares of AES Common Stock
outstanding for both periods. The pro forma book value per share information
assumes the issuance of 2.4 million shares of AES Common Stock at $66 3/4
per share (the closing price of AES Common Stock on February 24, 1997), or
approximately $165 million in stockholders' equity. The AES Chigen pro forma
per share equivalent data was computed by multiplying the AES pro forma per
share information by the Exchange Ratio of 0.2900. See "The
Amalgamation -- Terms of the Amalgamation".
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<PAGE> 18
THE AES CORPORATION SUMMARY CONSOLIDATED FINANCIAL DATA(1)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED
------------------------------------------ SEPTEMBER 30, SEPTEMBER 30,
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------ ------------- -------------
IN MILLIONS, EXCEPT RATIO AND PER SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................... $ 334 $ 401 $ 519 $ 533 $ 685 $ 512 $ 551
Operating costs and expenses... 201 248 326 301 437 326 344
Operating income............... 132 153 193 232 248 186 207
Interest expense............... 85 97 125 121 122 92 97
Income before income taxes and
minority interest............ 51 66 89 145 167 122 142
Net income..................... 43 56 71 100 107 79 89
Net income per share........... 0.66 0.80 0.98 1.32 1.41 1.04 1.16
Weighted average shares
outstanding.................. 63 70 73 76 76 76 77
BALANCE SHEET DATA:
Total assets................... $1,367 $1,552 $1,687 $1,915 $2,320 $2,226 $3,419
Revolving bank loan
(long-term).................. -- -- -- -- -- -- 125
Project finance debt
(long-term).................. 1,093 1,146 1,075 1,019 1,098 1,040 1,301
Other notes payable
(long-term).................. -- 50 125 125 125 125 325
Stockholders' equity........... 141 177 309 401 549 486 689
</TABLE>
- ---------------
(1) The information for the five years ended December 31, 1995 has been derived
from AES's audited consolidated financial statements. The information for
the nine months ended September 30, 1995 and for the nine months ended
September 30, 1996 is derived from AES's unaudited consolidated financial
statements.
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<PAGE> 19
AES CHINA GENERATING CO. LTD. SUMMARY FINANCIAL DATA(1)
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 7, 1993
(INCEPTION) TO FISCAL YEAR ENDED NINE MONTHS ENDED NINE MONTHS ENDED
NOVEMBER 30, 1994 NOVEMBER 30, 1995 AUGUST 31, 1995 AUGUST 31, 1996
----------------- ----------------- ----------------- -----------------
IN MILLIONS, EXCEPT RATIO AND PER SHARE DATA
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues..................... $ -- $ 1.4 $ 0.9 $ 7.0
Operating costs and
expenses................... 7.0 9.9 7.4 9.1
Operating loss............... (7.0) (8.5) (6.5) (2.1)
Interest income, net......... 6.6 10.5 8.1 4.3
Income before income taxes
and minority interest...... (0.4) 2.2 1.7 2.6
Net income/(loss)............ (0.4) 2.1 1.6 1.9
Net income/(loss) per
share...................... (0.03) 0.12 0.09 0.12
Weighted average shares
outstanding ............... 15 17 17 16
BALANCE SHEET DATA:
Total assets................. $210.9 $229.9 $227.2 $270.3
Loans from minority
partners................... -- 7.0 -- 35.3
Other notes payable.......... -- 1.0 -- 0.5
Shareholders' equity......... 201.6 187.6 199.4 188.1
</TABLE>
- ---------------
(1) The information for the period from December 7, 1993 (inception) to November
30, 1994 and the fiscal year ended November 30, 1995 has been derived from
AES Chigen's audited consolidated financial statements. The information for
the nine months ended August 31, 1995 and for the nine months ended August
31, 1996 is derived from AES Chigen's unaudited consolidated financial
statements.
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<PAGE> 20
RISK FACTORS
AES RISK FACTORS
Holders of AES Chigen Class A Common Stock should carefully consider the
following factors in connection with their consideration of the Amalgamation and
their receipt of AES Common Stock upon consideration thereof. Certain of such
factors also apply to AES Chigen and would continue to so apply in the event the
Amalgamation is not consummated. See also "AES Chigen Risk Factors" below.
LEVERAGE AND SUBORDINATION
AES and its subsidiaries had approximately $2.1 billion of outstanding
indebtedness at September 30, 1996. As a result of AES's level of debt, AES
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, although the Company believes it will be able to meet such
obligations. As of September 30, 1996, AES had a consolidated ratio of total
debt to total book capitalization (including current debt) of approximately 75%.
DOING BUSINESS OUTSIDE THE UNITED STATES
AES'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
AES's current development and acquisition activities are for projects and plants
outside the United States. AES, through subsidiaries, affiliates and joint
ventures, including AES Chigen, has ownership interests in 27 power plants
outside the United States in operation or under construction. Five of such power
plants are located in Argentina; four in Brazil; two in England; two in Northern
Ireland; two in Pakistan; eight in the PRC (through AES Chigen); three in
Hungary; and one in Kazakhstan.
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 structuring issues that have the
potential to cause substantial delays in respect of or material impairment of
the value of the project being developed or operated, which AES may not be
capable of fully insuring or hedging against. The ability to obtain financing on
a commercially acceptable non-recourse basis in developing nations may also
require higher investments by AES 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 AES,
its subsidiaries and its affiliates are or in the future may be developing,
constructing or operating could make it more difficult for AES to enforce its
respective rights under agreements relating to such projects. In addition, the
laws and regulations of certain countries, such as the PRC, may limit AES's
ability to hold a majority interest in some of the projects that it may develop
or acquire. International projects owned by AES may, in certain cases, be
expropriated by applicable governments. Although AES may have legal recourse in
enforcing its rights under agreements and recovering damages for breaches
thereof, there can be no assurance that any such legal proceedings will be
successful.
COMPETITION
The global power production market is characterized by numerous strong and
capable competitors, many of whom may have extensive and diversified
developmental or operating experience (including both domestic and international
experience) and financial resources similar to or greater than AES. 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, such as the
United States and Argentina, these factors have caused reductions in prices
contained in new
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<PAGE> 21
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 AES sells or intends to sell power.
There can be no assurance that the foregoing competitive factors will not have a
material adverse effect on AES.
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 AES to expend significant sums for preliminary engineering,
permitting, legal and other expenses in preparation for competitive bids which
AES 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 AES 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 AES's efforts generally, will be successful. If these
development efforts are not successful, AES may abandon a project under
development. At the time of abandonment, AES 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
AES 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 AES's projects could, under certain
circumstances, have an adverse effect on AES's ability to meet its obligations.
AES also is faced with certain development uncertainties arising out of doing
business outside of the United States. See "-- Doing Business Outside the United
States."
UNCERTAINTY OF ACCESS TO CAPITAL FOR FUTURE PROJECTS
Each of AES's projects under development and those independent power
facilities it may seek to acquire may require substantial capital investment.
Continued access to capital with acceptable terms is necessary to assure the
success of future projects and acquisitions. AES has 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. AES intends to continue to seek, where possible, such
non-recourse project financing in connection with the assets which AES 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 AES'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, AES, 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.
In addition to 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
14
<PAGE> 22
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 AES Common Stock.
AES's ability to arrange for financing on either a fully non-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 AES, 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 based on its
currently operating facilities or facilities under construction, such a decision
would affect the future growth of AES.
CONTROL BY EXISTING STOCKHOLDERS
As of February 1, 1997, AES's two founders, Roger W. Sant and Dennis W.
Bakke, and their immediate families together owned beneficially approximately
25% of AES's outstanding Common Stock. As a result of their ownership interests,
Messrs. Sant and Bakke may be able to significantly influence or exert control
over the affairs of AES, including the election of AES's directors. As of
February 1, 1997, all of AES's officers and directors and their immediate
families together owned beneficially approximately 34% of AES's outstanding
Common Stock. To the extent that they decide to vote together, these
stockholders would be able to significantly influence or control the election of
AES's directors, the management and policies of AES and any action requiring
stockholder approval, including significant corporate transactions.
LITIGATION CONCERNING THE AMALGAMATION
On November 22, 1996, an action was filed against AES in the Court of
Chancery of the State of Delaware in and for New Castle County, by a holder of
750 shares of AES Chigen Class A Common Stock, individually and on behalf of a
purported class of public shareholders of the approximately 8.2 million
outstanding shares of AES Chigen Class A Common Stock. The complaint seeks
preliminarily and permanently to enjoin AES from acquiring the outstanding
shares of AES Chigen which it does not already own. In addition, the complaint
seeks unspecified damages, including attorneys' fees and costs.
AES Chigen is not named in the suit. Plaintiff's allegations state that
AES, as the controlling shareholder of AES Chigen, breached its fiduciary duties
to treat the plaintiff class with entire fairness in connection with AES's
execution of an agreement with AES Chigen to acquire the outstanding AES Chigen
Class A Common Stock at an allegedly grossly inadequate price.
The parties have entered into a stipulation extending, until March 24,
1997, AES's time to answer, move or otherwise plead to the complaint and answer
or object to plaintiff's pending document production request. Plaintiff has the
right to move for an order requiring an earlier response. AES has informed AES
Chigen that it believes that it has meritorious defenses to the lawsuit and
intends to defend against it vigorously. The parties to the Amalgamation
Agreement intend to proceed with the Amalgamation, subject to shareholder
approval and the satisfaction of the other conditions contained in the
Amalgamation Agreement, unless enjoined.
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 1995, four customers, Oklahoma Gas & Electric Company (24%), The
Connecticut Light & Power Company, a subsidiary of Northeast Utilities (18%),
Hawaiian Electric Company, Inc. (18%) and Empresa Social de Energia de Buenos
Aires S.A. (13%), accounted for a total of 73% of AES's revenues. In October
1996, Moody's Investor Service and Standard & Poor's revised their ratings of
the senior unsecured long-term debt of Connecticut Light & Power Company from
Baa3/BBB- to Ba1/BB+, which
15
<PAGE> 23
made The Connecticut Light & Power Company the only one of AES's U.S. customers
whose long-term debt is not investment grade. 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 AES's plants collectively represented approximately 61% of AES's
consolidated total assets at December 31, 1995 and generated approximately 80%
of AES's consolidated total revenues for the year ended December 31, 1995.
REGULATORY UNCERTAINTY
AES'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, 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. AES 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 AES 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 commission
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 AES,
or an increase or decrease in the results of operations of AES.
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 AES.
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. Utilities have now 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
16
<PAGE> 24
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 AES cannot be
predicted, although any such restructuring could have a material adverse effect
on AES.
LITIGATION AND REGULATORY PROCEEDINGS
From time to time, AES and its subsidiaries and other affiliates are
parties to litigation and regulatory proceedings. AES Chigen shareholders should
review the descriptions of such matters contained in AES's Annual, Quarterly and
Current reports filed with the Commission and incorporated by reference herein.
There can be no assurance that any such litigation or regulatory proceedings
will not have a material adverse effect on AES or its subsidiaries or
affiliates. For a description of a lawsuit recently filed against AES in respect
of the Amalgamation, see "-- Litigation Concerning the Amalgamation."
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. AES 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 AES's financial condition or results of
operations.
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. AES 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 AES perceives a conflict between these principles and profits, AES
will try to adhere to its principles -- even though doing so might result in
diminished or foregone opportunities or financial benefits.
AES CHIGEN RISK FACTORS
Holders of AES Chigen Class A Common Stock should carefully consider the
following factors relating to AES Chigen and the AES Chigen Class A Common Stock
in connection with their consideration of the Amalgamation. Such factors would
continue to apply to AES Chigen, as a wholly-owned subsidiary of AES, if the
Amalgamation is consummated.
RISKS PERTAINING TO THE PRC
AES Chigen has substantially all of its assets in, and derives
substantially all of its revenues from, power plants owned by its Joint Ventures
(as defined below) located in the PRC. Therefore, AES Chigen and its
17
<PAGE> 25
operations are affected generally by developments in or affecting the PRC.
"Joint Ventures" means the PRC joint venture limited liability companies formed
to develop, construct, own and operate the current projects (see "The
Companies -- Business of AES Chigen -- Description of the Current Projects")
with respect to which AES Chigen, or one of its wholly-owned subsidiaries, has
made a contribution to the registered capital (equity). A "Joint Venture" refers
to any one of the PRC joint venture limited liability companies.
POLITICAL AND ECONOMIC CONSIDERATIONS
General economic conditions in the PRC could have a significant impact on
the business prospects of AES Chigen. The economy of the PRC differs from the
economies of most countries belonging to the Organization for Economic
Co-operation and Development in such respects as structure, government
involvement, level of development, growth rate, capital reinvestment, allocation
of resources, self-sufficiency, rate of inflation and balance of payments
position, among others. For over 40 years, the economy of the PRC has been
primarily a planned economy characterized by state ownership and control of
productive assets and the management of such assets through a series of economic
and social development plans. Although the majority of the PRC's productive
assets are still owned by the PRC Government, the adoption of economic reform
policies since 1978 has resulted in a gradual reduction in the role of state
economic plans in the allocation of resources, pricing and management of such
assets, an increased emphasis on the utilization of market forces, and rapid
growth in the PRC economy. However, such growth has been uneven among various
regions of the country and among various sectors of the economy. The success of
AES Chigen depends in part on the continued economic growth of the regions where
the Joint Ventures are located. At times, the economic reform measures adopted
by the national government of the PRC and its various ministries, agencies and
commissions (the "Central Government") and local governments (together with the
Central Government, the "PRC Government") may be inconsistent or ineffectual,
and therefore the Joint Ventures may not be able to enjoy the potential benefits
of such reforms. Further, these measures may be adjusted or modified in
particular ways in particular areas, possibly resulting in such economic
liberalization measures being inconsistent from time to time or from industry to
industry or across different regions of the PRC.
AES Chigen may also be adversely affected by changes in the political and
social conditions in the PRC, and by changes in governmental policies with
respect to laws and regulations, methods to address inflation, currency
conversion, rates and methods of taxation, or the method by which electricity
tariffs are set and approved, among other things. While the PRC Government is
expected to continue its economic reform policies, many of the reforms are new
or experimental and may be refined or changed. It is also possible that a change
in the PRC Government leadership could lead to changes in economic policy.
The PRC economy has experienced rapid growth in the past five years. This
growth has also been accompanied by rising inflation, which reached an annual
rate of 21.7% in 1994. The PRC Government has implemented policies from time to
time to restrain the rate of such economic growth and control inflation in order
to achieve coordinated economic development. In July 1993, the Central
Government began implementation of a number of austerity measures to control
economic growth and curb inflation, including increasing interest rates on bank
loans and deposits and postponing certain planned price reforms. While inflation
has since moderated to 8.6% for the first ten months of 1996, there can be no
assurance that such austerity measures will not be strengthened or result in
future severe dislocations in the PRC economy. Austerity measures intended to
slow economic growth may affect the demand for electricity and the prospects for
the financing of some of the Joint Ventures. Depending on the nature and
implementation of such additional measures, the Joint Ventures' economic
prospects at times may be adversely affected through, among other possible
measures, placing additional controls on the increase of electric power rates.
Any such development could also adversely affect the Joint Ventures' operations
or the ability of the Joint Ventures' customers to honor their obligations under
their power purchase contracts, which could adversely affect AES Chigen.
A significant portion of the economic activity in the PRC is related to
exports and may therefore be affected by developments in the economies of the
PRC's principal trading partners. Trade sanctions imposed by the PRC's main
trading partners, including the revocation or conditional extension by the
United States of China's Most Favored Nation trading status, could adversely
affect the trade and economic development of the PRC and the ability of the
Joint Ventures' customers to honor their obligations under their power purchase
18
<PAGE> 26
contracts with the Joint Ventures. In addition, current or future disputes
between the PRC and its main trading partners over specific trade issues, such
as intellectual property, the balance of trade or other political issues, such
as regional affairs or arms sales policies, could lead to the imposition of
trade or other sanctions which could adversely affect the demand for power in
the PRC.
RESTRICTIONS ON FOREIGN CURRENCY CONVERTIBILITY AND REMITTANCE ABROAD
The Joint Ventures will receive nearly all of their revenues in Renminbi. A
significant portion of this revenue will need to be converted to other
currencies, primarily US dollars, and remitted outside of the PRC to meet
foreign currency obligations to equipment suppliers, to repay borrowings from
foreign third party lenders and to make payments to AES Chigen in respect of
equity distributions and shareholder loans. The Renminbi is not freely
convertible into US dollars. Although the receipt of approvals to convert
Renminbi into foreign currencies and to remit foreign currencies outside of the
PRC is routine for approved foreign investment enterprises such as the Joint
Ventures, there can be no assurance that the PRC Government will continue to
provide such approvals. Moreover, while in the last two years foreign currency
has been readily available, no assurance can be given that the Joint Ventures
will in the future be able to convert sufficient amounts of Renminbi to foreign
currency in China's foreign exchange markets to meet their foreign currency
obligations, or that the Joint Ventures will freely be able to remit foreign
currency abroad.
EXCHANGE RATE FLUCTUATIONS
Prior to 1994, the Renminbi had experienced a significant net devaluation
against most major currencies, and during certain periods, significant
volatility in the market-based exchange rate. Since the beginning of 1994, the
Renminbi to US dollar exchange rate has largely stabilized. While the Joint
Ventures will receive nearly all of their revenues in Renminbi, AES Chigen
expects its Joint Ventures to have significant US dollar obligations with
respect to distributions to AES Chigen. Under the terms of all of their power
purchase contracts, AES Chigen's Joint Ventures are entitled to obtain tariff
adjustments for future Renminbi devaluation. While AES Chigen expects that its
Joint Ventures will be able to pass on increased costs resulting from a
devaluation of the Renminbi by means of such tariff adjustments, no assurance
can be given that the Joint Ventures will be able to obtain approval for a
sufficient tariff adjustment.
DEVELOPING LEGAL SYSTEM
China's legal system is relatively new, and the government is still in the
process of developing a comprehensive system of laws, a process that has been
ongoing since 1979. Considerable progress has been made in the promulgation of
laws and regulations dealing with economic matters such as corporate
organization and governance, foreign investment, commerce, taxation and trade.
Such legislation has significantly enhanced the protection afforded to foreign
investors. However, foreign investors may be adversely affected by new laws,
changes to existing laws (or interpretations thereof) and preemption of
provincial or local regulations by national laws or regulations. Moreover,
experience with respect to the implementation, interpretation and enforcement of
such laws and regulations is limited. Such administrative and judicial
interpretation and implementation and the enforcement of commercial claims and
resolution of commercial disputes may be subject to the exercise of considerable
discretion by both administrative and judicial organs and may be influenced by
external forces unrelated to the legal merits of a particular matter or dispute.
Even where adequate laws exist and contractual terms are clearly stated, there
can be no assurance that AES Chigen or a Joint Venture will obtain swift and
equitable enforcement of its rights.
RISKS RELATED TO AES CHIGEN'S BUSINESS
REGULATION AND RESTRICTIONS; TARIFFS
Similar to electric power companies in other countries, AES Chigen's Joint
Ventures are subject to governmental and electric power regulation in virtually
all aspects of their operations, including the amount and timing of electricity
generation, the setting of electric power tariffs, performance of scheduled
maintenance and compliance with power grid control and dispatch directives.
Foreign ownership of electric power
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plants in China is also restricted or controlled in varying degrees. There can
be no assurance that these regulations and restrictions will not change in the
future in a manner which could adversely affect the operations of AES Chigen's
Joint Ventures.
For power plants with foreign investment such as AES Chigen's Joint
Ventures, tariffs payable under power purchase contracts entered into by the
Joint Ventures are established on the basis of tariff formulas which are agreed
upon after discussions among AES Chigen, its partners, the prospective power
purchasers, the relevant local governments, the relevant pricing bureaus and the
relevant planning commissions. Once established, the tariffs are subject to
annual review by the relevant local government pricing bureau and adjustment in
accordance with the formulas. The tariff formulas contained in the power
purchase contracts entered into by AES Chigen's Joint Ventures are structured to
permit the Joint Ventures to pay the operating expenses of the plant, the
financing costs of each particular project and to enable AES Chigen to realize a
return on its investment. While the relevant PRC pricing bureaus have committed
to utilize the Joint Ventures' formulas in establishing and adjusting tariffs,
there can be no assurance that the relevant pricing bureaus will calculate and
adjust tariffs in accordance with these tariff formulas. On April 1, 1996, a new
law governing the electric power sector in the PRC came into effect. The law
establishes, among other things, broad principles with respect to the
methodology of calculating and setting electric power tariffs. Detailed
regulations with respect to tariff calculation and tariff setting are expected
to be promulgated in the near future by the Central Government. There can be no
assurance that such regulations, when promulgated, will not adversely affect the
tariff structures which AES Chigen's Joint Ventures have adopted.
GOVERNMENT APPROVAL PROCESSES
China's electric power industry is highly regulated, both in terms of
operating existing power plants and developing new power projects. All electric
power projects in China and all foreign investments are required to obtain
approvals from one or more central, provincial or local government authorities.
While the regulations governing and the procedures for obtaining approvals for
foreign investment projects are generally well-understood, the specific
regulations and procedures for the approval of electric power projects with
foreign investment in the PRC and associated foreign investment enterprises are
not entirely transparent. Project approvals and foreign investment approvals are
required, but follow separate procedures. At the highest level, the right to
approve projects in the PRC is vested in the State Council. The State Council
has reserved to itself the authority to approve any project with a total
investment which exceeds $100 million. Pursuant to various internal PRC
Government notices, the State Council has delegated the authority to approve any
project with a total investment of less than $100 million to various ministries
and ministry level entities, including the State Planning Commission of the
Central Government (the "SPC"). The SPC and certain ministries and other
ministry level entities have, in turn, adopted a policy, also by internal
directives, of further delegating authority to approve projects with a total
investment of less than $30 million to provincial governments, provincial level
bureaus of the Central Government and certain municipalities. The project
approval authority of local governments is, therefore, generally limited to not
more than $30 million. Separate from project approval, foreign investment must
be approved by the Ministry of Foreign Trade and Economic Cooperation
("MOFTEC"), or one of its departments at the provincial or local government
level, should the total investment amount be below $30 million. Accordingly,
foreign investment enterprises proposing to undertake projects must obtain
approvals for the projects from the appropriate government level planning
authorities and approvals for the foreign investment from a similar level
department of MOFTEC.
Two of AES Chigen's power plants have been structured as multiple projects
and joint ventures, each project and joint venture with a total investment below
the $30 million threshold, and have obtained local government approvals on this
basis. It is possible that projects structured in this fashion could be viewed
by the Central Government approval authorities as a single project. In several
other cases, AES Chigen's projects and Joint Ventures have obtained local
government approvals on the basis of anticipated total investments which were
less than $30 million at the time the approvals were obtained, but will, when
construction is completed, exceed the $30 million approval threshold. While it
is common in the PRC for projects and joint ventures such as these to obtain and
rely on only local government approvals, it is unclear whether such approvals
are
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sufficient. There can be no assurance, therefore, that the absence of Central
Government approvals will not adversely affect the Joint Ventures and their
projects in any of such cases.
ENVIRONMENTAL MATTERS
AES Chigen's Joint Ventures with power plants in operation have received
the environmental approvals from the PRC Government environmental authorities
required for them to operate their respective electric power plants. Inasmuch as
the Joint Ventures' electric power plants currently under construction are
typically among the most modern in the areas in which they are located, AES
Chigen believes that these plants will also receive all required environmental
approvals. There can be no assurance, however, that the requirements to obtain
such approvals may not be made more stringent in the future. If such a change in
policy occurs, there can be no assurance that all such requirements will be met
and that future approvals for existing or potential projects will be granted. If
a change in environmental requirements leads to an increase in costs, an
affected Joint Venture is able to receive an adjustment in the tariff it charges
for electric power pursuant to its power purchase contract.
The PRC is a party to the Framework Convention on Climate Change ("Climate
Change Convention"), which is intended to limit or capture emissions of
"greenhouse" gases, such as carbon dioxide. At present, ceilings on such
emissions could limit the production of electricity from fossil fuels,
particularly coal, or increase the costs of such production. At present,
ceilings on the emissions of "greenhouse" gases have not been assigned to
developing countries such as the PRC under the Climate Change Convention, and
the PRC has objected to any imposition of such ceilings. If the PRC were to
agree to such ceilings, or otherwise reduce its reliance on coal-fired power
plants, the business prospects of AES Chigen could be adversely affected.
CONSTRUCTION RISKS
The construction of an electric power generation plant, including its
ancillary facilities such as a transmission line or substation, may be adversely
affected by many factors commonly associated with the construction of
infrastructure projects, including shortages of equipment, materials and labor,
as well as labor disputes, adverse weather conditions, natural disasters,
accidents and other unforeseen circumstances and problems. Any of these could
cause completion delays and cost overruns. Delays in obtaining requisite
licenses, permits or approvals from government agencies or authorities could
also increase the cost or delay or prevent the commercial operation of a
project. Construction delays can result in the loss or delayed receipt of
revenues and, if completion is delayed beyond the completion date specified in
the power purchase contract, the payment of penalties. Additionally, the failure
to complete construction according to specifications can result in reduced plant
efficiency, higher operating costs and reduced or delayed earnings.
AES Chigen's Joint Ventures all rely on PRC contractors for the
construction of their electric power plants. While there are a number of PRC
contractors with substantial construction experience, there are only a limited
number that have experience constructing plants on a turnkey basis. In only a
few cases has AES Chigen been able to enter into a turnkey contract with a
Chinese contractor which includes a guaranteed fixed price and/or contractor
obligations to pay liquidated damages for delays in completion or for shortfalls
in performance. In the case of one project, AES Chigen's Joint Venture has
experienced delays in installation and defects in the quality of equipment. The
delays have been mitigated by the payment of damages by the contractor. AES
Chigen seeks to mitigate construction risk in a number of ways: carefully
choosing its contractors; closely supervising the construction of its projects
or retaining internationally recognized construction managers to supervise
construction; and, in some cases, by utilizing established foreign equipment
manufacturers and vendors who are able to directly pass through to the Joint
Ventures their equipment and performance warranties or, where appropriate, by
utilizing proven Chinese equipment and technology. Despite such mitigation
efforts, no assurance can be given that AES Chigen's Joint Ventures will not
experience construction delays or difficulties, or that any such delays or
difficulties will not have a material adverse effect on the operations of AES
Chigen's Joint Ventures.
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OPERATING RISKS
The operation of an electric power generation plant may be adversely
affected by many factors such as the breakdown or failure of equipment or
processes, performance below expected levels of output or efficiency, labor
disputes, operational errors, natural disasters, and the need to comply with the
directions of the relevant government authorities, the dispatcher and power
purchaser of a power plant. In addition, such operation may be hampered by
insufficient or poor quality fuel caused by either inadequate supply or
transportation or arrangements therefor.
AES Chigen is not the operator of any of its power plants either directly
or by means of traditional operation and maintenance agreements with
internationally recognized power plant operators. In some cases, AES Chigen's
Joint Ventures have contracted with the power purchaser to operate a power
plant. In such instances, the power purchaser is obligated under the power
purchase contract to purchase the annual minimum quantity of electric power
regardless of the power plant being unavailable due to the fault of the
operator. In other cases, the Joint Ventures themselves are operating the plant.
In these instances, AES Chigen may affect the operation of a power plant through
the appointment of a general manager and/or deputy general manager of the plant.
FUEL RISKS
Most of the Joint Ventures' power projects utilize coal, fuel oils or
natural gas for the generation of electricity. The power purchase contracts
which have been entered into by the Joint Ventures provide for a pass-through to
the power purchasers of increases in the cost of fuel. In the case of most of
the Joint Ventures, under normal circumstances, the procedures of the local
government pricing bureaus allow tariff adjustments reflecting fuel cost changes
to be made only once a year. As a result, in these cases AES Chigen's Joint
Ventures may not be able to receive compensation for increased fuel costs until
sometime after the date they are incurred.
For coal projects which are not "mine mouth" projects, coal must be
supplied to the project site from the interior provinces of China. The affected
Joint Ventures seek to mitigate this transportation risk by entering into long
term contracts for the transportation of coal. However, where rail is utilized
as the means of coal transportation, the coal transporters may experience
significant delays due to the limited capacity of the PRC's rail system. Because
of this lack of capacity, the Central Government rations the allocation of rail
cars. In one project which requires the transportation of coal by rail, AES
Chigen's Joint Venture has obtained an administrative allocation of rail cars
from the Central Government. However, there can be no assurance that a
satisfactory allocation of rail cars will be available in all future cases to
ensure that the coal supply requirements of the affected projects will be timely
met.
LOAD GROWTH; DISPATCH; TRANSMISSION CONSTRAINTS
Some regions or cities in the PRC have experienced slower economic
development in recent years. As a consequence, load growth in the PRC, while
generally increasing in the country overall, has exhibited uneven development.
Some of the Joint Ventures' power plants are designed to provide peaking power.
Such plants are dispatched only after base load power stations have been brought
on-line and reached maximum capacity. If electric power demand proves less than
expected in an area, additional peak or base load power may not be required in
the area or may be required at lower than expected levels. AES Chigen's Joint
Ventures seek to mitigate this risk by entering into take-or-pay power purchase
arrangements and by entering into dispatch contracts with PRC electric power
dispatching authorities which obligate the dispatchers to dispatch the power
plants at their full capacity for a minimum number of hours each year. There can
be no assurance, however, that the Joint Ventures will not experience difficulty
in enforcing take or pay contract obligations or such dispatch contract
obligations if electric power in an area proves not to be needed by the affected
power purchaser and dispatcher.
Additionally, the Chinese electric power transmission system is not fully
interconnected. Some parts of the transmission system contain isolated grids.
Three of AES Chigen's Joint Ventures are located in areas served by isolated
transmission grids. As a result, if demand in these areas is less than forecast,
it may be
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difficult or impossible for the affected Joint Venture to transmit the project's
available power to a region which has a demand for it. In order to take
advantage of a broader market and an additional power purchaser, one of these
Joint Ventures is planning to incur additional costs to build a low-voltage
local transmission line to interconnect its power plant with a larger grid.
RELIANCE ON AND CREDITWORTHINESS OF PRC COUNTERPARTIES
In all of its projects, AES Chigen and its Joint Ventures are relying on
the reliability and creditworthiness of PRC entities such as its partners,
contractors, customers, suppliers, operators, guarantors, lenders and others who
are parties to agreements with AES Chigen or its Joint Ventures. While AES
Chigen believes that these counterparties have the ability to perform and will
perform their obligations, the reliability and creditworthiness of PRC entities
are difficult to ascertain. In most cases, AES Chigen, in assessing the
reliability and credit standing of counterparties, is relying on financial or
other information provided to AES Chigen or its Joint Ventures by such parties
or others, or from information and sources publicly available in the PRC. AES
Chigen can offer no assurance that this information is accurate or that these
counterparties will meet their contractual obligations. The failure of any one
of these counterparties to fulfill its obligations to a Joint Venture could have
a substantial negative impact on such Joint Venture's operations.
CONFLICTS OF INTEREST OF CONTRACTING PARTIES
In a number of cases, AES Chigen's partner in a Joint Venture controls or
is affiliated with the power purchaser, contractor, operator and/or fuel
supplier of the project. It is possible, in these cases, that such arrangements
may result in one or more of these parties having a conflict of interest in a
project, which could have an adverse effect on the Joint Ventures' operations.
CONTROL BY AND RELIANCE ON AES
AES currently holds all of the outstanding shares of AES Chigen's Class B
Common Stock and is entitled, voting as a class, to elect one-half of the Board
of Directors of AES Chigen. Most of AES Chigen's executive officers are also
senior executives, officers and project personnel employed by AES. As a result,
AES and its officers and directors have a significant day-to-day influence over
the operations of AES Chigen.
ADHERENCE TO THE AES PRINCIPLES
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. AES Chigen has adopted a similar corporate culture and tries to
adhere to these principles, like AES, not as a means to achieve economic
success, but because adherence is a worthwhile goal in and of itself. However,
if AES Chigen or AES perceives a conflict between these principles and profits,
AES Chigen and AES will try to adhere to these principles -- even though doing
so might result in diminished or foregone opportunities.
THE CLASS A MEETING AND THE SPECIAL MEETING
The accompanying proxy is solicited by the Board of Directors of AES Chigen
for use at the Special Class Meeting of the holders of the AES Chigen Class A
Common Stock and at the Special General Meeting of Shareholders of AES Chigen to
be held on March 31, 1997 at 1001 North 19th Street, Arlington, Virginia 22209,
or at any adjournment of such meetings. This Proxy Statement/Prospectus and
accompanying proxy are first being sent or given to shareholders on or about
March , 1997.
Only holders of AES Chigen Class A Common Stock at the close of business on
February 18, 1997 are entitled to vote at the Class A Meeting. Only registered
holders of AES Chigen Class A Common Stock and AES Chigen Class B Common Stock
at the close of business on February 18, 1997 are entitled to vote at the
Special Meeting. Holders of each class of AES Chigen Common Stock are entitled
to one vote per share. There were 8,171,268 shares of AES Chigen Class A Common
Stock and 7,500,000 shares of AES Chigen Class B Common Stock outstanding at the
close of business on February 18, 1997. AES owns all of the
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outstanding AES Chigen Class B Common Stock and has agreed in the Amalgamation
Agreement to vote such shares in favor of adoption and approval of the
Amalgamation Agreement. AES will vote such shares by means of a written consent
in lieu of a special meeting of the Class B shareholders and will vote such
shares in favor of adoption and approval of the Amalgamation Agreement and the
Amalgamation at the Special Meeting.
If a proxy is properly executed and returned to AES Chigen, the shares it
represents will be voted at the meetings in accordance with the instructions
noted thereon. If no instructions are specified, the shares will be voted in
accordance with the Board of Directors' recommendations as set forth herein and
will confer authority to vote to adjourn the meetings for up to thirty days to
solicit additional votes if necessary to approve and adopt the Amalgamation
Agreement. Any shareholder executing a proxy has the power to revoke it at any
time before it is voted by filing with AES Chigen a written notice of
revocation, by delivering a duly executed proxy bearing a later date, or by
attending the Class A Meeting and/or the Special Meeting and voting in person.
The approval of the Amalgamation Agreement by the shareholders of AES
Chigen will require (x) the affirmative vote of the holders of a majority of the
outstanding shares of AES Chigen Class A Common Stock and the AES Chigen Class B
Common Stock, each voting as a separate class at a separate meeting or by
written consent and (y) the affirmative votes of a majority of the votes cast at
the Special Meeting. For the Class A Meeting, approval of the Amalgamation
Proposal will require the affirmative vote of the holders of no less than
4,085,635 shares of AES Chigen Class A Common Stock. In lieu of a special
meeting of the Class B shareholders, AES, the holder of all the outstanding AES
Chigen Class B Common Stock, has agreed in the Amalgamation Agreement to vote
its shares in favor of the Amalgamation Proposal by means of a written consent.
As of February 1, 1997, the directors and executive officers of AES and AES
Chigen owned an aggregate of 9,100 shares (or less than 1%) of AES Chigen Class
A Common Stock entitled to vote at the Class A Meeting and the Special Meeting.
All directors and executive officers of AES and AES Chigen entitled to vote
intend to vote their shares in favor of the Amalgamation.
For the Class A Meeting, a quorum consists of a minimum of two shareholders
present in person or by proxy and representing in excess of 50% of the total
issued shares of AES Chigen Class A Common Stock. For the Special Meeting, a
quorum consists of a minimum of two shareholders present in person or by proxy
and representing in excess of 50% of the total issued shares of AES Chigen
Common Stock. With respect to the vote of the holders of AES Chigen Class A
Common Stock at the Class A Meeting, proxies marked as abstentions and broker
non-votes (where a nominee holding shares for a beneficial owner has not
received voting instructions from the beneficial owner with respect to a
particular matter and such nominee does not possess or choose to exercise his
discretionary authority with respect thereto) will be considered as present at
the Class A Meeting and would have the same effect as a vote against the
Amalgamation Proposal. With respect to the vote of the shareholders at the
Special Meeting, proxies marked as abstentions and broker non-votes will be
considered as present at the Special Meeting but will not be counted in
calculating the number of votes cast on the Amalgamation Proposal and therefore
will have no effect on the outcome of the votes.
Proxies will be solicited by mail, telephone or other means of
communication. AES Chigen has retained the services of Corporate Investor
Communications, Inc. to assist in the solicitation of proxies from shareholders
for a fee, including their expenses, estimated at $3,750. In addition,
solicitation may be made by directors, officers, and regular employees of AES
Chigen. AES Chigen will reimburse brokerage firms, custodians, nominees and
fiduciaries in accordance with the rules of the National Association of
Securities Dealers, Inc., for reasonable expenses incurred by them in forwarding
materials to the beneficial owners of shares. The entire cost of solicitation
will be borne by AES Chigen.
SHAREHOLDERS SHOULD NOT SEND SHARE CERTIFICATES WITH THEIR PROXY CARDS. THE
PROCEDURE FOR THE EXCHANGE OF SHARES AFTER THE AMALGAMATION IS CONSUMMATED IS
SET FORTH ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS. SEE "THE
AMALGAMATION -- PROCEDURES FOR CONVERTING AES CHIGEN CLASS A COMMON STOCK INTO
AES COMMON STOCK."
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THE AMALGAMATION
BACKGROUND
The Board of Directors of AES Chigen held a meeting on August 1, 1996. Such
meeting included a discussion of the future financing needs for AES Chigen.
During that discussion, Dennis W. Bakke, a Class B Director of AES Chigen and
the President, Chief Executive Officer and a Director of AES, raised his general
concern (without elaboration) that the current AES Chigen ownership structure
did not allow AES Chigen to utilize, in the most effective manner, AES's
organizational resources as was originally contemplated prior to AES Chigen's
initial public offering. Mr. Bakke raised the question of whether AES should
consider the possibility of acquiring the outstanding shares of AES Chigen Class
A Common Stock presently held by the public. The Class A Directors acknowledged
concern over the issues discussed by Mr. Bakke and expressed their desire to
explore a possible transaction with AES, assuming a transaction could be
structured on acceptable terms. Mr. Bakke stated he would review the situation
internally at AES, and would provide more information to the Class A Directors
at a later point. At this time Mr. Bakke, on behalf of all of the Class B
Directors, indicated that in order to avoid any real or perceived conflict of
interest, in any future discussions between AES and AES Chigen, the Class A
Directors would have sole decision-making authority on behalf of AES Chigen on
this matter. Also, the Class B Directors indicated that they would recuse
themselves from representing AES Chigen in such discussions. In addition, it was
noted that the Stock Purchase and Shareholder's Agreement dated as of December
29, 1993 between AES and AES Chigen (the "Stock Purchase and Shareholder's
Agreement") required the agreement of the Class A Directors, voting separately,
to any transaction pursuant to which AES would acquire any shares of the AES
Chigen Class A Common Stock.
In mid-August 1996, Mr. Bakke telephoned William H. Taft, IV, a Class A
Director of AES Chigen and the principal liaison between AES and the Class A
Directors, and addressed additional concerns relating to AES Chigen's existing
capital structure, including the desire to reduce AES Chigen's administrative
and operating costs, the limitations and constraints created by the pressure on
AES Chigen, as a public company, to focus on short-term results, and the
additional limitations imposed on AES Chigen as a public company focused
exclusively on the China market. Mr. Bakke indicated that AES would like to
proceed with the exploration of a possible combination of the companies,
assuming that such a transaction would be acceptable to the Class A Directors.
Mr. Bakke stated that AES felt that a stock-for-stock transaction would be the
most appropriate transaction structure, so as to provide existing AES Chigen
shareholders, as shareholders of AES, with a continuing interest in AES Chigen's
business. Mr. Bakke suggested an exchange ratio of 0.26 of a share of AES Common
Stock for each share of AES Chigen Class A Common Stock. Mr. Bakke and Mr. Taft
also discussed the steps which would be necessary for AES Chigen to be in a
position to consider the terms of any such transaction and pursue these
discussions, including the creation of a special committee of the Board of
Directors of AES Chigen and the retention by the special committee of financial
and legal advisors.
On August 31, 1996, Mr. Bakke informed Mr. Taft, through Paul T. Hanrahan,
President and Chief Executive Officer of AES Chigen, that AES would be willing
to revise the terms upon which AES would acquire the shares of AES Chigen Class
A Common Stock. Under the revised terms, AES would offer to exchange shares of
AES Common Stock for shares of AES Chigen Class A Common Stock at a 0.29
exchange ratio, provided that such exchange ratio would be adjusted, if
necessary, so that a maximum of $10.88 in value of AES Common Stock would be
issued for each share of AES Chigen Class A Common Stock so exchanged. The
revised terms also contemplated that AES Chigen would agree to pay AES a
customary break-up fee in the event that the transaction was not consummated due
to the intervention of a third party. Mr. Bakke requested a reply prior to 6:00
p.m. on September 10, 1996.
The Class A Directors met on September 5, 1996 by teleconference to
consider the appropriate response to the terms presented by AES. The Class A
Directors determined that, while they would be willing to consider a proposal
from AES under appropriate circumstances, they were not prepared at that time to
do so, given the terms of the offer and the short deadline for a response. The
Class A Directors determined that it was premature to consider the offer by AES
because the Class A Directors had not retained, and not received the advice of,
financial and legal advisors. The Class A Directors felt that the retention of
appropriate advisors
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was important to ensure a process and a transaction that served the best
interests of all concerned. On September 9, 1996, Mr. Taft sent a letter to AES
setting forth the response of the Class A Directors, indicating that, because
the Class A Directors and the senior officers of AES Chigen were also occupied
with preparing for a debt offering, it would be difficult at that time to
consider the proposed transaction.
In mid-September, Mr. Bakke and Mr. Taft had a meeting at the offices of
AES in Arlington, Virginia to discuss Mr. Taft's letter of September 9th.
On September 24, 1996, a meeting was held at AES's offices among Mr. Bakke,
Mr. Taft, William Dykes (a Class A Director of AES Chigen) and Thomas I.
Unterberg (a director of AES and also a Class B Director of AES Chigen) in
person, and Dr. Victor Hao Li (a Class A Director of AES Chigen) participating
by teleconference. At this meeting, Mr. Bakke indicated that AES would be
interested, should the Class A Directors so desire, in making a proposal to
acquire the AES Chigen Class A Common Stock in exchange for AES Common Stock at
a 0.29 exchange ratio, provided that such exchange ratio would be adjusted, if
necessary, so that a maximum of $12.18 in value of AES Common Stock would be
issued in exchange for each share of AES Chigen Class A Common Stock. The
increase from $10.88 to $12.18 in value of AES Common Stock per share of AES
Chigen Class A Common Stock was a result of recent increases in the per share
price of AES Common Stock. Pursuant to the terms of this proposal, there would
have been no assurances provided as to the minimum value to be received by
holders of AES Chigen Class A Common Stock.
In light of AES's having indicated an interest in pursuing a possible
transaction, on October 13, 1996, the AES Chigen Board of Directors formed the
Special Committee, consisting exclusively of the Class A Directors, to evaluate
the terms of any such transaction. On October 15, 1996, the Special Committee
retained Merrill Lynch to act as its financial advisor. Skadden, Arps, Slate,
Meagher & Flom LLP, which had previously been retained by AES Chigen to assist
with respect to certain potential financing transactions, was also formally
retained by the Special Committee.
On October 18, 1996, counsel to AES delivered to counsel to the Special
Committee a draft agreement which could be used to provide for the amalgamation
of a wholly-owned subsidiary of AES with and into AES Chigen in the event that
AES and AES Chigen had determined to proceed with a business combination
transaction. During the next several weeks, counsel for the Special Committee
reviewed the terms of the draft agreement with counsel for AES.
On November 5, 1996, Mr. Taft met with Mr. Bakke, Barry J. Sharp, the Chief
Financial Officer of AES, William R. Luraschi, the General Counsel of AES, and
Roger Naill, a Vice President of AES. Mr. Taft informed AES that the Special
Committee would be meeting the following day with its legal and financial
advisors to consider the terms as then presently proposed, and reviewed
generally with AES a tentative schedule for discussing the reactions of the
Special Committee and, if appropriate, negotiating the terms of a possible
business combination.
On November 6, 1996, the Special Committee met to consider the terms of a
possible transaction, as then presently proposed by AES. The Special Committee
received a presentation from its legal advisors regarding the duties of
directors in considering such a transaction. The legal advisors, as part of
their presentation, also reviewed the terms of the agreement as proposed by AES.
The Special Committee then received a preliminary presentation from Merrill
Lynch regarding the financial terms of the transaction. After discussion and
further consultation with its financial and legal advisors, the Special
Committee determined to request that the exchange ratio be increased to 0.31 in
an effort to increase the value of the consideration to be received by the
holders of AES Chigen Class A Common Stock. In selecting 0.31, the Special
Committee noted that based on the $45 5/8 closing price of a share of AES Common
Stock on November 5, 1996, the value of the fraction of a share of AES Common
Stock to be received by holders of AES Chigen Class A Common Stock would be
$14.14, as compared to $13.23 at a 0.29 exchange ratio. The Special Committee
instructed Mr. Taft to communicate such request to AES.
Later that day, Mr. Taft, together with representatives of Merrill Lynch
and Skadden, Arps, Slate, Meagher & Flom LLP, met at the offices of AES with Mr.
Bakke, Mr. Sharp, Mr. Luraschi, and Kenneth R.
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Woodcock, a Senior Vice President of AES, to discuss the Special Committee's
response to the terms proposed by AES. Mr. Taft reviewed the work performed by
the Special Committee, as well as the analyses presented by its financial
advisor, and stated that the Special Committee felt that a minimum value for the
shares which AES Chigen shareholders would receive must be included (if a
maximum value were to be included) and that an exchange ratio of 0.31 would be
more appropriate. Mr. Taft also indicated that the Special Committee did not
feel that the inclusion of a break-up fee as part of any agreement would be
appropriate.
Mr. Bakke agreed to increase the maximum value and establish a minimum
value that AES Chigen shareholders would receive, although Mr. Bakke responded
that AES would not agree to any increase in the exchange ratio. Mr. Bakke
indicated that recent increases in the market price of the AES Common Stock had
significantly increased the value of the AES Common Stock to be received by the
holders of AES Chigen Class A Common Stock. Mr. Bakke stated that continued
increases in the value of the AES Common Stock would result in a further
increase in value to the holders of AES Chigen Class A Common Stock.
On November 8, 1996, representatives of Merrill Lynch, the Special
Committee's financial advisor, discussed with Mr. Sharp the possibility of
structuring a transaction at the 0.29 exchange ratio, but with a higher minimum
value to be received by holders of AES Chigen Class A Common Stock. Following
these discussions, Mr. Taft telephoned Mr. Bakke to discuss the possibility of a
transaction at an exchange ratio of 0.29 of a share of AES Common Stock for each
share of AES Chigen Class A Common Stock within a certain price range of AES
Common Stock, but which provided that the fraction of a share of AES Common
Stock to be received by the holders of AES Chigen Class A Common Stock, should
the price of AES Common Stock move outside that range, would have a value of not
less than $13.05. The $13.05 minimum value was selected as being generally
reflective of market conditions at the time for AES Chigen Class A Common Stock
(including the trading range of the AES Chigen Class A Common Stock of $9 1/4 to
$13 3/4 between October 1, 1996 and November 7, 1996), and was the minimum value
at which the financial advisor of the Special Committee had informally advised
the Special Committee that it could deliver an appropriate opinion in a
transaction with a fixed exchange ratio of 0.29. Mr. Bakke responded that he
would be prepared to support a guarantee of a minimum value, but he felt that
there should also be protection for AES should the price of a share of AES
Common Stock rise significantly. During the discussions, Messrs. Taft and Bakke
tentatively agreed that the value should be in the range of $13.05 to $14.50 and
that the proposed amalgamation agreement should provide for reimbursement of
expenses only and should not provide for a break-up fee.
After Mr. Bakke indicated that he would be prepared to recommend such a
transaction to the AES Board of Directors, Mr. Taft informed Mr. Bakke that he
would instruct the Special Committee's legal counsel to contact legal counsel
for AES so as to finalize the terms of a proposed amalgamation agreement and
that, subject to obtaining a positive reaction from a majority of the other
members of the Special Committee, a meeting of the Special Committee would be
called for November 12, 1996 in Beijing to consider the revised terms.
During the early evening on November 11, 1996, the Board of Directors of
AES met telephonically to consider the proposed transaction. Following
discussion, the AES Board of Directors determined to approve the proposed
transaction.
At about the same time in Beijing (where because of the difference in time
zones it was early morning on November 12, 1996), the Special Committee (with
Mr. Xiliang Feng absent) met with its legal and financial advisors to consider
the proposed transaction. The Special Committee's legal advisors provided a
description of the terms of the proposed agreement and reviewed changes to the
draft agreement previously reviewed by the Special Committee. Merrill Lynch then
delivered a presentation, described under "The Amalgamation -- Opinion of the
Special Committee's Financial Advisor" regarding the financial terms of the
proposed amalgamation. The Special Committee then received the oral opinion of
Merrill Lynch, which was subsequently confirmed in a written opinion dated as of
November 12, 1996, a copy of which is attached as Appendix B hereto, see "The
Amalgamation -- Opinion of the Special Committee's Financial Advisor", to the
effect that, as of such date, the consideration to be received by holders of AES
Chigen Class A Common
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Stock is fair to such holders from a financial point of view. After further
discussion, the Special Committee, by the unanimous vote of those members
present, resolved to recommend to the AES Chigen Board of Directors that the
Board approve the amalgamation agreement (as approved on November 12, 1996, the
"Original Amalgamation Agreement") and the transactions contemplated thereby and
recommend to the holders of AES Chigen Class A Common Stock that they approve
the Original Amalgamation Agreement and the transactions contemplated thereby.
Immediately following the meeting of the Special Committee, the Board of
Directors of AES Chigen met to consider the proposed transaction. The AES Chigen
Board of Directors received a report from the Special Committee discussing the
history of the negotiations, as well as the recommendation of the Special
Committee described above. The AES Chigen Board of Directors then, by the
unanimous vote of those directors present, approved the Original Amalgamation
Agreement and the transactions contemplated thereby.
On January 23, 1997, Mr. Luraschi spoke to Mr. Taft and advised him of
AES's decision to remove the $14.50 per share limit on the maximum value to be
received by holders of AES Chigen Class A Common Stock by removing the
possibility of a downward adjustment to the 0.29 exchange ratio in the event
that the price for AES Common Stock were to trade above $50 per share during the
measuring period set forth in the Original Amalgamation Agreement, subject to
the approval of the Board of Directors of AES. Mr. Taft indicated that the
revised terms would be acceptable to the Special Committee because holders of
AES Chigen Class A Common Stock would only benefit by the proposed revised
terms.
On January 30, 1997, the Board of Directors of AES met and approved the
removal of the $14.50 per share cap on the exchange ratio and approved and
adopted the Amalgamation Agreement (as revised from the Original Amalgamation
Agreement).
On February 12, 1997, the Special Committee met telephonically to consider
certain revisions to the terms of the Amalgamation, including removal of the
$14.50 per share cap on the value to be received by holders of AES Chigen Class
A Common Stock, as embodied in the Amalgamation Agreement, as so revised.
Following discussion, the Special Committee determined to approve the revised
terms of the AES offer and the revised Amalgamation Agreement, and to recommend
to the AES Chigen Board of Directors that the Board approve the revised
Amalgamation Agreement.
Immediately following the meeting of the Special Committee, the Board of
Directors of AES Chigen met telephonically to consider the proposed revisions to
the terms of the Amalgamation. The AES Chigen Board of Directors received the
recommendation of the Special Committee described above. The AES Chigen Board of
Directors then, by unanimous vote of those directors present, approved the
revised Amalgamation Agreement.
REASONS FOR THE AMALGAMATION
The Board of Directors of AES approved the Amalgamation because the Board
believes it will enhance the potential for future development and financing of
power projects in the PRC by AES, through AES Chigen or other subsidiaries or
affiliates of AES. The Amalgamation will allow AES Chigen, or any other
subsidiary or affiliate of AES pursuing business opportunities in the China
power market, to (i) direct its business strategy more appropriately toward
sustainable long-term performance, with less emphasis paid to short-term
earnings performance, (ii) reduce administrative and operating costs, (iii)
enhance AES Chigen's business performance through utilization of greater
resources available to the combined companies, and (iv) use AES Common Stock as
part of its compensation program to attract and retain qualified people at AES
Chigen.
In addition, the Board of AES believes the Amalgamation will significantly
improve the liquidity for AES Chigen shareholders arising from low trading
volumes in AES Chigen Class A Common Stock, while reducing the share price
volatility associated with operating AES Chigen as a public company focused
solely on a developing market such as the PRC.
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The Amalgamation will allow AES Chigen's shareholders to continue to share
in a portion of the potential long-term gains in AES Chigen through the
ownership of AES Common Stock following the Amalgamation, while diversifying
their investment through ownership of common stock of AES, which invests in a
variety of countries, and which has a more mature business.
TERMS OF THE AMALGAMATION
At the Effective Time, and upon the terms and subject to the conditions set
forth in the Amalgamation Agreement, AES Sub will be amalgamated with and into
AES Chigen in accordance with the Companies Act. At and after the Effective
Time, AES Chigen will continue in the form of the Amalgamated Company and will
operate under the name AES China Generating Co. Ltd.
EXCHANGE RATIO. As of the Effective Time, by virtue of the Amalgamation
and without any action on the part of the holder of any shares of AES Chigen
Class A Common Stock, each issued and outstanding share of AES Chigen Class A
Common Stock shall be canceled in consideration of the right to receive AES
Common Stock in the ratio of (i) 0.2900 of a share of AES Common Stock;
provided, that should the average closing price of AES Common Stock on the NYSE
(with fractions expressed as a decimal rounded to the nearest one
ten-thousandth) over the 15 consecutive trading day period ending at the close
of trading on the third trading day immediately prior to the date of the Special
Meeting (the "Average Closing Price") be less than $45.00, shares of AES Chigen
Class A Common Stock will be canceled in consideration of the right to receive a
fraction of a share of AES Common Stock (expressed as a decimal rounded to the
nearest one ten-thousandth) as is determined by dividing $13.05 by the Average
Closing Price (the "Exchange Ratio" or the "Amalgamation Consideration"). AES
has the right not to consummate the Amalgamation if the Exchange Ratio, as so
determined, is greater than 0.3100. Fractional shares of AES Common Stock will
not be issuable in connection with the Amalgamation. AES Chigen shareholders
will receive cash, without interest, in lieu of fractional shares of AES Common
Stock.
The Exchange Ratio, the $13.05 and $45.00 floor amounts, and the maximum
exchange ratio set forth as a condition to AES's obligations will be adjusted to
reflect fully the effect of any stock split (including a consolidation) of AES
Common Stock or a dividend payable in AES Common Stock, or any other
distribution of securities or dividend (in cash or otherwise) to holders of AES
Common Stock (including, without limitation, such a distribution made in
connection with a recapitalization, reclassification, merger, consolidation,
reorganization or similar transaction, but excluding any regular quarterly
dividend paid in cash) occurring or having a record date after the date of the
Amalgamation Agreement and prior to the Effective Time.
As of the Effective Time, by virtue of the Amalgamation and without any
action on the part of the holders of any shares of AES Chigen Common Stock, or
any shares of AES Sub, each share of the capital stock of AES Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and nonassessable share of common stock of the Amalgamated
Company; and each share of AES Chigen Common Stock that is owned by any
subsidiary of AES Chigen and each share of AES Chigen Common Stock that is owned
by AES, AES Sub or any other subsidiary of AES shall automatically be canceled
and shall cease to exist, and no consideration shall be delivered in exchange
therefor.
EFFECTIVE TIME OF AMALGAMATION; CLOSING DATE. The Amalgamation shall
become effective at such time as a certificate of amalgamation (the "Certificate
of Amalgamation") is duly issued by the Bermuda Registrar of Companies (the time
the Amalgamation becomes effective being the "Effective Time"). The closing of
the Amalgamation will take place at 10:00 a.m. on a date to be specified by AES
or AES Sub, which may be on, but shall be no later than the third business day
after, the day on which there shall have been satisfaction or waiver of the
conditions as described under "Description of the Amalgamation
Agreement -- Conditions" below (the "Closing Date"), unless another date is
agreed to in writing by the parties to the Amalgamation Agreement.
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RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
AES Chigen Special Committee and Board of Directors.
At a meeting of the Special Committee held on November 12, 1996, the
Special Committee unanimously (with one member absent) determined (i) to approve
and adopt the Original Amalgamation Agreement in substantially the form
presented at the meeting, (ii) to approve the transactions contemplated thereby,
including the Amalgamation, and (iii) to recommend to the holders of AES Chigen
Class A Common Stock that they approve the Original Amalgamation Agreement and
the transactions contemplated thereby.
In reaching the determination described above, the Special Committee gave
careful consideration, without assigning relative weights thereto, to a number
of factors, including, without limitation, the following:
(1) the Special Committee's familiarity with AES Chigen's business, assets,
financial condition, results of operations, business strategy and
prospects, and current trends in the markets in which it operates;
(2) the value and type of the consideration to be received by AES Chigen's
shareholders;
(3) the oral opinion of Merrill Lynch delivered to the Special Committee at
the meeting on November 12, 1996 and subsequently delivered to the
Special Committee in writing to the effect that, as of such date, the
consideration to be received by the holders of AES Chigen Class A
Common Stock in the Amalgamation is fair to such holders from a
financial point of view (a copy of Merrill Lynch's written opinion
setting forth the assumptions made, general procedures followed,
matters considered, and the limitations on the reviews undertaken, is
attached as Appendix B hereto);
(4) the opportunity for AES Chigen's shareholders to continue to share in
the potential for long-term gains in AES Chigen through the ownership
of AES Common Stock following the Amalgamation, while diversifying
their risk through ownership of shares of AES, which invests in various
countries;
(5) the current environment in which AES Chigen operates and the potential
benefits offered to AES Chigen by the transaction, including the
rationalization of management and operating structure, the enhanced
ability to focus on long term goals, the ability to use AES Common
Stock as part of AES Chigen's compensation program and thereby enhance
AES Chigen's ability to attract and retain qualified employees, and the
greater resources available to the combined company;
(6) the fact that the Original Amalgamation Agreement permits AES Chigen to
terminate the Original Amalgamation Agreement to accept a Superior
Proposal (as defined in "Description of the Amalgamation
Agreement -- No Solicitation" below), recognizing, however, that AES's
ownership position and certain of the terms of AES Chigen's Bye-laws
may serve to deter certain bidders;
(7) the other terms and conditions of the Original Amalgamation Agreement,
including the parties' reciprocal representations, warranties and
covenants and the conditions to their respective obligations; and
(8) AES's existing ownership interest in AES Chigen and the terms of the
Stock Purchase and Shareholder's Agreement between AES Chigen and AES
which imposes restrictions on the ability of AES to make an unsolicited
proposal for a combination transaction with AES Chigen.
At a meeting of the Board of Directors of AES Chigen held immediately
thereafter, the Board of Directors by a unanimous vote (with one member absent),
based upon the recommendation of the Special Committee, determined (i) to
approve and adopt the Original Amalgamation Agreement in substantially the form
presented at the meeting, (ii) to approve the transactions contemplated thereby,
including the Amalgamation and (iii) to recommend to the shareholders of AES
Chigen that they approve the Original Amalgamation Agreement and the
transactions contemplated thereby. See "The Amalgamation -- Background."
At a meeting of the Special Committee held on February 12, 1997, the
Special Committee considered certain revisions to the terms of the Amalgamation,
including removal of the $14.50 per share cap on the value
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to be received by holders of AES Chigen Class A Common Stock, as embodied in the
revised Amalgamation Agreement and unanimously (with one member absent and one
member represented by another director pursuant to Section 91A of the Companies
Act) determined (i) to approve in all respects the Amalgamation Agreement in
substantially the form reviewed by the Special Committee, (ii) to approve in all
respects the transactions contemplated thereby and (iii) to recommend that the
Board of Directors approve and adopt the Amalgamation Agreement in substantially
the form presented at the meeting.
At a meeting of the Board of Directors of AES Chigen held immediately
thereafter, the Board of Directors, by a unanimous vote (with one member absent
and one member represented by another director pursuant to Section 91A of the
Companies Act), based upon the recommendation of the Special Committee,
determined (i) to approve in all respects the Amalgamation Agreement in
substantially the form reviewed by the Board of Directors, (ii) to approve in
all respects the transactions contemplated thereby and (iii) to recommend to the
shareholders of AES Chigen that they approve the Amalgamation Agreement and the
transactions contemplated thereby.
Members of the Special Committee.
The members of the Special Committee are William Dykes, Xiliang Feng, Dr.
Victor Hao Li and William H. Taft, IV.
William Dykes has been a Class A Director of AES Chigen since February
1994. Mr. Dykes retired from Citibank N.A. in 1992 after 36 years of service.
Since his retirement, Mr. Dykes has provided financial advisory services for
international projects. Prior to his retirement, he spent 11 years as Managing
Director of Citicorp International Limited in Hong Kong where he was responsible
for providing financial advisory services and structuring major term loans to
governments, corporations and projects in the Pacific basin. During that time he
was responsible for Citibank's involvement in a number of major PRC-related
financings, including the 700 MW Shajiao B project constructed by Hopewell
Holdings Limited in Guangdong Province.
Xiliang Feng has been a Class A Director of AES Chigen since March 1995.
Since 1991, Mr. Feng has been Editor-in-Chief Emeritus and Special Advisor to
the China Daily newspaper and Chairman of the China Daily Distribution
Corporation in New York. Mr. Feng has also been Senior Consultant to "WINDOW"
newsmagazine of Hong Kong since 1991. Born in Shanghai in 1920, Mr. Feng
received a bachelor's degree in journalism from St. John's University in
Shanghai, a master's degree in journalism from the University of Missouri and
was a Professional Journalism Fellow at Stanford University in 1983. He was
awarded The Missouri Medal of Honor for Distinguished Service in Journalism
awarded by the University of Missouri in 1984. He has been a member of the
National Committee of the Chinese People's Political Consultative Conference
since 1987. Mr. Feng is a trustee of the International Center for Communications
at San Diego State University and a member of the Pacific Communications
Research Council.
Dr. Victor Hao Li has been a Class A Director of AES Chigen since February
1994. Since 1991, Dr. Li has been Co-Chairman of the Asia Pacific Consulting
Group of Watanabe, Ing & Kawashima in Honolulu, Hawaii and is a specialist in
Asian law. From 1981 to 1990, he served as President of the East-West Center, a
federally supported research center. He currently serves on the Board of
Directors of Hawaiian Electric Industries, Inc., a utility customer of AES
Barbers Point, Inc., a subsidiary of AES. Born in China, Dr. Li graduated from
Columbia College and Columbia Law School and holds two post-graduate degrees
from Harvard Law School.
William H. Taft, IV has been a Class A Director of AES Chigen since April
1994. Mr. Taft joined the law firm of Fried, Frank, Harris, Shriver and Jacobson
in September 1992 and is a partner in the firm's Washington, D.C. office. From
1989 until 1992 he was U.S. Permanent Representative of NATO. Prior to coming to
NATO, Mr. Taft served as Deputy Secretary of Defense from January 1984 until
April 1989 and as Acting Secretary of Defense from January to March 1989. From
1981 until 1984, Mr. Taft served as Department of Defense General Counsel. Prior
to his initial appointment to the Department of Defense, Mr. Taft was engaged in
the practice of law in Washington, D.C. from 1977 to 1981. Before entering
private practice, he served in various positions at the Federal Trade
Commission, the Office of Management and
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Budget, and the Department of Health, Education and Welfare (HEW), highlighted
by his appointment by President Ford in 1976 to serve as General Counsel of HEW.
AES Board of Directors.
On November 11, 1996, the Board of Directors of AES determined that the
Amalgamation is in the best interests of AES and its stockholders and approved
and adopted the Original Amalgamation Agreement and approved the transactions
contemplated thereby. On January 30, 1997, the Board of Directors approved the
removal of the $14.50 per share cap on the value to be received by holders of
AES Chigen Class A Common Stock, approved and adopted the revised Amalgamation
Agreement and approved the transactions contemplated thereby.
OPINION OF THE SPECIAL COMMITTEE'S FINANCIAL ADVISOR
On November 12, 1996, Merrill Lynch delivered its oral opinion, which was
subsequently confirmed in a written opinion dated as of November 12, 1996 (the
"Merrill Lynch Opinion"), to the Special Committee to the effect that, as of
such date, the proposed consideration to be received by the holders of the AES
Chigen Class A Common Stock in the Amalgamation was fair to such holders from a
financial point of view.
A copy of the Merrill Lynch Opinion, which sets forth the assumptions made,
general procedures followed, matters considered, and limitations on the reviews
undertaken, is attached as Appendix B hereto and incorporated herein by
reference. The Merrill Lynch Opinion is directed only to the fairness, from a
financial point of view, to the holders of the AES Chigen Class A Common Stock
of the proposed consideration to be received by them in the Amalgamation and
does not address AES Chigen's underlying business decision to effect the
Amalgamation or constitute a recommendation to any AES Chigen shareholder as to
how such shareholder should vote with respect to the Amalgamation. At the time
the Merrill Lynch Opinion was rendered, the Exchange Ratio included a downward
adjustment providing that in the event that as of the Effective Time the Average
Closing Price exceeded $50.00, shares of AES Chigen Class A Common Stock would
be canceled in consideration of the right to receive a fraction of a share of
AES Common Stock as would be determined by dividing $14.50 by the Average
Closing Price. As described in "The Amalgamation -- Background," the foregoing
downward adjustment to the Exchange Ratio was subsequently eliminated. The
summary of the Merrill Lynch Opinion set forth below is qualified in its
entirety by reference to the full text of such opinion attached as Appendix B
hereto. Shareholders are urged to read the opinion in its entirety.
In arriving at the Merrill Lynch Opinion, Merrill Lynch, among other
things, (i) reviewed AES Chigen's Annual Report, Form 10-K and related financial
information for each of the two fiscal years in the period ended November 30,
1995 and AES Chigen's Form 10-Q and the related unaudited financial information
for each of the quarterly periods ending August 31, 1996, May 31, 1996 and
February 28, 1996; (ii) reviewed AES Chigen's initial public offering prospectus
dated February 24, 1994 and AES Chigen's Form S-3 Registration Statement dated
October 16, 1996; (iii) reviewed AES's Annual Report, Form 10-K and related
financial information for each of the five fiscal years in the period ended
December 31, 1995 and AES's Form 10-Q and the related unaudited financial
information for each of the quarterly periods ending March 31, 1996 and June 30,
1996; (iv) reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of AES Chigen and
AES, furnished to Merrill Lynch by AES Chigen and AES, respectively; (v)
conducted discussions with members of senior management of AES Chigen and AES
concerning their respective businesses and prospects; (vi) reviewed the
historical market prices and trading activity for the AES Chigen Class A Common
Stock and the AES Common Stock and compared them with those of certain publicly
traded companies which Merrill Lynch deemed to be comparable to AES Chigen and
AES, respectively; (vii) compared the results of operations of AES Chigen and
AES with those of certain companies which Merrill Lynch deemed to be comparable
to AES Chigen and AES, respectively; (viii) compared the proposed financial
terms of the Amalgamation with the financial terms of certain other mergers and
acquisitions which Merrill Lynch deemed to be relevant; (ix) reviewed a draft of
the Amalgamation Agreement dated November 9, 1996, which the Special Committee
advised Merrill Lynch would be identical in all material respects to the
Amalgamation Agreement as executed; and (x) reviewed
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such other financial studies and analyses and performed such other
investigations and took into account such other matters as Merrill Lynch deemed
necessary.
In preparing the Merrill Lynch Opinion, Merrill Lynch, with the Special
Committee's consent, relied on the accuracy and completeness of all information
supplied or otherwise made available to Merrill Lynch by AES Chigen and AES and
Merrill Lynch did not independently verify such information or undertake an
independent appraisal of the assets or liabilities of AES Chigen or AES. With
respect to the financial forecasts furnished by AES Chigen and AES, Merrill
Lynch assumed that such forecasts had been reasonably prepared and reflected the
best currently available estimates and judgment of AES Chigen's and AES's
management as to the expected future financial performance of AES Chigen or AES,
as the case may be. The Merrill Lynch Opinion necessarily was based on market,
economic, financial and other conditions as they existed and could be evaluated
as of the date of the Merrill Lynch Opinion.
In connection with the preparation of the Merrill Lynch Opinion, Merrill
Lynch was not authorized by AES Chigen or its Board of Directors or the Special
Committee to solicit, nor did Merrill Lynch solicit, third-party indications of
interest for the acquisition of all or any part of AES Chigen.
The following is a summary of the analyses performed by Merrill Lynch in
connection with the Merrill Lynch Opinion which were described by Merrill Lynch
in connection with a presentation to the Special Committee on November 12, 1996.
Purchase Price Analysis. Merrill Lynch performed an analysis of the
Amalgamation which indicated an implied offer value of $13.30 (the "Implied
Offer Value") per share of AES Chigen Class A Common Stock based on the November
8, 1996 AES Common Stock price of $45.88 per share and using an exchange ratio
of 0.29 shares of AES Common Stock per share of AES Chigen Class A Common Stock
(the "Base Exchange Ratio"). The Implied Offer Value represented a 5.0% discount
to the price per share of AES Chigen Class A Common Stock of $14.00 on November
8, 1996, a 4.3% premium to the price per share of AES Chigen Class A Common
Stock at November 6, 1996, a 6.4% premium to the price per share of AES Chigen
Class A Common Stock at October 14, 1996 (the date of Merrill Lynch's
appointment as financial advisor to the Special Committee), a 45.8% premium to
the price per share of AES Chigen Class A Common Stock at August 1, 1996 (the
date of commencement of discussions between AES and AES Chigen regarding the
Amalgamation), a 2.8% premium to the average price per share of AES Chigen Class
A Common Stock during the thirty day period ending on November 8, 1996, a 40.6%
premium to the average price per share of AES Chigen Class A Common Stock during
the twelve month period ending on November 8, 1996 and a 30.7% premium to the
average price per share of AES Chigen Class A Common Stock since the initial
public offering of the AES Chigen Class A Common Stock on February 24, 1994. An
analysis of the ratios of an offer value of $209.2 million (based on the Implied
Offer Value and the fully diluted number of shares outstanding of AES Chigen
Class A Common Stock (assuming the exercise of all options and their exchange
into AES Chigen Class A Common Stock) and the AES Chigen Class B Common Stock)
(the "Fully Diluted Offer Value") to AES Chigen's 1997 estimated earnings of
$11.4 million and 1998 estimated earnings of $34.4 million (in each case based
on base case projections as such projections are described under "Discounted
Cash Flow Analysis" below), yielded multiples of 18.4x and 6.1x, respectively.
An analysis of the ratios of the Fully Diluted Offer Value to 1997 estimated
earnings per share of $0.55 and 1998 estimated earnings per share of $1.35 (in
each case based on the report of a research analyst) yielded multiples of 24.2x
and 9.9x, respectively.
Historical Stock Price and Exchange Ratio Analyses. Merrill Lynch reviewed
the performance of the per share daily closing market price of the AES Chigen
Class A Common Stock over the period from February 24, 1994 to November 8, 1996
and compared such daily closing prices with the performance of the Standard &
Poor's 500 Index. Merrill Lynch also reviewed the performance of the per share
daily closing market price of the AES Common Stock over the same period and
compared such daily closing prices with the Standard & Poor's 500 Index. In
addition, Merrill Lynch compared the historical market price per share of the
AES Chigen Class A Common Stock to the historical market price per share of the
AES Common Stock for the period February 24, 1994 to November 8, 1996. Such
comparisons indicated that during the period from February 24, 1994 to November
8, 1996, the price per share of the AES Chigen Class A Common Stock
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declined by 12.5%, the Standard & Poor's 500 Index increased by 57.4%, and the
price per share of the AES Common Stock increased by 98.9%. Such further
analysis indicated that the implied exchange ratio at market prices of the
number of shares of AES Common Stock necessary to equal one share of AES Chigen
Class A Common Stock over such period ranged from the lowest exchange ratio of
0.24 towards the end of the period to the highest exchange ratio of 0.76 towards
the beginning of the period. The Base Exchange Ratio was within such range.
Analysis of Selected Publicly-Traded Comparable Companies. Merrill Lynch
compared AES Chigen to two power companies operated in China deemed by Merrill
Lynch to be reasonably similar to AES Chigen: Huaneng Power and Shandong Huaneng
(the "Comparable Companies").
Merrill Lynch determined trading multiples for the Comparable Companies of
price to book value as of June 30, 1996 and multiples for the Comparable
Companies of 1998 estimated price to earnings (based on selected research
reports). An analysis of the multiples for the Comparable Companies produced the
following results: (i) price to book value as of June 30, 1996 yielded an
average multiple of 1.11x; and (ii) 1998 estimated price to earnings yielded an
average multiple of 8.4x. Merrill Lynch then compared the results of such
analyses for the Comparable Companies to the corresponding results for AES
Chigen. Applying the average multiple for price to book value as of June 30,
1996, Merrill Lynch calculated an implied value of $11.50 per share of AES
Chigen Class A Common Stock. Applying the average multiple for 1998 estimated
price to earnings (based on the selected research reports referred to above),
Merrill Lynch calculated an implied value of $13.50 per share of AES Chigen
Class A Common Stock.
Merrill Lynch considered the companies utilized in the above analysis to be
reasonably similar to AES Chigen because each participates in the power industry
in China, but, neither of these companies is identical to AES Chigen.
Accordingly, an analysis of the results of the foregoing is not purely
mathematical. Rather, it involves complex considerations and judgments
concerning differences in historical and projected financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the comparable companies or company to which they are being
compared.
Analysis of Selected Acquisition Transactions. Merrill Lynch reviewed
certain publicly available information regarding 32 selected acquisition
transactions, announced since February 15, 1989, involving minority interest
repurchases and consideration in excess of $100 million (collectively, the
"Comparable Transactions"). The Comparable Transactions, in reverse
chronological order of public announcement were the following (listed by
seller/acquiror): GEICO Corp./Berkshire Hathaway Inc.; REN Corp.-USA/COBE
Laboratories (Gambro AB); Bic Corp./BIC SA; Club Med Inc./Club Mediterranee
S.A.; Fleet Mortgage Group Inc./Fleet Financial Group Inc.; Pacific
Telecom/PacifiCorp; Contel Cellular Inc./GTE Corp.; Chemical Waste Management
Inc./WMX Technologies Inc.; Ogden Projects Inc./Ogden Corp.; Diamond Shamrock
Offshore/Burlington Resources Inc.; Medical Marketing Group Inc./Medco
Containment Services Inc.; Brand Cos Inc./Rust International Inc.; PHLCORP
Inc./Leucadia National Corp.; Unocal Exploration Corp./Unocal Corp.; American
Television & Commun./Time Warner; United Artists Entertainment/Tele-
Communications Inc.; Hamilton Oil Corp./BHP Hldgs (USA) Inc. (Broken Hill);
Ocean Drilling & Exploration/Murphy Oil Corp.; US WEST New Vector Group Inc./US
West Inc.; Freeport-McMoRan Oil and Gas/Freeport-McMoRan Inc.; Mack Trucks
Inc./Renault Vehicules Industriels; Shearson Lehman Brothers Hldgs/American
Express Co.; Esselte Business Systems Inc./Esselte AB; Telerate Inc./Dow Jones &
Co. Inc.; HIMONT Inc./Montedison SpA; Wheelabrator Technologies
Inc./Wheelabrator Technologies Inc.; AL Williams Corp./Primerica Corp.; Fisher
Scientific Grp /Henley Group Inc.; WestMarc Communications
Inc./Tele-Communications Inc.; Centel Cable Television Co./Centel Corp.; Sizzler
Restaurants Intl. Inc./Collins Foods International; Enserch Exploration
Partners/ENSERCH Corp.
For each of the Comparable Transactions Merrill Lynch compiled figures
illustrating, among other things, the premiums to market price at one day and
one month prior to the announcement date of each such Comparable Transaction.
The figures with respect to all of the Comparable Transactions produced (i) a
mean premium of 19.8% and a median premium of 19.2% at one day prior to the
announcement date and (ii) a mean premium of 27.6% and a median premium of 25.7%
at one month prior to the announcement date. The figures with respect to only
those Comparable Transactions involving consideration in the form of stock
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<PAGE> 42
produced (i) a mean premium of 18.3% and a median premium of 16.2% at one day
prior to the announcement date and (ii) a mean premium of 31.9% and a median
premium of 22.9% at one month prior to the announcement date. Merrill Lynch then
calculated the implied value per share of the AES Chigen Class A Common Stock
based on premiums derived from Merrill Lynch's analysis of the Comparable
Transactions and ranging from 20% to 30%. Based on its analysis, Merrill Lynch
calculated that the Comparable Transactions indicated a value range per share of
the AES Chigen Class A Common Stock that was from $15.00 to $16.25 per share,
more than the Implied Offer Value.
Merrill Lynch considered the Comparable Transactions utilized in the above
analysis to be reasonably comparable to the Amalgamation because each involved
minority interest repurchases and consideration in excess of $100 million, but
no company, business or transaction used in the Comparable Transaction analysis
is identical to AES Chigen or the Amalgamation. Accordingly, an analysis of the
results of the foregoing is not purely mathematical. Rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the comparable companies or AES Chigen, the business segments
being compared, or the transaction values of the Comparable Transactions or the
Amalgamation.
Discounted Cash Flow Analysis. Merrill Lynch performed a low value range
and a high value range portfolio discounted cash flow analysis of AES Chigen,
based upon projections prepared by AES Chigen's management with respect to a
downside case, a base case and an upside case for the expected life of each
project in the portfolio. Merrill Lynch also performed a low value range and a
high value range project by project discounted cash flow analysis of AES Chigen
based upon projections prepared by AES Chigen's management with respect to the
base case for the expected life of each such project. Merrill Lynch was advised
that the downside case was based on the minimum electricity purchase commitments
set out in the power purchase agreements for AES Chigen's projects, the base
case was based on management's expected sales of electricity from AES Chigen's
projects and the upside case was based on management's expected additional sales
of electricity if the main customer of the Jiaozuo project completes a
significant expansion program by the year 1999. In all cases Merrill Lynch
included $20 million of franchise value based upon the estimate of premiums that
willing buyers would be willing to pay for market entry into potentially
attractive markets via established entities. Utilizing these projections,
Merrill Lynch calculated a range of values based upon the discounted net present
value of AES Chigen's stream of projected after-tax free cash flow over the
expected life of each project in the portfolio. In performing the portfolio
discounted cash flow analysis, Merrill Lynch applied discount rates reflecting a
weighted average cost of capital ranging from 13% to 17% to the consolidated
projected after-tax free cash flow for all of the projects in the portfolio. In
the project by project analysis Merrill Lynch applied discount rates ranging
from 13% to 17% to the projected after-tax free cash flow for each of the
operating and late-stage construction projects and 17% to 19% for each of the
development projects. Based on this analysis, Merrill Lynch calculated a range
of values per share of AES Chigen Class A Common Stock of $9.75 to $11.75,
$11.75 to $14.00, $12.25 to $14.50 and $11.44 to $13.78 in the downside case,
the base case, the upside case, and the project by project case, respectively.
The Implied Offer Value was above or within the range of such values.
Present Value of Implied Future Stock Price. Merrill Lynch calculated a
present value of the estimated price of the AES Chigen Class A Common Stock in
the year 2000. Merrill Lynch estimated AES Chigen's equity value in 2000 based
on price to earnings multiples of 11.0x to 13.0x of projected 2000 net income
(based on AES Chigen's base case projections). Such projected future stock price
was discounted (using equity discount rates of 15% and 18%) to a range of
present values of approximately $14.00 to $18.50, which in each case was above
the Implied Offer Value.
AES Valuation. In evaluating the value of the AES Common Stock proposed to
be issued in the Amalgamation, Merrill Lynch reviewed the market price of the
AES Common Stock and performed certain analyses based on certain research
reports and on AES's management projections. Such analyses included a comparable
public company analysis, a portfolio discounted cash flow analysis (based on
AES's management projections), a project by project discounted cash flow
analysis and an analysis of the present value of the implied future price of AES
Common Stock. These analyses indicated values per share of AES Common Stock of
$37.50 to $48.00, $49.25 to $58.50, $36.50 to $54.75 and $47.00 to $57.25,
respectively. The closing
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<PAGE> 43
market price of the AES Common Stock on the NYSE on November 8, 1996 of $45.88
per share was within or below each such range of values.
Relative Implied Exchange Ratio Valuation. Utilizing both the low and high
value ranges in the project by project discounted cash flow analysis for AES
Chigen and for AES, Merrill Lynch calculated an implied exchange ratio of the
number of shares of AES Common Stock that would be exchangeable for one share of
AES Chigen Class A Common Stock. Merrill Lynch's calculations produced the
following results: (i) with respect to AES Chigen's downside case, the implied
exchange ratio was 0.22 (utilizing the high value range for each of AES Chigen
and AES) and 0.27 (utilizing the low value range for each of AES Chigen and
AES); (ii) with respect to AES Chigen's base case, the implied exchange ratio
was 0.26 (utilizing the high value range for each of AES Chigen and AES) and
0.32 (utilizing the low value range for each of AES Chigen and AES) and (iii)
with respect to AES Chigen's upside case, the implied exchange ratio was 0.27
(utilizing the high value range for each of AES Chigen and AES) and 0.34
(utilizing the low value range for each of AES Chigen and AES). The Base
Exchange Ratio was within the range of implied exchange ratios for the base case
and the upside case.
In addition Merrill Lynch calculated an implied exchange ratio based on its
review of the historical market value of the AES Chigen Class A Common Stock and
the AES Common Stock (based on an average implied exchange rate of 0.28 and 0.35
for the three months preceding November 8, 1996 and the twelve months preceding
November 8, 1996, respectively), its comparable public company analyses for AES
Chigen and AES and its calculation of the present value of the implied future
stock price of AES Chigen and of AES (using base case projections for AES Chigen
and AES). Merrill Lynch's calculations produced the following results: (i) with
respect to the historical market value the implied exchange ratio ranged from
0.28 to 0.35, (ii) with respect to the comparable public company analysis, the
implied exchange ratio ranged from 0.29 to 0.31 and (iii) with respect to the
present value of the implied future stock price, the implied exchange ratio
ranged from 0.30 to 0.32. The Base Exchange Ratio was within the range of the
implied exchange ratios for the historical market value and comparable company
analyses.
Pro Forma Merger Analysis. Utilizing the Base Exchange Ratio, Merrill
Lynch analyzed certain pro forma effects resulting from the Amalgamation,
including the effect on AES Chigen's projected earnings per share and the future
stock price of AES Chigen (in each case based on selected research reports and
on management forecasts).
The foregoing summary does not purport to be a complete description of the
analyses performed by Merrill Lynch or of its presentation to the Special
Committee. The preparation of financial analyses and fairness opinions is a
complex process and is not necessarily susceptible to partial analysis or
summary description. Merrill Lynch believes that its analyses (and the summary
set forth above) must be considered as a whole, and that selecting portions of
such analyses and of the factors considered by them, without considering all
such analyses and factors, could create an incomplete and misleading view of the
processes underlying the analyses conducted by Merrill Lynch and its opinion.
Merrill Lynch did not make any attempt to assign specific weights to particular
analyses in preparing its opinion. In performing its analyses, Merrill Lynch
made numerous assumptions with respect to industry performance, general business
and economic conditions, and other matters, many of which are beyond the control
of AES Chigen and AES. Any estimates contained in Merrill Lynch's analyses are
not necessarily indicative of actual past or future results or values, which may
be significantly more or less favorable than such estimates. Estimates of values
of companies do not purport to be appraisals or to reflect the prices at which
such companies may actually be sold. Because such estimates are inherently
subject to uncertainty, none of Merrill Lynch, AES Chigen, AES, or any other
person assumes responsibility for their accuracy.
As part of its investment banking business, Merrill Lynch is continuously
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions. The Special Committee retained Merrill Lynch to act as
its financial advisor because Merrill Lynch is an internationally recognized
investment banking firm with substantial experience in transactions similar to
the Amalgamation.
Merrill Lynch has, in the past, provided financing services to AES Chigen,
and has received fees for the rendering of such services. In addition, in the
ordinary course of business, Merrill Lynch may actively trade
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<PAGE> 44
the AES Chigen Class A Common Stock as well as the AES Common Stock for Merrill
Lynch's own account, for the accounts of its affiliates and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
For its financial advisory services in connection with the Amalgamation,
AES Chigen paid Merrill Lynch US $100,000 as of October 15, 1996, the date of
its engagement by the Special Committee, and an additional fee of US $400,000 on
the date Merrill Lynch delivered the Merrill Lynch Opinion. AES Chigen has also
agreed to reimburse Merrill Lynch for its reasonable out-of-pocket expenses,
including fees and expenses of its legal counsel, and to indemnify Merrill Lynch
and certain related persons against certain liabilities in connection with its
engagement, including certain liabilities under the federal securities laws.
THE FOREGOING DESCRIPTION OF THE OPINION AND PRESENTATION OF MERRILL LYNCH
CONTAINS FORWARD LOOKING INFORMATION. SEE "SPECIAL NOTE REGARDING
FORWARD-LOOKING INFORMATION" FOR INFORMATION WITH RESPECT TO THE FACTORS THAT
MAY AFFECT SUCH INFORMATION. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
THE PROJECTIONS AND FORECASTS FURNISHED TO THE FINANCIAL ADVISOR RENDERING THE
OPINION DESCRIBED ABOVE WERE PREPARED BY THE RESPECTIVE MANAGEMENTS OF AES OR
AES CHIGEN. NEITHER AES NOR AES CHIGEN PUBLICLY DISCLOSES INTERNAL MANAGEMENT
PROJECTIONS OF THE TYPE PROVIDED TO SUCH FINANCIAL ADVISOR IN CONNECTION WITH
SUCH FINANCIAL ADVISOR'S ANALYSIS OF THE AMALGAMATION, AND SUCH PROJECTIONS WERE
NOT PREPARED WITH A VIEW TOWARD PUBLIC DISCLOSURE. THESE PROJECTIONS WERE BASED
ON NUMEROUS VARIABLES AND ASSUMPTIONS THAT ARE INHERENTLY UNCERTAIN AND MAY BE
BEYOND THE CONTROL OF MANAGEMENT, INCLUDING, WITHOUT LIMITATION, FACTORS RELATED
TO GENERAL ECONOMIC AND COMPETITIVE CONDITIONS AND PREVAILING INTEREST RATES.
ACCORDINGLY, ACTUAL RESULTS COULD VARY SIGNIFICANTLY FROM THOSE SET FORTH IN
SUCH PROJECTIONS.
ACCOUNTING TREATMENT
The Amalgamation will be accounted for as a purchase under generally
accepted accounting principles.
PROCEDURES FOR CANCELLATION OF AES CHIGEN CLASS A COMMON STOCK AND ISSUANCE OF
AES COMMON STOCK
The manner of making payment for the cancellation of AES Chigen Class A
Common Stock in the Amalgamation is described below.
At the Effective Time, AES shall make available to First Chicago Trust
Company of New York (the "Exchange Agent"), for the benefit of those persons who
immediately prior to the Effective Time were the holders of AES Chigen Class A
Common Stock, a sufficient number of certificates representing shares of AES
Common Stock required to effect the delivery of the aggregate Amalgamation
Consideration required to be issued pursuant to the Amalgamation Agreement (the
certificates representing shares of AES Common Stock comprising such aggregate
Amalgamation Consideration being hereinafter referred to as the "Exchange
Fund"). The Exchange Agent shall, pursuant to irrevocable instructions, deliver
the shares of AES Common Stock contemplated to be issued pursuant to the
Amalgamation Agreement. The Exchange Fund shall not be used for any other
purpose.
Promptly after the Effective Time, the Exchange Agent shall mail to each
registered holder (other than Dissenting Shareholders) of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding AES Chigen Class A Common Stock (the "Certificates") (i) a form of
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Exchange Agent) and (ii) instructions for use in
effecting the surrender of the Certificates for the Amalgamation Consideration.
Upon surrender of Certificates for cancellation to the Exchange Agent, together
with such letter of transmittal duly executed and any other required documents,
the holder of such Certificates shall be entitled to receive for each of the
shares of AES
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<PAGE> 45
Chigen Class A Common Stock represented by such Certificates the Amalgamation
Consideration and the Certificates so surrendered shall forthwith be canceled.
Until so surrendered, Certificates shall represent solely the right to receive
the Amalgamation Consideration and any cash in lieu of fractional shares of AES
Common Stock as contemplated by the Amalgamation Agreement with respect to each
of the shares of AES Chigen Class A Common Stock represented thereby. No
dividends or other distributions that are declared after the Effective Time on
shares of AES Common Stock and payable to the holders of record thereof after
the Effective Time will be paid to persons entitled by reason of the
Amalgamation to receive shares of AES Common Stock until such persons surrender
their Certificates. Upon such surrender, there shall be paid to the person in
whose name shares of AES Common Stock are issued any dividends or other
distributions having a record date after the Effective Time and payable with
respect to such shares of AES Common Stock between the Effective Time and the
time of such surrender. After such surrender there shall be paid to the person
in whose name shares of AES Common Stock are issued any dividends or other
distributions on such shares of AES Common Stock which shall have a record date
after the Effective Time and prior to such surrender and a payment date after
such surrender and such payment shall be made on such payment date. In no event
shall the persons entitled to receive such dividends or other distributions be
entitled to receive interest on such dividends or other distributions. If any
cash or any certificate representing shares of AES Common Stock is to be paid to
or issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such exchange that
the Certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange shall pay
to the Exchange Agent any transfer or other taxes required by reason of the
issuance of certificates for such shares of AES Common Stock in a name other
than that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable. Notwithstanding the foregoing, neither the Exchange Agent
nor any party to the Amalgamation Agreement shall be liable to a holder of AES
Chigen Class A Common Stock for any shares of AES Common Stock or dividends
thereon or cash in lieu of fractional interests delivered to a public official
pursuant to applicable escheat law. The Exchange Agent shall not be entitled to
vote or exercise any rights of ownership with respect to shares of AES Common
Stock held by it from time to time hereunder, except that it shall receive and
hold all dividends or other distributions paid or distributed with respect to
such shares of AES Common Stock for the account of the persons entitled thereto.
Any portion of the Exchange Fund which remains unclaimed by the former
shareholders of AES Chigen for one year after the Effective Time shall be
delivered to AES, upon demand of AES, and any former shareholders of AES Chigen
shall thereafter look only to AES for payment of their claim for the
Amalgamation Consideration.
If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Amalgamated Company, the
execution of an indemnity agreement by such person and/or the posting by such
person of a bond in such reasonable amount as the Amalgamated Company may
reasonably direct, as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the shares of AES Common Stock, cash
in lieu of fractional shares of AES Common Stock and unpaid dividends and
distributions on shares of AES Common Stock deliverable in respect thereof
pursuant to the Amalgamation Agreement.
No fractional shares of AES Common Stock shall be issued in the
Amalgamation and no fractional share interests will entitle the owner thereof to
vote or to any rights of a stockholder of AES. In lieu of any such fractional
shares, each holder of shares of AES Chigen Class A Common Stock who would
otherwise have been entitled to a fraction of a share of AES Common Stock upon
surrender of Certificates for cancellation pursuant to the Amalgamation
Agreement, after aggregating all shares of AES Common Stock which such holder
would be entitled to receive under the Amalgamation Agreement, will be paid an
amount in cash (without interest) equal to the closing price per share of AES
Common Stock on the NYSE on the trading day prior to the day on which the
Effective Time occurs (with fractions expressed as a decimal rounded to the
nearest one ten-thousandth) multiplied by the Exchange Ratio. As soon as
practicable after the determination of the amount of cash to be paid to former
shareholders of AES Chigen in lieu of any fractional interests, the
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<PAGE> 46
Exchange Agent shall make available in accordance with the Amalgamation
Agreement such amounts to such former shareholders.
No transfers of shares of AES Chigen Class A Common Stock shall be made on
the share transfer books of AES Chigen after the close of business on the day
prior to the date of the Effective Time.
TREATMENT OF STOCK OPTIONS
Pursuant to the AES China Generating Co. Ltd. Incentive Stock Option Plan
(the "AES Chigen Option Plan"), all outstanding options issued thereunder (the
"Options") will, as of the Effective Time, automatically and without any action
on the part of the holder thereof, become options for AES Common Stock. The AES
Chigen Option Plan shall remain in full force and effect after the Effective
Time unless otherwise amended or terminated in accordance with the plan
document. The number of shares of AES Common Stock to which holders of the
Options will be entitled will be that number of shares of AES Common Stock which
such holders would have received if such holders had exercised their options
immediately prior to the Effective Time. The date of grant for each such Option
shall be the date on which the corresponding option was originally granted.
At the Effective Time, AES shall reserve for issuance the number of shares
of AES Common Stock that will become issuable upon the exercise of the Options.
Nothing shall affect the schedule of vesting (or the acceleration thereof) with
respect to the Options.
As soon as practicable after the Effective Time, AES will file a
registration statement or registration statements on Form S-8 (or any successor
form), or another appropriate form with respect to the shares of AES Common
Stock subject to the Options, and shall use its best efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus contained therein) for so long as
any Options remain outstanding.
After the Effective Time, no further grants will be made under the AES
Chigen Option Plan. It is the intention of AES to grant future stock options to
eligible AES Chigen employees under The AES Corporation Incentive Stock Option
Plan.
RESALE RESTRICTIONS
Except as provided below, all shares of AES Common Stock received by AES
Chigen shareholders in the Amalgamation will be freely transferable. Subject to
the requirements of applicable law, certificates surrendered for exchange by any
person constituting an "affiliate" of AES Chigen for purposes of Rule 145 under
the Securities Act of 1933, as amended (the "Securities Act"), shall not be
exchanged for certificates representing shares of AES Common Stock until AES has
received from such person a written "affiliate" agreement in a form reasonably
acceptable to AES. AES Chigen shall use reasonable efforts to cause each such
person to deliver such written agreement to AES on or prior to the Closing Date.
DESCRIPTION OF THE AMALGAMATION AGREEMENT
The following is a summary of material provisions of the Amalgamation
Agreement, which is included as Appendix A to this Proxy Statement/Prospectus
and is incorporated herein by reference. This summary is qualified in its
entirety by reference to the Amalgamation Agreement. For certain defined terms
used in the summary below, see "Description of the Amalgamation
Agreement -- Certain Definitions".
The Amalgamation
At the Effective Time, and upon the terms and subject to the conditions set
forth in the Amalgamation Agreement, AES Sub will be amalgamated with and into
AES Chigen in accordance with the Companies Act. AES Chigen will continue in the
form of the Amalgamated Company and shall operate under the name AES China
Generating Co. Ltd.
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The Amalgamation Consideration
In the Amalgamation, each issued and outstanding share of AES Chigen Class
A Common Stock shall be canceled in consideration of the right to receive AES
Common Stock in the ratio of 0.2900 of a share of AES Common Stock; provided,
that should the average closing price of AES Common Stock on the NYSE (with
fractions expressed as a decimal rounded to the nearest one ten-thousandth) over
the 15 consecutive trading day period ending at the close of trading on the
third trading day immediately prior to the date of the Special Meeting (the
"Average Closing Price") be less than $45.00, shares of AES Chigen Class A
Common Stock will be canceled in consideration of the right to receive a
fraction of a share of AES Common Stock (expressed as a decimal rounded to the
nearest one ten-thousandth) as is determined by dividing $13.05 by the Average
Closing Price (the "Exchange Ratio" or the "Amalgamation Consideration"). AES
has the right not to consummate the Amalgamation if the Exchange Ratio, as so
determined, is greater than 0.3100. Fractional shares of AES Common Stock will
not be issuable in connection with the Amalgamation. AES Chigen shareholders
will receive cash, without interest, in lieu of fractional shares of AES Common
Stock.
The following table indicates the Exchange Ratio assuming various Average
Closing Prices, with the resulting value to be received for each share of AES
Chigen Class A Common Stock:
<TABLE>
<CAPTION>
VALUE TO BE RECEIVED FOR
EACH SHARE OF AES CHIGEN
AVERAGE CLOSING PRICE EXCHANGE RATIO CLASS A COMMON STOCK
- --------------------- -------------- ------------------------
<C> <S> <C>
$42 1/8 0.3098(1) $13.05
$43 0.3035 $13.05
$44 0.2966 $13.05
$45 0.29 $13.05
$46 0.29 $13.34
$47 0.29 $13.63
$48 0.29 $13.92
$49 0.29 $14.21
$50 0.29 $14.50
$51 0.29 $14.79
$52 0.29 $15.08
$53 0.29 $15.37
$54 0.29 $15.66
$55 0.29 $15.95
$56 0.29 $16.24
$57 0.29 $16.53
$58 0.29 $16.82
$59 0.29 $17.11
$60 0.29 $17.40
$61 0.29 $17.69
$62 0.29 $17.98
$63 0.29 $18.27
$64 0.29 $18.56
$65 0.29 $18.85
$66 0.29 $19.14
$67 0.29 $19.43
$68 0.29 $19.72
$69 0.29 $20.01
$70(2) 0.29 $20.30
</TABLE>
- ---------------
(1) AES will have the right not to consummate the Amalgamation if the Exchange
Ratio is greater than 0.3100.
(2) For each additional one dollar increase in the Average Closing Price of AES
Common Stock, the value to be received for each share of AES Chigen Class A
Common Stock increases by $0.29.
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The Exchange Ratio, the $13.05 and $45.00 floor amounts, and the maximum
exchange ratio set forth as a condition to AES's obligations will be adjusted to
reflect fully the effect of any stock split (including a consolidation) of AES
Common Stock or a dividend payable in AES Common Stock, or any other
distribution of securities or dividend (in cash or otherwise) to holders of AES
Common Stock (including, without limitation, such a distribution made in
connection with a recapitalization, reclassification, merger, consolidation,
reorganization or similar transaction, but excluding any regular quarterly
dividend paid in cash) occurring or having a record date after the date of the
Amalgamation Agreement and prior to the Effective Time.
As of the Effective Time, by virtue of the Amalgamation and without any
action on the part of the holders of any shares of AES Chigen Common Stock, or
any shares of AES Sub, each share of the capital stock of AES Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and nonassessable share of common stock of the Amalgamated
Company. Each share of AES Chigen Common Stock that is owned by any subsidiary
of AES Chigen and each share of AES Chigen Common Stock that is owned by AES,
AES Sub or any other subsidiary of AES shall automatically be canceled and shall
cease to exist, and no consideration shall be delivered in exchange therefor.
Directors, Executive Officers and Organizational Documents
The Amalgamation Agreement provides that Roger W. Sant, Dennis W. Bakke and
Robert F. Hemphill, Jr. will be the directors of the Amalgamated Company, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
The Amalgamation Agreement also provides that the executive officers of AES
Chigen immediately prior to the Effective Time shall be the executive officers
of the Amalgamated Company, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
Further, the memorandum of association of AES Chigen as in effect
immediately prior to the Effective Time shall be the memorandum of association
of the Amalgamated Company until thereafter changed or amended as provided
therein or by applicable law; and the Bye-laws of AES Chigen shall be the
bye-laws of the Amalgamated Company, until thereafter changed or amended as
provided therein or by applicable law. The registration number of the
Amalgamated Company in Bermuda after the Effective Time shall be the same
registration number as that of AES Chigen immediately prior to the Effective
Time.
Representations and Warranties
The Amalgamation Agreement contains various customary representations and
warranties of AES, AES Sub and AES Chigen. The Amalgamation Agreement contains
representations and warranties of AES Chigen as to, among other things, its
organization, standing and corporate power, its subsidiaries, its capital
structure, its authority to execute and deliver the Amalgamation Agreement and
consummate the transactions contemplated thereby, due execution and delivery of
the Amalgamation Agreement, enforceability, noncontravention, the absence of the
need for consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, the documents, including
financial statements, filed by AES Chigen with the Commission and the accuracy
of the information contained therein, the absence of any Material Adverse Change
in respect of AES Chigen, or any split, combination or reclassification of any
of its capital stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, any granting by AES Chigen to any officer of AES Chigen of any
increase in compensation, except in the ordinary course of business consistent
with prior practice, as was required under employment agreements or any increase
in severance or termination pay, except as was required under employment,
severance or termination agreements, or any damage, destruction or loss, whether
or not covered by insurance, that has or reasonably could be expected to have a
Material Adverse Effect in respect of AES Chigen or any change in accounting
methods, principles or practices by AES Chigen materially affecting its assets,
liabilities or business, except insofar as may have been required by a change in
GAAP, the absence of material litigation pending or, to the knowledge of AES
Chigen, threatened against AES Chigen or any of its subsidiaries, compliance
with applicable laws, brokers' fees and expenses, receipt of
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<PAGE> 49
an opinion of AES Chigen's financial advisor, and approval by the Special
Committee and AES Chigen's Board of Directors of the Amalgamation Agreement.
The Amalgamation Agreement also contains representations and warranties of
AES and AES Sub as to, among other things, organization, standing and corporate
power, capital structure, authority to execute and deliver the Amalgamation
Agreement and consummate the transactions contemplated thereby, due execution
and delivery of the Amalgamation Agreement, enforceability, noncontravention,
the absence of a need for consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, the
documents, including financial statements, filed by AES with the Commission and
the accuracy of the information contained therein, the absence of any Material
Adverse Change in respect of AES, or any split, combination or reclassification
of any of its capital stock or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of or in substitution for shares
of its capital stock, or any damage, destruction or loss, whether or not covered
by insurance, that has or reasonably could be expected to have a Material
Adverse Effect in respect of AES or any change in accounting methods, principles
or practices by AES materially affecting its assets, liabilities or business,
except insofar as may have been required by a change in GAAP, the absence of
material litigation pending or, to the knowledge of AES, threatened against AES
or any of its subsidiaries, brokers' fees and expenses, and AES Sub's interim
operations.
The Amalgamation Agreement provides that AES Chigen shall not be deemed to
have breached any of its representations and warranties if any senior officer of
AES (other than any such senior officer who is also an officer of AES Chigen)
had knowledge of such breach at the time the Amalgamation Agreement was
delivered by AES. In addition, the Amalgamation Agreement provides that no party
thereto shall have any liability for damages to the other parties for the breach
of any representations or warranties contained therein. The other parties' sole
remedy will be to not consummate the Amalgamation and/or to terminate the
Amalgamation Agreement.
No Solicitation
The Amalgamation Agreement provides that AES Chigen shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, AES Chigen or any of its subsidiaries to, (i) solicit or
initiate, or encourage the submission of, any Takeover Proposal or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Takeover Proposal; provided, however, that, if in
the opinion of the Special Committee, after consultation with counsel, such
failure to act would be inconsistent with its fiduciary duties to AES Chigen or
the holders of AES Chigen Class A Common Stock under applicable law, AES Chigen
may, in response to an unsolicited Takeover Proposal, and subject to compliance
with its obligation to keep AES fully informed (as discussed below), (a) furnish
information with respect to AES Chigen to any person pursuant to a
confidentiality agreement and (b) participate in negotiations regarding such
Takeover Proposal. For purposes of the Amalgamation Agreement, "Takeover
Proposal" means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of a substantial amount of assets of
AES Chigen or any of its subsidiaries (other than investors in the ordinary
course of business) or of over 20% of any class of equity securities of AES
Chigen or any of its subsidiaries or any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of any
class of equity securities of AES Chigen or any of its subsidiaries, or any
amalgamation, consolidation, business combination, sale of substantially all
assets, recapitalization, liquidation, dissolution or similar transaction
involving AES Chigen or any of its subsidiaries other than the transactions
contemplated by the Amalgamation Agreement, or any other transaction the
consummation of which would reasonably be expected to impede, interfere with,
prevent or materially delay the Amalgamation or which would reasonably be
expected to dilute materially the benefits to AES of the transactions
contemplated thereby.
Except as set forth in the Amalgamation Agreement or as required by Bermuda
law, the Special Committee shall not (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to AES or AES Sub, the approval or
recommendation by such Special Committee of the Amalgamation or the
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Amalgamation Agreement, (ii) approve or recommend, or propose to approve or
recommend, any Takeover Proposal or (iii) enter into any agreement with respect
to any Takeover Proposal. Notwithstanding the foregoing, if in the opinion of
the Special Committee, after consultation with counsel, failure to do any of the
foregoing would be inconsistent with its fiduciary duties to AES Chigen or the
holders of the AES Chigen Class A Common Stock under applicable law, the Special
Committee may (subject to the terms of the Amalgamation Agreement) withdraw or
modify its approval or recommendation of the Amalgamation or the Amalgamation
Agreement, approve or recommend a Superior Proposal, or enter into an agreement
with respect to a Superior Proposal, in each case relating to the receipt of a
Superior Proposal at any time after the second business day following AES's
receipt of written notice (a "Notice of Superior Proposal") advising AES that
the Special Committee has received a Superior Proposal, specifying the material
terms and conditions of such Superior Proposal and identifying the person making
such Superior Proposal; provided that AES Chigen shall not enter into an
agreement with respect to a Superior Proposal unless AES Chigen shall have
furnished AES with written notice no later than 12:00 noon, New York City time,
one day in advance of any date that it intends to enter into such agreement (it
being understood that such time periods may be concurrent). In addition, if AES
Chigen proposes to enter into an agreement with respect to any Takeover
Proposal, it shall concurrently with entering into such agreement pay, or cause
to be paid, to AES the Expenses. For purposes of the Amalgamation Agreement, a
"Superior Proposal" means any bona fide Takeover Proposal to acquire, directly
or indirectly, for consideration consisting of cash and/or securities, more than
50% of the shares of AES Chigen Class A Common Stock then outstanding or all or
substantially all the assets of AES Chigen and otherwise on terms which the
Special Committee determines in its good faith judgment (based on the advice of
a financial advisor of nationally recognized reputation) to be more favorable to
AES Chigen or the holders of the AES Chigen Class A Common Stock than the
Amalgamation.
For the purposes of the Amalgamation Agreement, the parties thereto have
agreed that failure to take, following the receipt of a Takeover Proposal, an
action which the Special Committee reasonably believes is likely to result in a
Superior Proposal would be deemed to be a breach of the Special Committee's
fiduciary duties.
The Amalgamation Agreement provides that AES Chigen shall immediately
advise AES orally and in writing of any request for information or of any
Takeover Proposal, or any inquiry with respect to or which could lead to any
Takeover Proposal, the material terms and conditions of such request, Takeover
Proposal or inquiry, and the identity of the person making any such Takeover
Proposal or inquiry. AES Chigen will keep AES fully informed of the status and
details (including amendments or proposed amendments) of any such request,
Takeover Proposal or inquiry.
Access to Information
The Amalgamation Agreement provides that AES Chigen shall, and shall cause
each of its subsidiaries to, afford to AES, and to AES's officers, employees,
accountants, counsel, financial advisors and other representatives, reasonable
access during normal business hours during the period prior to Effective Time to
all their respective properties, books, contracts, commitments, personnel and
records and, during such period, AES Chigen shall, and shall cause each of its
subsidiaries to, furnish promptly to AES (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of federal or state securities laws and (b) all
other information concerning its business, properties and personnel as AES may
reasonably request.
Cooperation and Reasonable Efforts
AES, AES Sub and AES Chigen agreed to use all reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Amalgamation and the transactions contemplated thereby,
including approvals from Governmental Entities, the making of all necessary
registrations and filings (including filings with Governmental Entities, if
any), the taking of all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, the obtaining of all necessary consents, approvals or
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waivers from third parties, the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging the Amalgamation
Agreement or the consummation of any of the transactions contemplated thereby,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed, and the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated thereby, and to fully carry out the purposes of, the Amalgamation
Agreement.
AES, AES Sub and AES Chigen will give prompt notice to the other parties of
(i) any material representation or warranty made by it contained in the
Amalgamation Agreement that is qualified as to materiality becoming untrue or
inaccurate in any respect or any such material representation or warranty that
is not so qualified becoming untrue or inaccurate in any material respect or
(ii) the failure by it to comply with or satisfy in any material respect any
material covenant, condition or agreement to be complied with or satisfied by it
under the Amalgamation Agreement; provided, however, that no such notification
shall affect the representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties under the
Amalgamation Agreement.
NYSE Listing Application
Under the Amalgamation Agreement, AES has agreed to promptly prepare and
submit to the NYSE a listing application covering the shares of AES Common Stock
issuable in the Amalgamation, and to use its reasonable best efforts to obtain,
prior to the Effective Time, approval for the listing of such AES Common Stock,
subject to official notice of issuance. AES Chigen has agreed to cooperate fully
with AES with respect to such listing.
Conditions
The obligations of AES Chigen, AES Sub and AES to consummate the
Amalgamation are subject to the satisfaction of the following conditions: (a)
the Amalgamation Agreement and the transactions contemplated thereby shall have
been approved and adopted by the requisite votes of the shareholders of AES
Chigen in accordance with the Companies Act and AES Chigen's Bye-laws; (b) no
Governmental Authority shall have enacted, issued, promulgated, enforced or
entered any order, executive order, stay, decree, judgment or injunction (each
an "Order") or statute, rule or regulation which is in effect and which has the
effect of making the Amalgamation illegal or otherwise prohibiting consummation
of the Amalgamation; (c) the Registration Statement shall have been declared
effective, and no stop order suspending the effectiveness of the Registration
Statement shall be in effect; (d) AES and AES Chigen shall have received from
the NYSE evidence that the shares of AES Common Stock to be issued to the
shareholders of AES Chigen in the Amalgamation shall be listed on the NYSE
immediately following the Effective Time; (e) AES Chigen shall have received the
consent of the Bermuda Minister of Finance to amalgamate with AES Sub; (f) all
other consents, authorizations, orders and approvals of (or filings or
registrations with) any third party or governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of the Amalgamation Agreement shall have been obtained or made,
except for filings in connection with the Amalgamation and any other documents
required to be filed after the Effective Time and except where the failure to
have obtained or made any such consent, authorization, order, approval, filing
or registration would not have a Material Adverse Effect in respect of AES
Chigen or AES following the Effective Time; (g) AES and AES Chigen shall have
received an opinion of Chadbourne & Parke LLP, counsel to AES, in form and
substance reasonably acceptable to AES and reasonably acceptable to Skadden,
Arps, Slate, Meagher & Flom LLP, special counsel to the Special Committee,
substantially to the effect that the Amalgamation will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code and that AES and AES Chigen will each be a party to that reorganization
within the meaning of Section 368(b) of the Code; and (h) AES and AES Chigen
shall have received an opinion of Conyers, Dill & Pearson, Bermuda counsel to
AES Chigen, to the effect that all necessary corporate action has been taken to
effect the Amalgamation, and, upon issuance of the Certificate of Amalgamation,
the Amalgamation will be effective. None of the above conditions are expressly
waivable by AES Chigen, AES
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Sub or AES in the Amalgamation Agreement, however, the parties may elect to
waive the conditions in (g) and (h) subject to agreement by the other parties.
The obligations of AES and AES Sub to consummate the Amalgamation are
further subject to the satisfaction or waiver by AES of the following
conditions: (a) there shall not be threatened or pending by any Governmental
Entity any suit, action or proceeding (i) challenging the acquisition by AES of
AES Chigen, seeking to restrain or prohibit the consummation of the Amalgamation
or the performance of any of the other transactions contemplated by the
Amalgamation Agreement, or seeking to obtain from AES Chigen or AES any damages
that are material in relation to AES Chigen and its subsidiaries taken as whole,
(ii) seeking to prohibit or limit the ownership or operation by AES Chigen, AES
or any of their respective subsidiaries of a material portion of the business or
assets of AES Chigen and its subsidiaries, taken as a whole, or AES and its
subsidiaries, taken as a whole, or to compel AES Chigen or AES to dispose of or
hold separate any material portion of the business or assets of AES Chigen and
its subsidiaries, taken as a whole, or AES and its subsidiaries, taken as a
whole, as a result of the Amalgamation or any of the other transactions
contemplated by the Amalgamation Agreement, (iii) seeking to prohibit AES or any
other subsidiary of AES from effectively controlling in any material respect the
business or operations of AES Chigen and its subsidiaries, taken as a whole, or
(iv) which otherwise is reasonably likely to have a Material Adverse Effect in
respect of AES Chigen; (b) there shall not be any statute, rule, regulation,
judgment, order or injunction enacted, entered, enforced, promulgated or deemed
applicable to the Amalgamation, or any other action shall be taken by any
Governmental Entity or court, that is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in subclauses (i) through
(iv) of clause (a) above; (c) there shall not have occurred any Material Adverse
Change in respect of AES Chigen; (d) all of the representations and warranties
of AES Chigen set forth in the Amalgamation Agreement that are qualified as to
materiality shall be true and correct and all such representations and
warranties that are not so qualified shall be true and correct in all material
respects, in each case as of the date of the Amalgamation Agreement and as of
the Closing Date; (e) AES Chigen shall not have failed to perform in any
material respect any material obligation or to comply in any material respect
with any material agreement or covenant of AES Chigen to be performed or
complied with by it under the Amalgamation Agreement; (f) the Exchange Ratio
shall not be more than 0.3100 of a share; (g) the Board of Directors of AES
Chigen shall have approved amendments to the Bye-Laws of AES Chigen in form
reasonably acceptable to AES, and shall have directed that after the Effective
Time they be submitted to the sole shareholder of AES Chigen for approval; and
(h) the number of shares of AES Chigen Class A Common Stock held by a person who
did not vote in favor of the Amalgamation and who complies with Bermuda law
concerning the right of holders to dissent and require an appraisal shall not be
more than 10% of the total issued and outstanding shares of AES Chigen Class A
Common Stock.
The obligation of AES Chigen to consummate the Amalgamation is further
subject to the satisfaction or waiver by AES Chigen of the following conditions:
(a) all of the representations and warranties of AES set forth in the
Amalgamation Agreement that are qualified as to materiality shall be true and
correct and all such representations and warranties that are not so qualified
shall be true and correct in all material respects, in each case as of the date
of the Amalgamation Agreement and as of the Closing Date; (b) AES shall not have
failed to perform in any material respect any material obligation or to comply
in any material respect with any material agreement or covenant of AES to be
performed or complied with by it under the Amalgamation Agreement; and (c)
Merrill Lynch shall not have withdrawn the Merrill Lynch Opinion.
Employee Benefits Matters
AES and AES Chigen have agreed that any employee benefit or compensation
plans, agreements or arrangements, including "employee benefit plans" as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), to which AES Chigen or any subsidiary of AES Chigen is a
party (together, the "AES Chigen Benefit Plans") in effect at the date of the
Amalgamation Agreement shall remain in effect until otherwise amended or
terminated after the Effective Time. To the extent the AES Chigen Benefit Plans
are amended or terminated, it is the current nonbinding intent of the parties
that employee benefit plans which are no less favorable, in the aggregate, than
the AES Chigen Benefit Plans shall be provided to the employees of AES Chigen.
Notwithstanding the foregoing, Options shall be
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treated as discussed in "The Amalgamation -- Treatment of Stock Options." AES
and AES Chigen have also agreed to take all actions necessary and appropriate to
merge the AES China Generating Co. Ltd. Profit Sharing and Employee Stock
Ownership Plan into The AES Corporation Profit Sharing and Stock Ownership Plan.
Termination
The Amalgamation Agreement may be terminated and the Amalgamation and the
other transactions contemplated thereby may be abandoned at any time prior to
the Effective Time, notwithstanding any requisite approval and adoption of the
Amalgamation Agreement and the transactions contemplated thereby, as follows:
(a) by mutual written consent duly authorized by the Boards of Directors
(including the Special Committee) of each of AES and AES Chigen; (b) by either
AES or AES Chigen: (i) if as a result of the failure, occurrence or existence of
any of the conditions set forth in the Amalgamation Agreement the Amalgamation
shall not have occurred on or before April 30, 1997 (provided, however, that
this right to terminate the Amalgamation Agreement is not available to any party
whose failure to perform any of its obligations under the Amalgamation Agreement
results in the failure, occurrence or existence of any such condition) or (ii)
if any Governmental Entity shall have issued an Order permanently enjoining,
restraining or otherwise prohibiting the Amalgamation and such Order shall have
become final and nonappealable; (c) by AES in the event of a breach by AES
Chigen of any representation, warranty, covenant or other agreement contained in
the Amalgamation Agreement or any other development which (i) would give rise to
the failure of the conditions regarding AES Chigen's representations, warranties
and covenants and (ii) cannot be or has not been cured within 30 days after the
giving of written notice to AES Chigen; (d) by AES if (i) the Special Committee
shall have withdrawn or modified in a manner adverse to AES its approval or
recommendation of the Amalgamation or the Amalgamation Agreement, (ii) the
Special Committee shall have approved or recommended any Takeover Proposal
(including any Superior Proposal) in accordance with the Amalgamation Agreement
or (iii) AES Chigen shall have entered into any agreement with respect to any
Takeover Proposal (including any Superior Proposal) in accordance with the
Amalgamation Agreement; (e) by AES or AES Chigen if AES Chigen enters into a
definitive agreement in accordance with the Amalgamation Agreement, provided
that AES Chigen has complied with all provisions thereof, including the notice
provisions therein, and provided that AES Chigen makes simultaneous payment of
the Expenses; or (f) by AES Chigen in the event of a breach by AES in any
material respect of any representation, warranty, covenant or other agreement
contained in the Amalgamation Agreement, which (i) would give rise to the
failure of the conditions regarding AES's representations, warranties and
covenants and (ii) cannot be or has not been cured within 30 days after the
giving of written notice to AES, except, in any case, such failures which, in
the aggregate, would not have a Material Adverse Effect in respect of AES.
In the event of termination of the Amalgamation Agreement by either AES
Chigen or AES, the Amalgamation Agreement shall become void and have no effect,
without any liability or obligation on the part of AES or AES Chigen, other than
AES's and AES Chigen's respective representations concerning brokers, their
respective covenants concerning fees and expenses and certain other provisions,
and except to the extent that such termination results from the willful and
material breach by a party of any of its representations, warranties, covenants
or agreements set forth in the Amalgamation Agreement.
Amendment, Extension and Waiver
The Amalgamation Agreement may be amended by the parties at any time. The
Amalgamation Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties.
At any time prior to the Effective Time, the parties may (a) extend the
time for the performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and warranties
contained in the Amalgamation Agreement or in any document delivered pursuant to
the Amalgamation Agreement or (c) waive compliance with any of the agreements or
conditions contained in the Amalgamation Agreement. Any agreement on the part of
a party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to the
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Amalgamation Agreement to assert any of its rights under the Amalgamation
Agreement or otherwise shall not constitute a waiver of those rights.
A termination, amendment, extension or waiver of the Amalgamation Agreement
or any other action pursuant to the Amalgamation Agreement shall, in order to be
effective, require, in the case of AES Chigen, action by the Special Committee,
or action by the duly authorized designee of such Special Committee. Further,
any action permitted to be taken by AES Chigen pursuant to the Amalgamation
Agreement may be taken by the Special Committee on behalf of AES Chigen.
Indemnification; Insurance.
AES Chigen shall not, and for a period of six years from and after the
Effective Time AES and the Amalgamated Company shall not, amend the provisions
of the Bye-Laws providing for the indemnification of directors and officers of
AES Chigen in any manner adverse to such directors and officers. For a period of
six years after the Effective Time, AES shall cause to be maintained in effect
the current policies of directors' and officers' liability insurance maintained
by AES Chigen (provided that AES may substitute therefor policies of at least
the same coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events which occurred
before the Effective Time to the extent available. The indemnification and
insurance provisions are intended to be for the benefit of, and shall be
enforceable by, each indemnified party, his or her heirs and representatives.
Termination of Certain Agreements.
AES and AES Chigen have agreed that each of the Stock Purchase and
Shareholder's Agreement, and the Non-Competition and Non-Disclosure Agreement,
dated as of December 29, 1993, and amended and restated as of February 1, 1994,
by and between AES and AES Chigen, shall be terminated as of the Effective Time.
Certain Definitions.
Certain definitions are set forth below. Other definitions may be found in
the text of this Proxy Statement/Prospectus.
(a) "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "Code" means the United States Internal Revenue Code of 1986, as
amended.
(c) "GAAP" means United States generally accepted accounting principles.
(d) "Governmental Entity" means any U.S. federal, state or local government
or foreign government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign;
(e) "Material Adverse Change" or "Material Adverse Effect" means, when used
in connection with AES Chigen or AES, any change or effect that is materially
adverse to the business, financial condition or results of operations of such
party and its subsidiaries taken as a whole;
(f) "person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity; and
(g) a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.
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RIGHTS OF DISSENTING SHAREHOLDERS
Any holder of shares of AES Chigen Class A Common Stock who does not vote
in favor of the Amalgamation and who is not satisfied that he or she has been
offered fair value for his or her shares may within one month of the giving of
the notice of the Class A Meeting and the Special Meeting apply to the Supreme
Court of Bermuda (the "Court") to appraise the fair value of all of such
holder's shares.
Under the Amalgamation Agreement, AES Chigen shall give AES (i) prompt
notice of any demands for appraisal of shares of AES Chigen Class A Common Stock
received by AES Chigen and (ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such demands. AES Chigen shall
not, without the prior written consent of AES, make any payment with respect to,
or settle, offer to settle or otherwise negotiate, any such demands. The
relevant portion of Section 106 of the Companies Act is as follows:
(6) Any shareholder who did not vote in favour of the amalgamation and
who is not satisfied that he has been offered fair value for his shares may
within one month of the giving of the notice referred to in subsection (2)
apply to the Court to appraise the fair value of his shares.
(6A) Subject to subsection (6B), within one month of the Court
appraising the fair value of any shares under subsection (6) the company
shall be entitled either --
(a) to pay the dissenting shareholder an amount equal to the value
of his shares as appraised by the Court; or
(b) to terminate the amalgamation in accordance with subsection
(7).
(6B) Where the Court has appraised any shares under subsection (6) and
the amalgamation has proceeded prior to the appraisal then, within one
month of the Court appraising the value of the shares, if the amount paid
to the dissenting shareholder for his shares is less than that appraised by
the Court the amalgamated company shall pay to such shareholder the
difference between the amount paid to him and the value appraised by the
Court.
(6C) No appeal shall lie from an appraisal by the Court under this
section.
(6D) The costs of any application to the Court under this section
shall be in the discretion of the Court.
(7) An amalgamation agreement may provide that at any time before the
issue of a certificate of amalgamation the agreement may be terminated by
the directors of an amalgamating company, notwithstanding approval of the
agreement by the shareholders of all or any of the amalgamating companies.
In a determination of fair value, the Court has considerable discretion.
There is little developed case law in Bermuda regarding the determination of
fair value. The applicable provisions of the Companies Act are modeled on the
comparable provisions of the Canada Business Corporations Act, and thus,
Canadian authorities would be instructive. Generally accepted valuation
principles recognized in the leading Canadian decision include the market value
approach, the assets approach, the earnings or investment value approach or some
combination thereof and the Court would use whichever method it thought
appropriate to ascertain the fair value of AES Chigen Class A Common Stock. The
Court can assess fair value at a figure higher than, equal to or lower than the
consideration payable in the Amalgamation.
The Court is the exclusive venue for the institution of proceedings to
appraise fair value pursuant to Section 106 of the Companies Act. There is no
right of appeal from an appraisal by the Court. An award in respect of the costs
of an appraisal application by a dissenting shareholder is in the discretion of
the Court and is not statutorily determined.
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MATERIAL TAX CONSEQUENCES
The discussion appearing below under "United States Federal Income
Taxation" generally summarizes the material United States federal income tax
consequences of the Amalgamation for holders of AES Chigen Class A Common Stock
who hold such stock as a capital asset (generally, property held for
investment). The discussion under "Bermuda Taxation" generally summarizes the
material Bermuda tax consequences of the Amalgamation. The discussion does not
deal with all possible tax consequences of the Amalgamation and does not purport
to deal with the tax consequences applicable to all categories of investors,
some of which (such as dealers in securities, insurance companies and tax-exempt
entities) may be subject to special rules. In particular, the discussion does
not address the tax consequences under state or local law or the laws of
countries other than the United States and Bermuda. Furthermore, the proper
characterization under U.S. tax law of reorganization transactions accomplished
under foreign law that may not be identical in all legal particulars to merger
and other reorganization transactions accomplished under U.S. laws is a subject
on which there are no authoritative precedents involving transactions similar to
the Amalgamation. Accordingly, prospective investors should consult their own
tax advisors regarding the particular tax consequences to them of the
Amalgamation. The following discussion is based upon laws and relevant
interpretations thereof in effect as of the date of this Proxy
Statement/Prospectus, all of which are subject to change.
UNITED STATES FEDERAL INCOME TAXATION
In the opinion of Chadbourne & Parke LLP, counsel to AES, the following are
the material United States federal income tax consequences of the Amalgamation.
AES CHIGEN AND AES. The Amalgamation is expected to be treated as a
tax-free reorganization pursuant to Section 368(a)(l)(B) of the Code. AES Chigen
will make no exchange or disposition giving rise to taxable gain or loss.
U.S. HOLDERS OF AES CHIGEN STOCK. For purposes of the following
discussion, the term "U.S. Holder" means a beneficial owner of shares of AES
Chigen who is (a) an individual who is a United States citizen or resident, (b)
a corporation, partnership (including an entity treated as a corporation or
partnership for United States tax purposes) or other entity created or organized
under the laws of the United States or any political subdivision thereof, or (c)
an estate or trust or any other person that is otherwise subject to United
States federal income tax on a net basis with respect to its worldwide income.
With respect to the tax year of any trust that begins after December 31, 1996, a
U.S. Holder shall mean a trust whose administration is subject to the primary
supervision of a United States court and which has one or more United States
fiduciaries who have the authority to control all substantial decisions of the
trust. The term "Non-U.S. Holder" means a beneficial owner of shares of AES
Chigen who is not a U.S. Holder.
Unless the special rules discussed below apply (see "-- Possible
Application of Passive Foreign Investment Company Rules"), the exchange by a
U.S. Holder of shares of AES Chigen Class A Common Stock for shares of AES
Common Stock pursuant to the Amalgamation will have the following consequences:
(i) except for cash received in lieu of a fractional share, no gain or loss will
be recognized upon the exchange of shares of AES Chigen Class A Common Stock;
(ii) cash received in lieu of a fractional share will be treated as capital gain
or loss in an amount equal to the difference between the cash received and the
shareholder's basis in the fractional share; (iii) the aggregate basis of shares
of the AES Common Stock received will be the same as the aggregate basis of the
shares of AES Chigen Class A Common Stock exchanged therefor (less the U.S.
Holder's basis in any fractional share); and (iv) the holding period of shares
of the AES Common Stock will include the period during which such shareholder
held the AES Chigen Class A Common Stock exchanged therefor.
POSSIBLE APPLICATION OF PASSIVE FOREIGN INVESTMENT COMPANY RULES. It is
possible that AES Chigen could be characterized as a Passive Foreign Investment
Company (a "PFIC") as defined in Section 1296 of the Code. If so, the tax
consequences to a shareholder of AES Chigen Class A Common Stock upon the
exchange of shares of AES Chigen Class A Common Stock for shares of AES Common
Stock will depend on the application of an additional set of rules.
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Under Section 1291(f) of the Code, to the extent that the IRS so provides
in regulations, gain will be recognized upon the exchange of shares of a PFIC in
a transaction that would otherwise be treated as a non-recognition transaction,
including a reorganization of the type contemplated by the Amalgamation. The IRS
has issued regulations under Section 1291(f) in proposed form (the "Proposed
Regulations"). While the Proposed Regulations would generally require the
recognition of gain upon an exchange of shares of a PFIC pursuant to certain
types of tax-free reorganizations, they provide an exception to gain recognition
in the case of tax-free reorganizations that qualify under Section 368(a)(1)(B)
of the Code, assuming other conditions are met. It is anticipated that the
conditions of the Proposed Regulations will be met; accordingly, because the
Amalgamation is expected to qualify under Section 368(a)(1)(B) of the Code, no
gain or loss should be recognizable by a U.S. Holder of AES Chigen Class A
Common Stock pursuant to the Amalgamation under the Proposed Regulations. If,
however, the Amalgamation does not constitute a tax-free reorganization under
Section 368(a)(1)(B) of the Code, certain U.S. Holders could be required to
recognize gain or loss under the Proposed Regulations even if the Amalgamation
constituted a tax-free reorganization under another subsection of Section 368(a)
of the Code.
The Proposed Regulations are stated to be effective for transactions
occurring on or after April 1, 1992. If the Proposed Regulations are adopted in
their current form, the tax consequences to a U.S. Holder of AES Chigen Class A
Common Stock will be as set forth in the preceding paragraph. However, because
they have not yet been adopted in final form, they are not currently effective
and there is no assurance they will be finally adopted in the form and with the
effective date proposed. Nevertheless, the IRS has announced that, in the
absence of final regulations, taxpayers may apply reasonable interpretations of
the Code provisions applicable to PFICs and that it considers the rules set
forth in the Proposed Regulations to be reasonable interpretations of those Code
provisions.
In the absence of a final regulation requiring recognition of gain upon the
exchange of shares of a PFIC in the circumstances presented in the Amalgamation
and in light of the fact that under the Proposed Regulations such gain
recognition would not be required if, as discussed above, the Amalgamation
constitutes a tax-free reorganization under Section 368(a)(1)(B) of the Code,
Chadbourne & Parke LLP believes that a shareholder of AES Chigen Class A Common
Stock may reasonably conclude that such gain recognition is not required, even
if AES Chigen were determined to be a PFIC.
The PFIC provisions are complex and subject to interpretation. As discussed
above, the effect of relevant portions of those provisions is not settled. Under
these circumstances, each U.S. Holder of the shares of AES Chigen Class A Common
Stock is urged to consult his own tax advisor with respect to the possible
application and effect of those provisions.
NON-U.S. HOLDERS. A Non-U.S. Holder of shares of AES Chigen Class A Common
Stock will be exempt from U.S. federal income and withholding tax on any gain
realized with respect to the exchange of such shares for shares of AES Common
Stock pursuant to the Amalgamation unless the Amalgamation does not qualify as a
reorganization pursuant to Section 368(a) of the Code and (i) such gain is
effectively connected with the conduct by such Non-U.S. Holder of a trade or
business within the United States, or (ii) such gain is realized by an
individual Non-U.S. Holder who holds such shares as capital assets and is
present in the United States for at least 183 days in the taxable year of the
sale and certain other conditions are met.
BERMUDA TAXATION
In the opinion of Appleby, Spurling & Kempe, Bermuda counsel to AES, the
following are the material Bermuda tax consequences of the Amalgamation.
Bermuda currently does not impose any tax on the income, capital gains,
sales, dividends, remittances or accumulated profits of any person or entity.
AES Sub and AES Chigen have each obtained from the Minister of Finance of
Bermuda under The Exempted Undertakings Tax Protection Act, 1966 (as amended) an
undertaking that until March 28, 2016, in the event of there being enacted in
Bermuda any legislation imposing tax computed on profits or income, or
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computed on any capital asset, gain or appreciation, or imposing any tax in the
nature of estate duty or inheritance tax, such tax shall not be applicable to
either of them or to any of their respective operations, or to their shares,
debentures or other obligations except in so far as such tax applies to persons
ordinarily resident in Bermuda and holding such shares, debentures or other
obligations of AES Sub or AES Chigen or to any land leased or let to either of
them.
AES Sub and AES Chigen are each liable to pay the Bermuda Government an
annual registration fee. In the case of AES Sub, such fee is $1,680 and in the
case of AES Chigen the fee is $25,000 based on their respective assessable
capital, consisting of authorized share capital and share premium account.
FEES AND EXPENSES
AES has retained First Chicago Trust Company of New York to act as the
Exchange Agent in connection with the Amalgamation. The Exchange Agent will
receive reasonable and customary compensation for its services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be indemnified
against certain liabilities in connection therewith, including certain
liabilities under the federal securities laws. The Exchange Agent has not been
retained to make solicitations or recommendations in its role as Exchange Agent.
Proxies will be solicited by mail, telephone or other means of
communication. AES Chigen has retained the services of Corporate Investor
Communications, Inc. to assist in the solicitation of proxies from shareholders
for a fee, including their expenses, estimated at $3,750. In addition,
solicitation may be made by directors, officers, and regular employees of AES
Chigen. AES Chigen will reimburse brokerage firms, custodians, nominees and
fiduciaries in accordance with the rules of the National Association of
Securities Dealers, Inc., for reasonable expenses incurred by them in forwarding
materials to the beneficial owners of shares. The entire cost of solicitation
will be borne by AES Chigen.
The consideration to be provided to holders of AES Chigen Class A Common
Stock pursuant to the Amalgamation will be shares of AES Common Stock and cash
in lieu of fractional shares. Under the Amalgamation Agreement, except as
provided below, all fees and expenses incurred in connection with the
Amalgamation, the Amalgamation Agreement and the transactions contemplated
thereby shall be paid by the party incurring such fees or expenses, whether or
not the Amalgamation is consummated. However, AES Chigen shall pay, or cause to
be paid, to AES all of AES's out-of-pocket expenses in an amount up to but not
to exceed $750,000 (the "Expenses") upon demand if (i) AES terminates the
Amalgamation Agreement as a result of the Special Committee's approval or
recommendation of a Takeover Proposal, (ii) AES Chigen terminates the
Amalgamation Agreement and enters into an agreement with respect to a Takeover
Proposal or (iii) prior to the termination of the Amalgamation Agreement (other
than by AES Chigen as a result of a material, incurable breach by AES), a
Takeover Proposal shall have been made and within one year of such termination,
AES Chigen enters into an agreement with respect to, approves or recommends or
takes any action to facilitate, such Takeover Proposal.
REGULATORY APPROVALS
GENERAL
AES and AES Chigen are aware of no U.S. federal, state or local government
permits, licenses or regulatory approvals material to their respective
businesses that must be obtained for consummation of the Amalgamation, other
than compliance with federal and state securities laws. The Amalgamation was not
subject to the pre-merger notification provisions of the HSR Act.
Under the Amalgamation Agreement, AES and AES Chigen have agreed to use all
reasonable efforts to consummate the transactions contemplated thereby. See
"Description of the Amalgamation Agreement -- Cooperation and Reasonable
Efforts."
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STATE TAKEOVER LAWS
A number of states have adopted takeover laws and regulations which
purport, to varying degrees, to be applicable to attempts to acquire securities
of corporations which are incorporated in such states or which have, or whose
business operations have substantial economic effects in such states, or which
have substantial assets, security holders, principal executive offices or
principal places of business therein. However, in 1982, the Supreme Court of the
United States, in Edgar v. Mite Corp., invalidated on constitutional grounds the
Illinois Business Takeovers Act, which, as a matter of state securities law,
made takeovers of corporations meeting certain requirements more difficult, and
the reasoning in such decision is likely to apply to certain other state
takeover statutes. In 1987, however, in CTS Corp. v. Dynamics Corp. of America,
the Supreme Court of the United States held that the State of Indiana could, as
a matter of corporate law and, in particular, those aspects of corporate law
concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without the prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions. Subsequently, in TLX Acquisition Corp. v. Telex
Corp., a federal district court in Oklahoma ruled that the Oklahoma takeover
statutes were unconstitutional insofar as they applied to corporations
incorporated outside of Oklahoma in that they would subject such corporations to
inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a
federal district court in Tennessee ruled that four Tennessee takeover statutes
were unconstitutional as applied to corporations incorporated outside Tennessee.
This decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a federal district court in Florida held in Grand
Metropolitan PLC v. Butterworth that the provisions of the Florida Affiliated
Transactions Act and the Florida Control Share Acquisition Act were
unconstitutional as applied to corporations incorporated outside of Florida.
AES has not attempted to comply with any state takeover statutes in
connection with the Amalgamation. AES reserves the right to challenge the
validity or applicability of any state law allegedly applicable to the
Amalgamation and nothing in this Proxy Statement/Prospectus nor any action taken
in connection herewith is intended as a waiver of that right. In the event that
any state takeover statute is found applicable to the Amalgamation, AES might be
unable to consummate the Amalgamation or be delayed in continuing or
consummating the Amalgamation. In such case, AES may not be obligated to carry
out the Amalgamation. See "Description of the Amalgamation
Agreement -- Conditions."
THE COMPANIES
BUSINESS OF AES
With a presence in over 35 countries, AES is a global power company
committed to supplying electricity to customers world-wide in a socially
responsible way. AES, based in Arlington, Virginia, markets power principally
from electric generating facilities that it develops, owns and operates. AES was
one of the original entrants in the independent power market and today is one of
the world's largest global power companies, based on net equity ownership of
generating capacity (in megawatts) in operation or under construction. AES
Common Stock is listed and principally traded on the NYSE Composite Transaction
reporting system (Symbol: AES).
Over the last six years, AES has experienced significant growth. This
growth has resulted primarily from the development and construction of new
plants ("greenfield development") and also from the acquisition of existing
plants, primarily through competitively bid privatization initiatives outside
the United States.
In part, AES's strategy in helping meet the world's need for electricity is
to participate in competitive power generation markets as they develop either by
greenfield development or by acquiring and operating existing facilities in
these markets.
Other elements of AES's strategy include:
- Supplying energy to customers at the lowest cost possible, taking into
account factors such as reliability and environmental performance.
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- Constructing or acquiring projects of a relatively large size (generally
larger than 100 megawatts).
- Entering into power sales contracts with electric utilities or other
customers with credit strength.
AES 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, AES prefers to operate all
facilities which it develops or acquires; however, there can be no assurance
that AES will have operating control of all of its facilities in the future.
See "Recent Developments -- AES".
BUSINESS OF AES CHIGEN
AES Chigen is a leading independent power generation company in China and
one of the few international developers that has successfully completed the
development of electric power projects in the country. AES Chigen was founded in
December 1993 by AES to serve as the exclusive vehicle for AES to develop,
acquire, finance, construct, own and operate electric power generation
facilities in the PRC. AES currently holds 48% of the equity capital of AES
Chigen and AES, as the holder of all of the AES Chigen Class B Common Stock, has
the right to elect one-half of the Board of Directors of AES Chigen. Thus, AES
may be deemed to control the management and operation of AES Chigen. AES does
not, however, have control of AES Chigen in respect of approval of the
Amalgamation; pursuant to the Stock Purchase and Shareholder's Agreement, AES
was required to obtain the consent of the Class A Directors of AES Chigen prior
to entering into the Amalgamation Agreement. See "AES Chigen's Relationship with
AES -- Stock Purchase and Shareholder's Agreement".
To respond to significant opportunities in China, AES, through a
wholly-owned subsidiary, opened an office in Hong Kong in early 1993. Following
the incorporation of AES Chigen, AES purchased shares of AES Chigen Class B
Common Stock for $50.0 million and, in early 1994, AES Chigen completed an
initial public offering of shares of its Class A Common Stock, which provided
AES Chigen with net proceeds, after underwriting commissions and discounts, of
$151.9 million. AES Chigen Class A Common Stock is quoted and principally traded
on NASDAQ NMS (Symbol: CHGNF).
Since commencing business, AES Chigen has committed $259.6 million and as
of January 31, 1997 has invested $165.7 million in eight power projects in
operation or under construction in the PRC having an aggregate nameplate
capacity of approximately 818 MW (approximately 422 MW of which is attributable
to AES Chigen's interests in certain joint venture enterprises). These joint
ventures' projects include coal, oil and natural gas-fired and hydropower plants
located in six different provinces in China.
AES Chigen plans to build upon its position as a leading independent power
producer in China through the continued development of and investment in
electric power projects. AES Chigen has signed joint venture contracts and is in
various stages of negotiation to develop five additional power projects with an
aggregate nameplate capacity of approximately 2,900 MW (approximately 805 MW of
which is attributable to AES Chigen's interests in the proposed project
companies). If all of these projects are completed, the estimated total
investment commitment by AES Chigen would be approximately $209.7 million.
See "Recent Developments -- AES Chigen".
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DESCRIPTION OF THE CURRENT PROJECTS
The following table presents certain summary information on AES Chigen's
current projects.
THE CURRENT PROJECTS
<TABLE>
<CAPTION>
COMPANY
COMPANY INVESTMENT
LOCATION CAPACITY INTEREST COMMITMENT
PROJECT (PROVINCE) (MW) (MW) % FUEL STATUS
- -------------------------- ---------- -------- ------- ---------- ------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Jiaozuo Aluminum Power.... Henan 250 175 70 Coal Under construction (first
unit scheduled to be in
operation by the second
quarter of 1997; second unit
scheduled to be in operation
by the second quarter of
1998)
Wuhu Grassy Lake.......... Anhui 250 62.5 25 Coal First unit in operation
(second unit scheduled to be
in operation by the second
quarter of 1997)
Hefei Prosperity Lake..... Anhui 115.2 80.6 70 Oil Under construction (simple
cycle unit scheduled to be
in operation by the third
quarter of 1997; combined
cycle unit scheduled to be
in operation in the third
quarter of 1998)
Wuxi Tin Hill............. Jiangsu 63 34.7 55 Oil In operation
Aixi Heart River.......... Sichuan 50 35 70 Coal Under construction
(scheduled to be in
operation in February 1998)
Chengdu Lotus City........ Sichuan 48 16.8 35 Natural Under construction
Gas (scheduled to be in
operation in the third
quarter of 1997)
Cili Misty Mountain....... Hunan 26.2 13.4 51 Hydro In operation
Yangchun Sun Spring....... Guangdong 15.1 3.8 25 Oil In operation
-------- -------
Total..................... 817.5 421.8
======= =======
</TABLE>
OVERVIEW
AES Chigen, directly or through one of its wholly-owned offshore
subsidiaries, has formed sino-foreign Joint Ventures, each with one or more
Chinese entities as partners, to develop, construct, own and operate each of the
electric power plants described in this section. Two of the power plants -- Cili
Misty Mountain and Yangchun Sun Spring -- are financed solely with registered
capital (equity). Four of the power plants -- Aixi Heart River, Jiaozuo Aluminum
Power, Chengdu Lotus City and Wuxi Tin Hill -- are financed with a combination
of registered capital and shareholder loans. One of the power plants -- Wuhu
Grassy Lake -- is financed by registered capital, shareholder loans and third
party debt. One other project -- Hefei Prosperity Lake -- which is currently
financed by registered capital and shareholder loans, may also be in the future
financed by third party debt.
All of AES Chigen's power plants are owned by cooperative joint ventures,
except for one of the projects -- Wuhu Grassy Lake -- which is owned by an
equity joint venture. The joint venture contracts for three of the cooperative
joint ventures -- Wuxi Tin Hill, Aixi Heart River and Chengdu Lotus
City -- provide for the liquidation of the project assets at the end of the term
of the Joint Venture. The cooperative joint venture contracts relating to the
remaining four projects provide for the transfer of all of the fixed assets of
the Joint Venture to the Chinese partners without charge at the end of the Joint
Venture term. Three of these four provide for the recovery of AES Chigen's
registered capital during the term of the Joint Venture. AES Chigen expects that
its distributions under the fourth cooperative joint venture contract will
permit it to recover its registered capital and earn a return on investment.
Revenues from the power plants are generally used to pay operating
expenses, taxes and financing costs and allocated to provide reserves for
employee social welfare benefits and other matters as required by law. Repayment
of principal and interest of third party loans (if any) and shareholder loans
(if any) of the Joint
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Ventures has priority over distributions of profit to the Joint Venture
partners. Dividends are generally distributed to AES Chigen and its partners by
the Joint Ventures pursuant to board resolutions. In a number of cases with
respect to the Joint Ventures described in this section, AES Chigen has a
priority in the payment of dividends over the Chinese partners to the Joint
Venture. In certain cases, where AES Chigen is not entitled to appoint a
majority of the board of directors of a Joint Venture, the declaration of
dividends or other equity distributions by such Joint Venture may depend on the
assent of the other directors of the Joint Venture.
Pursuant to certain shareholder loan contracts, AES Chigen has committed to
provide shareholder loans to several of the Joint Ventures. In each case the
applicable Joint Venture has either registered the shareholder loan with the
relevant branch of the State Administration of Foreign Exchange of the Central
Government (the "SAFE") if the loan has been drawn, or the Joint Venture will
register the shareholder loan with the relevant branch of the SAFE when the loan
is drawn by the Joint Venture. The payment of principal and interest to AES
Chigen with respect to its shareholder loans to the Joint Ventures is made in
accordance with schedules established by the relevant shareholder loan
contracts.
Each of the Joint Ventures described in this section has entered into one
or more power purchase contracts for the sale of the electricity from its power
plant on a minimum take-or-pay basis. The power purchase contracts generally
require that the power purchaser purchase a specified annual minimum amount of
electricity generated by the power plant during the term of the power purchase
contract at a fixed price or pursuant to a tariff formula set forth in the power
purchase contract. In all but two cases -- Cili Misty Mountain and Yangchun Sun
Spring -- the power purchase contracts also contain incentives to encourage the
power purchaser to purchase greater than the agreed minimum amount of
electricity. Payments for electricity sold under the power purchase contracts
are generally made to the Joint Ventures on a monthly basis.
All of the power purchase contracts have tariff formulas and other pricing
provisions which are designed, based on the minimum take obligation of the power
purchaser, to be sufficient to pay the operating costs and financing costs of
the project and to enable AES Chigen to realize a return on its investment.
These tariff formulas are indexed to hedge against US dollar and Renminbi
exchange rate fluctuation risks relating to repayment of principal and interest
on debt and the conversion to US dollars of AES Chigen's profits. In the event
of a change in law which increases the Joint Ventures' costs, the power purchase
contracts typically require an adjustment to the tariff formulas in order to
pass through such increased costs.
The Joint Ventures in all cases except one -- Cili Misty Mountain -- have
entered, or it is anticipated will enter, into dispatch contracts with the
relevant dispatching entity for its power plant pursuant to which the dispatcher
has agreed or plans to agree to dispatch the power plant at least the annual
minimum amount of hours required under the power purchase contract. For the one
case, the power purchaser, which is also the dispatcher, is responsible for
dispatching the power plant.
Each of the joint venture contracts for the projects described in this
section may be terminated early, including on account of a termination of the
relevant power purchase contract. In all cases except one -- Jiaozuo Aluminum
Power -- in the event of an early termination of a power purchase contract which
results from a default of a power purchaser, AES Chigen is entitled under the
applicable power purchase contract to receive from the power purchaser payment
intended to compensate the Joint Venture for the return it would have received
had the power purchase contract continued to the end of its term.
In two cases -- Yangchun Sun Spring and Wuxi Tin Hill -- projects directly
managed by the Joint Ventures have been successfully constructed on time. For
three of AES Chigen's projects currently under construction -- Jiaozuo Aluminum
Power, Cili Misty Mountain, and Chengdu Lotus City -- the respective Joint
Venture also directly manages the construction of the power plant. In these
instances the Joint Venture has entered into arrangements with various
construction and equipment procurement consortiums, including established
foreign equipment manufacturers, in which certain responsibilities relating to
construction and procurement have been allocated to members of the consortium.
For the remaining three projects currently under construction, each relevant
Joint Venture has entered into a fixed price, fixed schedule construction
contract, one of which is a turnkey arrangement. In all of the projects
described in this section, the electrical transmission and interconnection
facilities are being financed by interest bearing loans from the Joint Venture
to the relevant power purchaser who is responsible for constructing, owning,
operating and maintaining the
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facilities. In the case of Wuhu Grassy Lake, Hefei Prosperity Lake and Chengdu
Lotus City, the power purchasers have also agreed in the power purchase
contracts to begin making payments under their respective power purchase
contracts on a specified date if the power plant is completed, but cannot
deliver electricity due to a delay in completing the transmission and
interconnection facilities.
Five of the eight power plants are or will be operated directly by the
Joint Ventures -- Cili Misty Mountain, Wuxi Tin Hill, Aixi Heart River, Jiaozuo
Aluminum Power and Chengdu Lotus City -- and three -- Yangchun Sun Spring, Hefei
Prosperity Lake and Wuhu Grassy Lake -- will be operated by the relevant power
purchasers. Fuel for most of the power plants has been contracted for under long
term fuel supply contracts with fuel suppliers or will be supplied by the power
purchasers. In the latter case, the relevant power purchaser is not excused from
its payment obligations under its power purchase contract if it is unable to
provide fuel to the power plant.
The power projects which are currently in operation or under construction
have obtained insurance coverage for property loss and damage (including damage
arising from natural calamities) and third party liability. Most force majeure
risks which can be categorized as natural calamities are covered under the
insurance policies. The Joint Ventures are in all cases relieved of their
obligation to deliver electricity under their power purchase contracts for the
power plants described in this section in the event of force majeure, including
an event of force majeure caused by the PRC Government. In the case of all
projects, except Wuhu Grassy Lake and Hefei Prosperity Lake, the power purchaser
is not relieved of its obligations under its applicable power purchase contract,
including the obligation to make payments to AES Chigen in such circumstances.
In these two projects, the power purchaser is relieved of its obligation to
purchase the minimum amount of electric power under its respective power
purchase contract during periods in which the power plant is unable to generate
electric power due to events of force majeure, including events of force majeure
caused by the PRC Government.
In the case of all of the power plants described in this section, AES
Chigen and its Joint Venture partners have applied for and received PRC
approvals for the project and for the establishment of the related foreign
investment enterprise. In the case of two power plants -- Jiaozuo Aluminum Power
and Wuhu Grassy Lake -- the power plants have received project approvals at the
Central Government level from the State Planning Commission and have received
approvals from MOFTEC for the establishment of their related Joint Venture. Each
of the remaining six power plants has received its project approval and foreign
investment approval from provincial and local government entities.
Two of AES Chigen's power plants currently in operation or under
construction -- Wuxi Tin Hill and Hefei Prosperity Lake -- have been structured
as multiple projects and Joint Ventures, with each project and Joint Venture
having a total investment not exceeding the $30 million approval authority
threshold generally applicable to provincial and local governments. In two other
cases -- Aixi Heart River and Chengdu Lotus City -- AES Chigen's projects and
Joint Ventures have obtained local government approvals on the basis of
anticipated total investments which did not exceed $30 million at the time the
approvals were obtained, but will, when construction is completed, exceed the
$30 million approval threshold. See "Risk Factors -- AES Chigen Risk
Factors -- Risks Related to AES Chigen's Business -- Government Approval
Processes."
The tariff formulas set forth in the power purchase contracts of the Joint
Ventures described in this section have been either approved or confirmed by the
relevant provincial and local government pricing bureaus responsible for
reviewing such tariffs.
All of the joint venture contracts and project contracts of the Joint
Ventures are governed by PRC law. Some of the joint venture contracts provide
for arbitration of a dispute arising under the joint venture contracts in
locations outside of the PRC, while some provide for arbitration in the PRC by
PRC arbitration bodies. Most of the project contracts, including the power
purchase contracts, provide for arbitration of disputes in the PRC by PRC
arbitration bodies.
JIAOZUO ALUMINUM POWER
The Power Plant. The Jiaozuo Aluminum Power power plant is a 2 x 125 MW
coal-fired power plant located adjacent to the Jiaozuo Aluminum Mill ("Jiaozuo
Mill") aluminum production mills in Jiaozuo, Henan Province. Construction of the
power plant commenced in the first quarter of 1995. The first unit of the
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power plant is scheduled to commence commercial operation by the second quarter
of 1997. The second unit is scheduled to commence commercial operation in the
second quarter of 1998.
Joint Venture. The Jiaozuo Aluminum Power power plant is owned by Jiaozuo
Wan Fang Power Company Ltd. ("Jiaozuo Wan Fang"), a 23-year cooperative Joint
Venture formed by Jiaozuo Mill and a wholly-owned subsidiary of AES Chigen.
Pursuant to the joint venture contract AES Chigen is entitled to recover its
registered capital (equity) during the term of the Joint Venture. AES Chigen, as
the majority shareholder of Jiaozuo Wan Fang, is entitled to appoint four of the
six members of the board of directors of the Joint Venture, including the
chairman of the board and the general manager. Pursuant to a co-development
agreement, an entity unaffiliated with AES Chigen is entitled to no more than
ten percent of AES Chigen's equity distributions from Jiaozuo Wan Fang.
Financing. The approved total investment in Jiaozuo Wan Fang is $151.3
million. The Joint Venture's approved registered capital is $53.7 million. As of
November 30, 1996, it is estimated that the total cost of Jiaozuo Aluminum Power
will be approximately $161.3 million. Any difference between the approved total
investment and the actual total cost will be funded by additional equity or
loans to be contributed pro rata by the shareholders of Jiaozuo Wan Fang. AES
Chigen has committed to contribute $37.6 million to the registered capital of
the Joint Venture. Jiaozuo Mill has committed to contribute $16.1 million in
land use rights and certain fixed assets to the registered capital of the Joint
Venture.
Power Purchase. Jiaozuo Wan Fang and Jiaozuo Mill have entered into a
23-year power purchase contract effective April 26, 1996. Pursuant to the power
purchase contract, Jiaozuo Mill has agreed to purchase from Jiaozuo Wan Fang at
least 5,500 hours each calendar year at 75 MW up to the amount required to
operate Jiaozuo Mill's aluminum mill. Any remaining electricity from the power
plant, but no less than 5,500 hours at 155 MW, will be purchased by the Henan
Electric Power Corporation ("Henan Power") under a 23-year power purchase
contract between Jiaozuo Wan Fang and Henan Power. Both power purchase contracts
require the purchasers to pay for a minimum amount of electricity generated
every calendar year and to compensate the Joint Venture for any shortfalls in
purchases of such minimum amount based on the most recent approved tariff for
power less fuel costs. Both power purchase contracts allow the Joint Venture to
adjust the minimum amount of electricity required to be purchased by the power
purchasers and Jiaozuo Mill may request the Joint Venture to adjust the minimum
amount of electricity required to be purchased by Jiaozuo Mill, in all cases,
upon prior notice.
There are no specific provisions regarding liquidated damages upon early
termination of either power purchase contract. However, in the case of early
termination due to Henan Power's default, Henan Power is obligated under the
power purchase contract, to the extent permitted by law, to transmit electricity
generated by the Joint Venture's power plant to any entity designated by the
Joint Venture which is interconnected with Henan Power.
Construction. Jiaozuo Wan Fang is directly managing the construction of
the power plant. Jiaozuo Wan Fang has hired the Henan Power Design Institute for
the project design and Henan Provincial No. 1 Power Construction Company and
Henan Provincial No. 2 Power Construction Company as contractors for civil and
installation work. Although no heat rate (the term "heat rate" refers to a power
plant's thermal efficiency), output or completion guarantees are being provided
by the contractors, these two contractors have built a number of similar power
plants. In addition, more than 100 of such 125 MW units have been delivered by
their manufacturer, Shanghai Electric Corporation ("Shanghai Electric"), which
is providing a limited two-year warranty of the units. An independent
engineering company, Bechtel Power Corporation, has been retained by Jiaozuo Wan
Fang to manage scheduling and procurement. The construction risk in the case of
this project is also mitigated by the tariff formula set forth in the power
purchase contract which provides for an increase in the tariff payable by the
power purchaser sufficient to compensate the Joint Venture for any reduction in
heat rate and capacity resulting from the contractor's performance failure.
Interconnection and Dispatch. The interconnection facilities are being
constructed by Henan Power. Jiaozuo Wan Fang has agreed to provide a loan in the
amount of approximately $9.9 million to Henan Power for the design and
construction of the interconnection facilities. When in commercial operation,
the power plant will be dispatched by Henan Power. The Joint Venture is required
under its dispatch contract with Henan Power to cause the power plant to
maintain an annual minimum availability. If this annual minimum
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availability is not met, the minimum amount required to be purchased by Henan
Power may be reduced proportionately.
Fuel. Jiaozuo Wan Fang plans to enter into one-year fuel supply contracts
for the purchase of anthracite coal from mines in Jiaozuo and mines located
approximately 120 kilometers from the power plant. The price for coal is to be
negotiated periodically with the mine owners. Jiaozuo Wan Fang will arrange for
the transportation of the coal by truck to the power plant.
Operation. Jiaozuo Wan Fang will operate the power plant.
WUHU GRASSY LAKE
The Power Plant. The Wuhu Grassy Lake power plant is a 2 x 125 MW
coal-fired power plant located near Wuhu, Anhui Province. It is the phase IV
expansion of an existing 325 MW coal-fired power station. The first unit of the
power plant commenced commercial operation in September 1996. The second unit is
scheduled to commence commercial operation in the second quarter of 1997.
Joint Venture. The Wuhu Grassy Lake power plant is owned by Wuhu Shaoda
Electric Power Development Company Ltd. ("Wuhu Shaoda"), a 20-year equity Joint
Venture formed by China Power International Holdings Limited ("CPI"), Anhui
Liyuan Electric Power Development Company Limited ("Anhui Liyuan"), Wuhu Energy
Development Company Limited ("Wuhu Energy") and a wholly-owned subsidiary of AES
Chigen. The board of directors of Wuhu Shaoda consists of nine directors, of
which two are appointed by AES Chigen. AES Chigen also appoints one of the two
vice chairmen and the deputy general manager responsible for supervising the
operation and maintenance of the power plant.
Financing. The approved total investment in the Joint Venture is $118.4
million. The Joint Venture's approved registered capital is $30.0 million. The
Joint Venture partners of Wuhu Shaoda have committed to contribute their
registered capital according to their respective ownership interests as follows:
(i) CPI, $13.5 million (45%), (ii) AES Chigen, $7.5 million (25%), (iii) Anhui
Liyuan, $6.0 million (20%) and (iv) Wuhu Energy, $3.0 million (10%). As of
November 30, 1996, the estimated total cost of this project was in line with the
approved total investment. The difference between the total investment and the
registered capital of Wuhu Shaoda has been financed through a bank facility and
shareholder loans arranged by the Joint Venture partners. Wuhu Shaoda has
entered into a $65.0 million term loan facility (the "Term Loan") with a
syndicate of lenders. The first drawdown of the Term Loan took place in August
1996. The Term Loan is to be repaid in 11 successive semi-annual installments
beginning April 22, 1998. In addition to the Term Loan, AES Chigen has committed
to provide an $18.0 million subordinated loan (the "AES Loan") and Anhui Liyuan
has committed to provide up to $4.6 million and Wuhu Energy has committed to
provide up to $2.3 million in subordinated shareholders' loans to the Joint
Venture. AES Chigen has guaranteed to the lenders of the Term Loan certain
obligations of its wholly-owned subsidiary under the joint venture contract,
including with respect to the funding of the AES Loan and certain other
liabilities which, in the aggregate, do not exceed $6.0 million.
Dividend payments are subject to certain restrictions under the Term Loan.
No dividend distributions by the Joint Venture are permitted if certain debt
service coverage ratios are not met.
Power Purchase. The electric power from the power plant will be purchased
by Anhui Provincial Electric Power Corporation ("Anhui Power") pursuant to a
20-year operation and offtake contract dated as of July 5, 1996, between Wuhu
Shaoda and Anhui Power. Under the power purchase contract, Anhui Power has
agreed to purchase a minimum amount of electricity at a price calculated based
upon an agreed tariff formula. In the event that the power plant fails to
generate electricity for a period in excess of that permitted for maintenance
and repair in the operation and offtake contract and such failure is a result of
force majeure or Wuhu Shaoda's failure to perform its obligations under the
operation and offtake contract, the minimum amount required to be purchased by
Anhui Power may be reduced in proportion to such excess shutdown period,
provided that in no event will the electricity payments to be made under the
operation and offtake contract be reduced below the amount necessary to allow
Wuhu Shaoda to pay all applicable financing costs under the Term Loan, the AES
Loan and the other shareholder loans.
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Construction. The power plant is being designed, engineered and
constructed pursuant to a fixed price construction contract between Wuhu Shaoda
and Anhui Power. Pursuant to the construction contract, Anhui Power is the
principal contractor and is responsible for the timely and successful completion
of the power plant. Anhui Power has sub-contracted the design, construction,
installation and commissioning work to several of its subsidiaries. Anhui Power
is eligible for a bonus in the event of early completion of a unit. If the power
plant is not completed by August 1997, Anhui Power is required by the operation
and offtake contract nonetheless to commence purchases of the minimum amount of
electricity. The construction contract does not obligate Anhui Power to provide
guarantees of heat rate or capacity. However, in the event that Anhui Power
fails to achieve the design heat rate or nameplate capacity of the power plant,
the tariff formula set forth in the operation and offtake contract increases the
tariff payable by Anhui Power in a manner that compensates Wuhu Shaoda for the
reduction in heat rate and capacity. An independent engineering company, Stone
and Webster Management Consultants, has been retained by the lenders of the Term
Loan to monitor construction.
Interconnection and Dispatch. The power plant is interconnected to the
Anhui power grid and is subject to dispatch by Anhui Power pursuant to an
interconnection contract between Wuhu Shaoda and Anhui Power.
Fuel. As part of its obligations under the operation and offtake contract,
Anhui Power is required to supply such fuel as may be necessary to allow the
power plant to generate electricity purchased under the operation and offtake
contract.
Operation. Pursuant to the operation and offtake contract, Anhui Power is
responsible for the operation, maintenance and management of the power plant.
Anhui Power is responsible for ensuring that the power plant generates the
minimum amount of electricity required to be purchased by Anhui Power and is
required to compensate Wuhu Shaoda for any resulting shortfall in such minimum
amount, unless, as indicated above, the shortfall is the result of force majeure
or the failure of Wuhu Shaoda to perform its obligations under the operation and
offtake contract.
HEFEI PROSPERITY LAKE
The Power Plant. The Hefei Prosperity Lake power plant is an oil-fired
combined cycle power plant consisting of 2 x 38.2 MW gas turbine generating
units ("gas turbine unit") and a 1 x 38.8 MW heat recovery steam turbine
generating unit ("steam turbine unit"). It is located within the boundaries of
an existing 325 MW coal fired power plant in Hefei, Anhui Province. Construction
of the power plant commenced in November 1996. The gas turbine unit is scheduled
to commence commercial operation in the third quarter of 1997 and the steam
turbine unit is scheduled to commence commercial operation in the third quarter
of 1998.
Joint Ventures. The Hefei Prosperity Lake power plant is owned by Anhui
Liyuan AES Power Company Ltd. ("Liyuan-AES") and Hefei Zhongli Energy Company
Ltd. ("Zhongli Energy"), two 16-year cooperative Joint Ventures formed among a
wholly-owned subsidiary of AES Chigen, Hefei Municipal Construction and
Investment Company ("Hefei Construction") and Anhui Liyuan. In accordance with
the joint venture contracts, AES Chigen is entitled to appoint four of the seven
members of the board of directors and the general manager of each of the Joint
Ventures.
Financing. The approved total investment in each of Liyuan-AES and Zhongli
Energy is $30.0 million. The approved registered capital of each of Liyuan-AES
and Zhongli Energy is $15.0 million. The Joint Venture partners in Liyuan-AES
and Zhongli Energy have committed to contribute registered capital to each Joint
Venture according to their respective ownership interests as follows: (i) Anhui
Liyuan, $3.0 million (20%), (ii) AES Chigen, $10.5 million (70%) and (iii) Hefei
Construction, $1.5 million (10%). As of November 30, 1996, it is estimated that
the total cost of Hefei Prosperity Lake will be approximately $64.7 million. The
difference between the estimated total cost and the registered capital of each
Joint Venture will be financed through shareholder loans or third party debt
arranged by the Joint Venture partners. AES Chigen has entered into shareholder
loan contracts with Liyuan-AES and with Zhongli Energy pursuant to which AES
Chigen has committed to provide loans to the Joint Ventures in an aggregate
amount not to exceed $16.0 million.
Power Purchase. The power generated by the power plant is purchased by
Anhui Power pursuant to a 16-year operation and offtake contract, dated
September 26, 1996, between Liyuan-AES and Zhongli Energy,
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as the sellers, and Anhui Power as power purchaser. Under the operation and
offtake contract, Anhui Power has agreed to purchase a minimum amount of
electricity at an agreed upon tariff formula or to compensate the Joint Ventures
for any shortfall in purchases of such minimum amount based on an approved
tariff less approved generation costs. Anhui Power's minimum take obligation
under the operation and offtake contract may be reduced in proportion to periods
of power plant shutdown or curtailment of generation due to events of force
majeure or breach of the operation and offtake contract by the Joint Ventures,
provided that in no event will the payments to be made under the operation and
offtake contract be reduced below the amount necessary to allow the Joint
Ventures to pay all applicable financing costs under the Joint Ventures' loan
agreements.
Construction. The power plant is being designed, engineered and
constructed pursuant to a fixed-price construction contract between the Joint
Ventures and Anhui Mingda Power EPC Contract Company ("Mingda"), a wholly owned
subsidiary of Anhui Power. Pursuant to the construction contract, Anhui Power is
the principal contractor and is responsible for the timely and successful
completion of the power plant. Mingda is eligible for a bonus in the event of
early or on-time completion of the gas turbine unit and the steam turbine unit
but must pay penalties in the event of late completion or not meeting
performance guarantees, including heat rate and capacity guarantees. The gas
turbine unit and steam turbine unit have been ordered from GEC Alsthom. GEC
Alsthom will also provide the conceptual design as a subcontractor to Mingda. If
Mingda fails to complete the gas turbine unit by August 1, 1997 and the steam
turbine unit by July 1, 1998, Anhui Power's minimum take or pay obligation for
the minimum amount under the operation and offtake contract nonetheless
commences. An independent engineering company, Black & Veatch International
Company, has been retained by the Joint Ventures to monitor construction.
Interconnection and Dispatch. The power plant is interconnected to the
Anhui power grid and is subject to dispatch by Anhui Power pursuant to an
interconnection contract between the Joint Ventures and Anhui Power. Under the
operation and offtake contract, Anhui Power, as the operator, is required to
indemnify the Joint Ventures for any loss or cost as a result of the breach of
the interconnection contract.
Fuel. As part of its obligations under the operation and offtake contract,
Anhui Power is required to supply such fuel as may be necessary to allow the
power plant to generate electricity to be purchased under the operation and
offtake contract.
Operations. Pursuant to the operation and offtake contract, Anhui Power is
responsible for the operation, maintenance and management of the power plant.
Anhui Power is responsible for ensuring that the power plant generates the
minimum amount and is required to compensate the Joint Ventures for any
resulting shortfall in the minimum amount, unless, as indicated above, the
shortfall is a result of force majeure or the failure of the Joint Ventures to
perform their obligations under the operation and offtake contract.
WUXI TIN HILL
The Power Plant. Wuxi Tin Hill power plant is an oil-fired combined cycle
power plant which consists of a 2 x 24 MW gas turbine generating plant and a 15
MW heat recovery steam turbine generating plant located in Xishan (previously
known as Wuxi County), Jiangsu Province. The gas turbine generating plant was
completed and commenced commercial operation in March 1996 and the heat recovery
steam turbine generating plant commenced commercial operation in the first
quarter of 1997.
Joint Ventures. The Wuxi Tin Hill power plant is owned by Wuxi-AES-CAREC
Gas Turbine Power Company Ltd. ("Wuxi-AES-CAREC") and Wuxi-AES-Zhonghang Power
Co. Ltd. ("Wuxi-AES-Zhonghang"), two 16-year cooperative Joint Ventures formed
among AES Chigen, China National Aero-Engine Corporation ("CAREC") and Wuxi
Power Industry Company ("Wuxi Power"). In accordance with the joint venture
contracts, AES Chigen is entitled to appoint four of the eight members of the
board of directors, including the chairman of the board, for each of the Joint
Ventures, while CAREC and Wuxi Power each is entitled to appoint two members.
The chairman of the board of directors of each Joint Venture has the right to
break any tie board votes.
Financing. The approved total investment in Wuxi-AES-CAREC is $29.5
million. The approved total investment in Wuxi-AES-Zhonghang is $10.5 million.
The approved registered capital of Wuxi-AES-CAREC is $11.8 million and the
approved registered capital of Wuxi-AES-Zhonghang is $5.0 million. As of August
31, 1996, the estimated total cost of this project was in line with the approved
total investment. AES
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Chigen has contributed $6.5 million to the registered capital of Wuxi-AES-CAREC
and $2.8 million to the registered capital of Wuxi AES-Zhonghang. CAREC and Wuxi
Power each has contributed $2.7 million to the registered capital of
Wuxi-AES-CAREC and each has contributed $1.1 million to the registered capital
of Wuxi-AES-Zhonghang. AES Chigen, CAREC and Wuxi Power have entered into
shareholder loan agreements with the Joint Ventures pursuant to which they have
provided loans to the two Joint Ventures pro rata in accordance with their
ownership interests.
Power Purchase. Power generated by the power plant is purchased by the
Xishan Electricity Management Office ("Xishan Office") under a 16-year power
purchase contract, effective May 1995, between Wuxi-AES-CAREC and Xishan Office.
Wuxi-AES-CAREC sells the electricity generated by the steam generating plant to
Xishan Office on behalf of Wuxi-AES-Zhonghang under a services agreement with
Wuxi-AES-CAREC.
The power purchase contract requires Xishan Office to purchase a minimum
amount of 186 gigawatt-hours ("GWh") of electricity per calendar year from the
power plant and to compensate the Joint Ventures for any shortfalls in the
purchase of such minimum amount based on the most recent tariff for electricity
less fuel costs. Pursuant to the power purchase contract, the minimum amount of
electricity which Xishan Office is required to purchase from the Joint Ventures
may be reduced by the number of peak time shutdown hours which exceeds an agreed
number of hours permitted for outages related to the power plant.
During 1996, Xishan Office did not purchase the required minimum amount of
electricity under the power purchase contract and, accordingly, is required to
compensate the Joint Venture for the shortfall. The parties have a disagreement
over the amount of the required minimum take. Xishan Office has paid 88% of the
amount the Joint Venture believes is due but disputes the balance. The parties
also have a disagreement over the amount of construction-period interest that is
due in respect of shareholders loans provided to the Joint Venture by its
respective partners. AES Chigen believes that the amount at issue in these
disagreements is not material to the financial results of AES Chigen.
Construction. The construction of the power plant has been managed by the
Joint Ventures. The gas turbines were supplied by United Technologies Inc.
("United Technologies"). Pursuant to a maintenance contract with the Joint
Ventures, United Technologies will provide 10 years of service and maintenance
for the gas turbines. The balance of the plant has been provided by Chinese
manufacturers.
Interconnection and Dispatch. The interconnection facilities were
completed in March 1996 and the power plant is connected to the East China Power
Grid. The power plant is currently dispatched under an agreement between Wuxi
AES-CAREC and Xishan Power Supply Bureau. A dispatch contract between the Joint
Ventures and Jiangsu Provincial Power Bureau Dispatch Center for the dispatch of
the power plant is under negotiation.
Fuel. Wuxi-AES-CAREC has signed 16-year fuel oil supply contracts with two
local State-owned oil companies under the administrative control of the Xishan
municipal government. The fuel suppliers are obligated, under the contracts, to
pay damages for any failure to supply the power plant with adequate quantities
of fuel or fuel not meeting certain specifications. The price of fuel oil to be
supplied under these supply contracts is to be negotiated annually. The oil
companies are obligated to arrange for the transportation of the fuel to the
power plant.
Operation. The power plant is operated by Wuxi-AES-CAREC.
AIXI HEART RIVER
The Power Plant. The Aixi Heart River power plant is a 50 MW coal-fired
circulating fluidized bed power plant located in Nanchuan, Sichuan Province.
Construction of the power plant commenced in February 1996, and is expected to
be completed in February 1998.
Joint Venture. The Aixi Heart River power plant is owned by Sichuan Fuling
Aixi Power Company Ltd. ("Fuling Aixi"), a 25-year cooperative Joint Venture
formed by Sichuan Fuling Banxi Colliery ("Banxi Colliery") and a wholly owned
subsidiary of AES Chigen. AES Chigen appoints three of the five members of the
board of directors as well as the chairman, the general manager and financial
controller.
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Financing. The approved total investment in the Joint Venture is $30.4
million ($30.0 million based on the Renminbi yuan to US dollar exchange rate at
the time the approval was granted). The Joint Venture's approved registered
capital is $12.1 million. As of November 30, 1996, it is estimated that the
total cost of Aixi Heart River will be approximately $39.1 million. AES Chigen
has committed to contribute $8.5 million to the registered capital of Fuling
Aixi and Banxi Colliery has committed to contribute $3.6 million to the Joint
Venture's registered capital. Pursuant to the construction and term loan
agreement with Fuling Aixi, AES Chigen has committed to provide a loan in the
principal amount of up to $23.5 million to Fuling Aixi. Any difference between
the estimated total cost and the committed shareholder loan and approved
registered capital will be funded by additional equity contributed pro rata by
the shareholders.
Power Purchase. Electricity generated by the power plant will be sold to
Sichuan Fuling Power Company ("Sichuan Power") under a 25-year power purchase
contract. The power purchase contract requires Sichuan Power to purchase a
minimum of 270 GWh of electricity per calendar year. In the event that Sichuan
Power fails in any calendar year to purchase such minimum amount, Sichuan Power
is required by the power purchase contract to make payment for any shortfall at
the then current power price less fuel costs. Pursuant to the power purchase
contract, if Fuling Aixi fails to deliver electricity to Sichuan Power by the
construction completion date specified in the construction contract, it is
obligated to pay a penalty to Sichuan Power for each day of delay.
Construction. Fuling Aixi has entered into a construction contract with
Shanghai Electric to construct the power plant. Certain critical components of
the equipment of the power plant (including the coal fluidized bed boilers and
their design) are being supplied by Pyropower, Inc. ("Pyropower") pursuant to a
supply contract between Shanghai Electric and Pyropower. The balance of the
plant is being provided by Chinese manufacturers. Shanghai Electric will provide
a one-year warranty of its work. If Shanghai Electric fails to complete
construction of the power plant by the guaranteed completion date, the
contractor will be required to pay liquidated damages to Fuling Aixi for each
day of delay in an amount sufficient to compensate the Joint Venture for
penalties due to Sichuan Power under the power purchase contract for delayed
commercial operation of the power plant. Under the construction contract,
Shanghai Electric has guaranteed all the performance specifications of the power
plant, including output, heat rate and emissions. If the power plant fails to
achieve the performance specifications, Shanghai Electric will be obligated to
pay liquidated performance damages to Fuling Aixi.
Interconnection and Dispatch. Sichuan Power is responsible for
construction, and has guaranteed the completion, of the interconnection facility
by the power plant's performance testing date. If a delay in the completion of
the interconnection facility results in delays in commencement of the commercial
operation of the power plant, Sichuan Power is obligated to pay Fuling Aixi a
penalty for each day of delay. The dispatcher of the power plant has agreed to
dispatch the power plant at 100% of its operational capacity during peak hours
and at 75% of its operational capacity during off-peak hours.
Fuel. Fuling Aixi has entered into a 25-year coal supply contract with
Banxi Colliery. Any increase in the price of coal to be paid by Fuling Aixi will
only become effective under the coal supply contract when the price of
electricity payable by Sichuan Power has been increased to reflect the increased
coal cost. The occurrence of a force majeure event will not excuse Banxi
Colliery's obligations under the coal supply contract. Banxi Colliery is also
obligated to supply coal to the power plant in the case of non-payment by Fuling
Aixi for such coal if such non-payment was caused by a failure of Sichuan Power
to make a payment to Fuling Aixi under the power purchase contract. If the coal
supply contract is terminated by Fuling Aixi on account of Banxi Colliery's
default, Banxi Colliery is required to pay a termination charge to Fuling Aixi.
Operation. Fuling Aixi will operate the power plant.
CHENGDU LOTUS CITY
The Power Plant. The Chengdu Lotus City power plant is a 2 x 24 MW natural
gas-fired power plant located in Chengdu, Sichuan Province. Construction of the
power plant commenced in September 1996 and is scheduled to take 334 days.
Joint Venture. The Chengdu Lotus City power plant is owned by
Chengdu-AES-Kaihua Gas Turbine Power Co. Ltd. ("Chengdu AES-Kaihua"), a 16-year
cooperative Joint Venture formed by AES Chigen,
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Huaxi Electric Power (Group) Shareholding Company Ltd. ("Huaxi") and CAREC. AES
Chigen is entitled to appoint three members of the nine-member board of
directors of Chengdu AES-Kaihua and the general manager.
Financing. The approved total investment in the Joint Venture is $29.8
million. The Joint Venture's approved registered capital is $11.9 million. As of
November 30, 1996, it is estimated that the total cost of Chengdu Lotus City
will be approximately $37.4 million. AES Chigen has committed to contribute $4.2
million to the registered capital of Chengdu AES-Kaihua. AES Chigen's joint
venture partners have committed to contribute the following amounts to the
registered capital of the Joint Venture: Huaxi has committed to contribute $4.2
million and CAREC has committed to contribute $3.6 million. AES Chigen, Huaxi
and CAREC have entered into support contracts with Chengdu AES-Kaihua pursuant
to which they have committed to arrange loans for Chengdu AES-Kaihua in the
principal amount of $25.3 million to fund the difference between their
registered capital contributions and the estimated total cost of the Joint
Venture.
Power Purchase. Electricity generated by the power plant is to be sold to
Huaxi under a 15-year power purchase contract. The power purchase contract
requires Huaxi to purchase, in each calendar year, 3,000 hours of electric power
based on the net station capacity of the power plant declared by Chengdu
AES-Kaihua to be available in such year. If Huaxi fails, for any reason
(including due to the failure of the interconnection facilities or natural gas
pipeline to be completed), to accept electric power which is made available by
Chengdu AES-Kaihua, Huaxi is required by the power purchase contract to pay
Chengdu AES-Kaihua for the electricity made available at the then current power
price less fuel costs.
The tariff payable by Huaxi under the power purchase contract is
established annually by the board of directors of Chengdu AES-Kaihua in
accordance with a budget which estimates the costs of generating the minimum
amount in the following year. The estimated power price becomes the price
payable by Huaxi in such following year after its approval by the Chengdu
pricing bureau. Any differences between the estimated power price and the actual
costs per kWh incurred by Chengdu AES-Kaihua are recovered each year by means of
a true-up mechanism.
Construction. Chengdu AES-Kaihua has entered into a construction contract
with CAREC to construct the power plant. The principal equipment for the power
plant, the gas turbine generator sets, is being provided to Chengdu AES-Kaihua
pursuant to a supply contract between CAREC and United Technologies. All
performance guarantees (including damages for failures to meet heat rate and
output guarantees) and warranties of United Technologies under the supply
contract have been assigned by CAREC to Chengdu AES-Kaihua. The balance of the
plant is being provided by Chinese manufacturers. An independent engineering
company, Duke/Fluor Daniel International, has been retained by the Joint Venture
to manage scheduling and to ensure equipment performance compliance.
Interconnection and Dispatch. The interconnection facility is to be
constructed by Huaxi. Chengdu AES-Kaihua has agreed to provide Huaxi with a loan
of RMB Y 15.0 million for the construction of the interconnection facilities.
The Joint Venture has entered into a dispatch contract with the Sichuan Dispatch
Center, pursuant to which the dispatcher of the power plant has agreed to
dispatch the power plant.
Fuel. Chengdu AES-Kaihua has entered into a 15-year gas supply contract
with Huachuan Petroleum & Natural Gas Exploration and Development Company
("Huachuan") for the supply of natural gas to the power plant. The gas supply
contract requires Huachuan to provide a minimum annual quantity of natural gas
to the Chengdu facility which meets certain specifications at a price set by the
Chengdu municipal pricing bureau. Any increase in the price of gas to be paid by
Chengdu AES-Kaihua will only become effective under the gas supply contract when
the price of electricity payable by Huaxi under its power purchase contract has
been increased to reflect the increased cost. If Huachuan fails, on any
occasion, to deliver gas in the quantities and specifications required by
Chengdu AES-Kaihua, Huachuan is obligated under the gas supply contract to
indemnify Chengdu AES-Kaihua for the total revenue lost by Chengdu AES-Kaihua
due to such failure. Huachuan is also obligated to continue supplying natural
gas to the power plant in the case of non-payment by Chengdu AES-Kaihua for such
natural gas if such non-payment was caused by a failure of Huaxi to make payment
to Chengdu AES-Kaihua under the power purchase contract.
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Chengdu AES-Kaihua may terminate the gas supply contract for Huachuan's
breach of contract, including its failure to deliver natural gas. If Chengdu
AES-Kaihua terminates the contract, Huachuan must pay a termination charge
similar to the termination charge payable under the power purchase contract. If
Huachuan pays this termination charge, the termination charge for which Huaxi
would be liable under the power purchase contract as a consequence of Huachuan's
default is not applicable. Upon any such payment, Chengdu AES-Kaihua is
obligated to transfer the power plant and related gas interconnection facility
to Huachuan.
Operation. Chengdu AES-Kaihua will operate the power plant.
CILI MISTY MOUNTAIN
The Power Plant. The Cili Misty Mountain power plant, located in Cili
County, Hunan Province, consists of a 5.2 MW hydroelectric generating unit
("unit 1"), and two 10.5 MW hydroelectric generating units ("unit 2" and "unit
3"). Unit 1, the original power plant, has been in commercial operation since
1979. Unit 2 went into commercial operation in May 1996 and unit 3 went into
commercial operation in February 1997.
Joint Venture. The Cili Misty Mountain power plant is owned by Hunan
Xiangci-AES Hydro Power Company Ltd. ("Xiangci-AES"), a 25-year Joint Venture
formed by Hunan Cili Electric Power Company ("Cili Electric Power") and AES
Chigen. AES Chigen appoints three of the five members of the Joint Venture's
board of directors, and appoints the general manager.
Financing. The approved total investment and approved registered capital
of Xiangci-AES is $14.7 million. AES Chigen contributed $7.5 million to the
registered capital of Xiangci-AES and Cili Electric Power contributed all of the
assets of the previously existing and operating unit 1 and all of the equipment
and materials purchased for the construction of unit 2 and unit 3 which, at the
time of AES Chigen's equity contribution to Xiangci-AES, were being incorporated
into the project by Cili Electric Power. All liabilities of the power plant
incurred prior to the establishment of Xiangci-AES are the sole obligation of
Cili Electric Power. As of November 30, 1996, the estimated total cost of this
project was in line with the approved total investment.
Power Purchase. Electricity generated by the power plant is sold by
Xiangci-AES to Cili Electric Power pursuant to a 25-year power purchase
contract. Cili Electric Power is required by the terms of the power purchase
contract to purchase all of the electricity generated by the power plant and to
use its best efforts to purchase electricity in excess of 120 GWh. Since the
power plant utilizes hydro power, the extent to which the power plant is able to
generate electric power depends upon the flow of river water. Due to a drought
in the area, the power plant was not able to generate 120 GWh in 1996.
Additionally, Cili Electric Power has indicated to the Joint Venture that load
growth in Cili County is likely to be less than anticipated in the near future.
Because the power plant is located in an area served by an isolated transmission
grid, the Joint Venture is planning to incur additional costs to build a 36
kilometer low voltage transmission line to connect the power plant with the
Hunan provincial grid and the larger market it serves. The power purchase
contract provides that payment for electricity purchased by Cili Electric Power
is based on a tariff which is the higher of a minimum rate and a market rate.
Construction. Pursuant to the terms of the joint venture contract, all of
the capital contributed by AES Chigen to Xiangci-AES is to be used to complete
construction of unit 2 and unit 3. Cili Electric Power was responsible under the
terms of the joint venture contract for completing the construction of unit 2
and unit 3. Work on unit 2 and unit 3 began in September 1991, with completion
originally targeted for June 1995. Construction of unit 2 was completed and it
began commercial operation in May 1996. However, due to problems with
installation and an equipment defect, construction of unit 3 was delayed.
Xiangci-AES has entered into an agreement with Cili Electric Power pursuant to
which the Joint Venture has directly assumed the work of completing the
construction of unit 3. Cili Electric Power has been discharged from any further
obligation to complete the power plant.
Interconnection and Dispatch. The power plant is interconnected to the
Cili County power grid. The power plant is dispatched by Cili Electric Power.
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Operation. Xiangci-AES operates the power plant.
YANGCHUN SUN SPRING
The Power Plant. The Yangchun Sun Spring power plant, located in Yangchun,
Guangdong Province, consists of one existing 8.6 MW diesel engine generating
facility which was constructed prior to AES Chigen's involvement, and another
6.5 MW Stork-Wartsila diesel engine generating facility which commenced
commercial operation in April 1996.
Joint Venture. Yangchun Sun Spring is owned by Yangchun Fuyang Diesel
Engine Power Co. Ltd. ("Yangchun Fuyang"), a 12-year cooperative Joint Venture
formed by Yangchun Municipal Power Supply Company ("Yangchun Power Supply"),
Shenzhen Futian Gas Turbine Power Co., Ltd. ("Shenzhen Futian") and a
wholly-owned subsidiary of AES Chigen. AES Chigen has the right to appoint one
of the four members of the board of directors of the Joint Venture.
Financing. AES Chigen and Shenzhen Futian each has contributed $2.3
million in cash to Yangchun Fuyang for their respective 25% ownership interests.
Yangchun Power Supply has contributed land use rights, and all the fixed assets
of the existing plant and all the equipment and materials purchased for the unit
then under construction as its registered capital for a 50% ownership interest
in Yangchun Fuyang.
Power Purchase. The electricity generated from the power plant is
purchased by Yangchun Municipal Power Supply Bureau ("Yangchun Power Bureau")
under a 12.5-year power purchase contract. The Yangchun Power Bureau is required
by the power purchase contract to purchase at least 34.4 GWh each year
commencing on January 1, 1995 and at least 58 GWh each year after December 31,
1995. The Yangchun Power Bureau is required to pay for such minimum amounts of
electricity even if it does not or cannot purchase such minimum amounts. The
Yangchun Power Bureau's payment obligation is secured by a pledge of the annual
profit from a 13 MW hydro power plant owned by the Yangchun City People's
Government.
Construction and Management. Yangchun Fuyang and Yangchun Power Supply
have entered into a 12.5-year construction and management contract. The contract
calls for Yangchun Power Supply to assume full responsibility for the operation
and maintenance of the power plant on behalf of Yangchun Fuyang in compliance
with the power purchase contract, and to supply fuel to the power plant. The
construction and management contract provides for scheduled distributions to AES
Chigen and Shenzhen Futian beginning on March 31, 1996 and continuing on a
semi-annual basis for the remainder of the contract term. The amounts are
adjusted if the foreign exchange rate between the U.S. dollar and Renminbi
exceeds or falls below specified thresholds. Yangchun Power Supply has pledged
its registered capital interest in Yangchun Fuyang as security for its
obligations to make scheduled distributions to AES Chigen and Shenzhen Futian
under the construction and management contract.
Interconnection and Dispatch. The power plant is interconnected to the
Yangchun municipal power grid. The power plant is dispatched by the Yangchun
Electric Dispatch Office pursuant to a dispatch contract between the Joint
Venture and the Yangchun Power Bureau.
Fuel. Fuel oil required for the power plant is supplied by Yangchun Power
Supply.
Operation. Yangchun Fuyang operates the power plant.
DESCRIPTION OF THE POTENTIAL PROJECTS
This section contains descriptions of projects, other than current
projects, for which AES Chigen has signed a joint venture contract. However, in
none of the following projects has AES Chigen funded its equity contribution to
the registered capital of the joint venture. After the Amalgamation, the ability
of AES Chigen to make investments in the potential projects would be
substantially limited by the AES Debt Covenants. See "AES Chigen's Relationship
with AES -- Material Effects of the Amalgamation."
Under PRC law, joint venture contracts only become effective after issuance
of certain required government approvals. Some of AES Chigen's joint venture
contracts and project contracts for projects in development are also subject to
the satisfaction or waiver of certain significant contractual conditions
precedent. The conditions precedent specified in such contracts must be
satisfied before AES Chigen will contribute to the registered capital of the
applicable joint venture. These conditions precedent may include the
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negotiation and execution of further substantial project contracts or the
receipt of certain government approvals.
Some of the required government approvals have not been obtained for each
of the projects described in this section and receipt of such approvals is not
certain. In addition, substantial uncertainties exist with regard to the ability
of the parties to the joint venture contracts and other project contracts to
satisfy the conditions precedent in those documents. Certain of these conditions
involve subjective determinations by one or more parties enabling the parties,
by the terms of the contracts, to exercise considerable discretion in making
such determinations. No assurances can be given that governmental approvals will
be received, conditions precedent will be satisfied, or that the joint ventures
described in this section will be funded.
The projects described in this section are at various stages of negotiation
and discussion. AES Chigen and PRC Government authorities, including power
bureaus, pricing bureaus, industrial customers and other third parties, must
still reach agreement on a number of commercial and technical issues. There can
be no certainty that the parties to these negotiations will reach agreement with
AES Chigen and that the projects described in this section will be completed.
Moreover, the final terms of the contracts relating to these projects may differ
materially from the terms described below, and the terms may be revised even
after a joint venture contract or other project contract has been signed or
becomes effective. AES Chigen may also decide from time to time to change its
investment strategies regarding development of the projects described in this
section. Among other things, AES Chigen may increase the levels of registered
capital contemplated for such projects. Furthermore, AES Chigen may in the
future be unable to, or elect not to, proceed with one or more, or any, of the
projects described in this section. AES Chigen in the past has signed a number
of joint venture contracts for projects that it is no longer pursuing.
Yangcheng Sun City. The Yangcheng Sun City power plant is a 6 x 350 MW
coal-fired power plant to be located near Yangcheng, Shanxi Province. The
Yangcheng Sun City power plant is to be owned by Yangcheng International Power
Generating Company Ltd. ("Yangcheng International Power"), a 20-year cooperative
joint venture formed by North China Electric Power Group Corporation ("North
China Power"), Jiangsu Province Investment Corporation ("Jiangsu Investment"),
Shanxi Energy Enterprise (Group) Company ("Shanxi Energy"), Shanxi Provincial
Power Company ("Shanxi Power"), Jiangsu Provincial Power Company ("Jiangsu
Power") and AES Chigen.
The approved total investment in Yangcheng International Power is
approximately $1.6 billion. The approved registered capital of Yangcheng
International Power is 25% of the total investment, equal to $392.9 million. The
respective ownership interests of the shareholders in Yangcheng International
Power are as follows: AES Chigen-25%, North China Power-25%, Jiangsu
Investment-20%, Shanxi Energy-16%, Shanxi Power-10% and Jiangsu Power-4%. Hence,
AES Chigen's registered capital contribution will be approximately $98.2
million. The difference between the total investment and the total registered
capital of the joint venture is expected to be financed through debt arranged or
guaranteed by the Chinese parties. It is anticipated that export credit agency
loan guarantees from the Export-Import Bank of the United States and Hermes
Kreditversicherungs Aktiengesellschaft of approximately $800 million will be
provided to Yangcheng International Power. The export credit agency loan
guarantees are expected to be supported by guarantees from the Construction Bank
of China.
Pursuant to the joint venture contract, AES Chigen is entitled to appoint
two members of the nine-member board of directors of Yangcheng International
Power, one of the three vice chairmen, and a deputy general manager of the power
plant.
Preliminary work on the site has begun. Equipment supply contracts were
executed in Beijing in September 1996 with Siemens Ltd., which will supply the
turbines and generators, and with Foster Wheeler Energy International, which
will supply the boilers. Shanxi Power has been selected as the turnkey
contractor, and negotiations are currently underway with Shanxi Power on the
engineering, procurement and construction contract. It is anticipated that the
power plant will require five years to be completed.
The power plant will primarily utilize local sources of low-cost anthracite
coal. The coal is available from several coal mines owned and operated by Shanxi
provincial government entities located within 30 kilometers of the power plant
site. Long-term fuel supply contract negotiations with Shanxi Provincial Coal
Sales and
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Transportation Company will commence in the near future. It is anticipated that
the project will also be operated by Yangcheng International Power.
Electric power from the plant will be transmitted over a 730 kilometer
transmission line to Jiangsu Power in Jiangsu Province, on the eastern coast of
China. The construction of the transmission line is not part of the investment
of the joint venture. It will be constructed and financed by the Chinese
shareholders in Yangcheng International Power pursuant to a separate
arrangement.
Following State Planning Commission approval of the project feasibility
study in March 1996, negotiations commenced on the principal project agreements.
The ability of AES Chigen to make an investment in the Yangcheng Sun City
project following the Amalgamation is contingent on, among other things, the
consent of AES Chigen's partners in such project and the approval of the
relevant PRC Government authorities. See "AES Chigen's Relationship with AES --
Material Effects of the Amalgamation."
OTHER POTENTIAL PROJECTS
Tianjin TEDA. The Tianjin TEDA power project, to be located in the Tianjin
Economic-Technological Development Area near Tianjin, is a 100 MW coal-fired
cogeneration project consisting of 3 x 220 ton circulating fluidized bed boilers
and 2 x 50 MW steam turbine units. The first phase will consist of one boiler
and one steam turbine. The Tianjin TEDA power plant is to be owned by the
Tianjin TEDA AES Power Company Ltd., a 20-year cooperative joint venture formed
by a wholly owned subsidiary of AES Chigen and the Tianjin Economic Development
Corporation ("Tianjin Development"). Total investment in the joint venture is
expected to be approximately $95 million. Registered capital of the joint
venture is expected to be 40% of the total investment. Unless third-party debt
can be arranged, the parties will contribute shareholder loans representing 60%
of the total investment. AES Chigen has a 70% ownership interest and Tianjin
Development has a 30% ownership interest in the joint venture. Applications for
approval of the project have been made to the State Planning Commission and
MOFTEC. The joint venture contract will become effective upon satisfaction of
certain conditions precedent.
Nanpu Southern Delta. The Nanpu Southern Delta power plant, to be located
in Huian County Fujian Province, is a 700 MW coal-fired power plant consisting
of 2 x 350 units. The Nanpu Southern Delta power plant is to be owned by the
Fujian Nanpu Power Company Limited, a 19-year cooperative joint venture formed
by AES Chigen, the Fujian Provincial Power Bureau ("Fujian Power") and CPI. The
total investment in the joint venture is expected to be approximately $600
million and the registered capital is expected to be approximately $150 million.
The project costs in excess of the registered capital are expected to be
financed through limited-recourse project financing. CPI and Fujian Power have
committed to obtain, on behalf of the project company, all necessary approvals,
including those from the State Planning Commission, MOFTEC and SAFE. Negotiation
of the power purchase contract and other project documents has commenced. The
project has received its initial project approval from the State Planning
Commission, and Fujian Power has commenced the preliminary design work for the
power plant at its own cost.
The ability of AES Chigen to make an investment in the Nanpu Southern Delta
project following the Amalgamation is contingent on, among other things, the
consent of AES Chigen's partners in such project and the approval of the
relevant PRC Government authorities. See "AES Chigen's Relationship with AES --
Material Effects of the Amalgamation."
RECENT DEVELOPMENTS
AES
In February 1997, AES entered into a definitive agreement to acquire the
international assets (inclusive of approximately $42 million of net monetized
assets) of Destec Energy, Inc. ("Destec"), a large independent energy producer
with headquarters in Houston, Texas, at a total price to AES of $407 million,
which price is subject to adjustment to reflect net cash flow between the
international assets of Destec and the rest of Destec from January 1, 1997 to
the closing date. AES and NGC Corporation ("NGC") were selected as the winning
bidders in an auction for all of Destec at a total acquisition price of $1.27
billion. For its share of the
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acquisition price, NGC has agreed to acquire Destec's domestic energy and other
businesses. Destec's international assets to be 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 1600 MW
coal-fired plant in Victoria, Australia (20 percent). The acquisition by AES of
Destec's international assets also includes all of Destec's non-U.S.
developmental stage power projects, including projects in Taiwan, England,
Germany, the Philippines, Australia and Colombia. A number of risks are
associated with this acquisition including those relating to the closing of the
transaction, the receipt of government approvals and other consents, financing,
operation and maintenance, construction and environmental risk.
In February 1997, AES announced that its subsidiary, AES Electric Ltd.,
raised $184 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 announced the execution by subsidiaries of AES of
three power purchase agreements (the "PPAs"), for an aggregate generating
capacity of at least 457 MWs, 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 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. The project is subject to a number
of risks not covered by the reimbursement obligations, including those related
to financing, construction and contract compliance, and there can be no
assurance that the project will be completed successfully.
On January 30, 1997, AES issued a press release reporting revenues of $835
million, net income of $125 million and net income per share of $1.62 for the
fiscal year ended December 31, 1996.
In January 1997, AES, through a subsidiary, completed the purchase of an
additional 13% of Tiszai Eromu Rt., an electric generation company in Hungary
consisting of three power plants totaling 1,281 MWs of gross capacity (1,115 MW
net) and a coal mine, from employee pension plans at a cost of $17 million,
bringing AES's total equity interest in Tiszai Eromu Rt. to 93.8%. In July 1996,
AES acquired its initial 80.8% of Tiszai Eromu Rt. at a cost of $110 million.
The plants consist of (i) the Tisza II facility, an 860 MW oil and natural
gas-fired facility that sells electricity under a contract that has an initial
term ending in 2010, (ii) the Tiszapalkonya facility, a 250 MW coal-fired
facility that sells electricity under a contract that has an initial term ending
in 2001, and (iii) the Borsod facility, a 171 MW coal-fired facility that sells
electricity under a contract that has an initial term ending in 2001. AES also
has the right to develop an additional 150-200 MW coal-fired electric generating
facility. The Borsod facility, the coal mine and the right to develop the
additional facility are 67.9% owned by Tiszai Eromu Rt. through its principal
subsidiary. The remaining 32.1% is owned by the Hungarian government. AES plans
to purchase an additional 2% of Tiszai Eromu Rt. from the Hungarian government
at a cost of $3 million. AES has also recently completed a voluntary severance
program which achieved a reduction of 56% of the workforce (or approximately
2,500 people) at a cost of approximately $23 million. Substantial risks
associated with these plants exist, however, including those relating to the
successful completion of power sales arrangements with the Hungarian government,
plant operation and maintenance, construction difficulties in respect of the
undeveloped facility, plant refurbishment, environmental risk, political risk,
repatriation of earnings and currency inconvertibility.
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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 (net)
gas-fired combined cycle power plant in the City of Merida, Yucatan, Mexico.
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.
In August 1996, AES, together with its partner, acquired a 4,000 MW
mine-mouth, coal-fired power facility in Kazakhstan. AES owns at least 70% of
the joint venture. The facility sells electricity to the government-owned
distribution company under a 35 year power sales contract. Due to economic
difficulties over the last 10 years, the facility has experienced a reduction in
performance and has operated at a capacity factor of approximately 20%. AES has
agreed to upgrade all aspects of the power station, and increase the capacity to
63% over a five year period (assuming that the purchaser performs its
obligations under the power sales contract). There can be no assurance that AES
will be able to make the required upgrades. Through December 31, 1996,
approximately $35 million has been billed under the power sales contract for
electricity delivered by AES and the purchaser has paid approximately $5
million. 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 by AES of electricity under the power sales contract. Other
substantial risks associated with this plant exist, including those relating to
operations and maintenance, construction, refurbishment, political risk,
repatriation of earnings and currency inconvertibility.
AES CHIGEN
On January 31, 1997, AES Chigen issued a press release reporting revenues
of $9.2 million, net income of $2.1 million and net income per share of $0.26
for the fiscal year ended November 30, 1996.
On December 19, 1996, AES Chigen completed a $180 million public offering
of its 10 1/8% Notes due December 2006 (the "2006 Notes") and received net
proceeds of approximately $173.9 million. Pursuant to the terms of the indenture
under which the 2006 Notes were issued (the "Indenture"), AES Chigen was
required to deposit approximately $27.1 million in an interim reserve account to
make interest payments on the 2006 Notes through June 15, 1998, and
approximately $9.1 million in a debt payment reserve. The 2006 Notes are
redeemable at the option of AES Chigen on or after December 15, 2001. The
Indenture limits, among other things, (i) the payment of dividends and
redemption of equity interests by AES Chigen and its project companies; (ii) the
redemption of subordinated indebtedness; (iii) the making of certain
investments; (iv) the incurrence by AES Chigen and its project companies of
certain indebtedness; (v) the imposition by AES Chigen or any of its project
companies of restrictions on the payment of dividends and other actions; (vi)
the creation by AES Chigen or any of its project companies of certain liens;
(vii) certain transactions with affiliates of AES Chigen; (viii) certain asset
sales and the incurrence of indebtedness to refinance existing indebtedness;
(ix) the issuance of stock by certain subsidiaries of AES Chigen; (x) any change
in the nature of AES Chigen's business; and (xi) the merger or consolidation of
AES Chigen or its project companies with other entities. The Indenture also
obligates AES Chigen and its project companies to maintain certain insurance,
obtain required government approvals, maintain good title to their properties
and operate and maintain their power generation facilities in accordance with
prudent industry operating and maintenance practices. The events of default
under the Indenture include, among other things, (i) failure to pay interest
within 30 days or failure to pay principal at maturity or upon redemption or
repurchase of the 2006 Notes; (ii) a default in the performance of covenants
contained in the Indenture; (iii) a default under indebtedness of AES Chigen or
any of its project companies in the amount of $5 million or more (other than
under the 2006 Notes or any non-recourse debt); and (iv) a judgment against AES
Chigen or any of its project companies in an amount in excess of $5 million. The
2006 Notes have been rated BB- by Standard & Poor's Rating Group and Ba3 by
Moody's Investors Service. Net proceeds from the offering of the 2006 Notes will
be used to fund investments in AES Chigen's projects (including those described
under "The Companies -- Business of AES
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Chigen"), and for general corporate purposes. AES Chigen's ability to make
investments in projects will be subject to limitations after the Amalgamation.
See "AES Chigen's Relationship with AES -- Material Effects of the
Amalgamation."
CERTAIN LITIGATION IN RESPECT OF THE AMALGAMATION
On November 22, 1996, an action was filed against AES in the Court of
Chancery of the State of Delaware in and for New Castle County, by a holder of
750 shares of AES Chigen Class A Common Stock, individually and on behalf of a
purported class of public shareholders of the approximately 8.2 million
outstanding shares of AES Chigen Class A Common Stock. The complaint seeks
preliminarily and permanently to enjoin AES from acquiring the outstanding
shares of AES Chigen which it does not already own. In addition, the complaint
seeks unspecified damages, including attorneys' fees and costs.
AES Chigen is not named in the suit. Plaintiff's allegations state that
AES, as the controlling shareholder of AES Chigen, breached its fiduciary duties
to treat the plaintiff class with entire fairness in connection with AES's
execution of an agreement with AES Chigen to acquire the outstanding AES Chigen
Class A Common Stock at an allegedly grossly inadequate price.
The parties have entered into a stipulation extending, until March 24,
1997, AES's time to answer, move or otherwise plead to the complaint and answer
or object to plaintiff's pending document production request. Plaintiff has the
right to move for an order requiring an earlier response. AES has informed AES
Chigen that it believes that it has meritorious defenses to the lawsuit and
intends to defend against it vigorously. The parties to the Amalgamation
Agreement intend to proceed with the Amalgamation, subject to shareholder
approval and the satisfaction of the other conditions contained in the
Amalgamation Agreement, unless enjoined.
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THE AES CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes certain selected consolidated financial
data, which should be read in conjunction with AES's consolidated financial
statements and related notes and which are incorporated by reference herein. The
selected consolidated financial data as of and for each of the five years in the
period ended December 31, 1995 have been derived from the audited consolidated
financial statements of AES. The selected financial data presented below for the
nine months ended September 30, 1995 and September 30, 1996 are derived from the
unaudited consolidated financial statements of AES contained in AES's Quarterly
Report on Form 10-Q at and for the nine months ended September 30, 1995 and
September 30, 1996 and incorporated herein by reference. The results of
operations for the nine months ended September 30, 1996 are not necessarily
indicative of the results to be expected for the full year. AES believes that
the unaudited information for the nine months ended September 30, 1996 contains
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the operating results for such periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------ NINE MONTHS ENDED NINE MONTHS ENDED
1991 1992 1993 1994 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
------ ------ ------ ------ ------ ------------------ ------------------
IN MILLIONS, EXCEPT PER SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................... $ 334 $ 401 $ 519 $ 533 $ 685 $ 512 $ 551
Net income/(loss)...................... 43 56 71 100 107 79 89
Net income/(loss) per share............ 0.66 0.80 0.98 1.32 1.41 1.04 1.16
Cash dividends per share............... 0.20.. 0.39 0.58 -- -- -- --
BALANCE SHEET DATA:
Total assets........................... $1,367 $1,552 $1,687 $1,915 $2,320 $2,226 $3,419
Project financing debt (long-term)..... 1,093 1,146 1,075 1,019 1,098 1,040 1,301
Revolving bank loan (long-term)........ -- -- -- -- -- -- 125
Other notes payable (long-term)........ -- 50 125 125 125 125 325
</TABLE>
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THE AES CORPORATION
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of AES Common Stock as of February 1, 1997 by (a) persons known to AES
to be the beneficial owners of more than five percent of the outstanding AES
Common Stock, (b) each director of AES, (c) each of the five most highly
compensated executive officers of AES during the 1995 fiscal year of AES and (d)
all directors and executive officers of AES as a group. Except as otherwise
noted, the persons named in the table below have sole voting and investment
power with respect to all shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
SHARES OF
AES
COMMON STOCK
POSITIONS HELD BENEFICIALLY % BEFORE % AFTER
NAME WITH AES OWNED(1)(2) AMALGAMATION(1)(2) AMALGAMATION(3)
- -------------------------------- ---------------------------- ------------ ------------------ ---------------
<S> <C> <C> <C> <C>
Roger W. Sant................... Chairman of the Board and 10,638,296(4) 13.66 13.26
Director
Dennis W. Bakke(d).............. President, Chief Executive 8,993,433(5) 11.58 11.24
Officer and Director
Vicki Ann Assevero(ab).......... Director 2,761 * *
Alice F. Emerson(bc)............ Director 11,597 * *
Frank Jungers(bc)............... Director 551,770(6) * *
Henry R. Linden(ab)............. Director 28,373 * *
John H. McArthur(b)............. Director -0- -0- -0-
Russell E. Train(bd)............ Director 591,110(7) * *
Thomas I. Unterberg(ab)......... Director 675,557(8) * *
Robert H. Waterman, Jr.(bcd).... Director 341,657(9) * *
Robert F. Hemphill, Jr.(a)...... Director 856,683(10) 1.11 1.07
Kenneth R. Woodcock............. Senior Vice President 2,039,618(11) 2.63 2.55
Thomas A. Tribone............... Senior Vice President 201,641 * *
All directors and executive
officers as a group (21
persons)......................
26,383,879(12) 33.95 32.95
</TABLE>
- ---------------
a Member of the Financial Audit Committee.
b Member of the Environment, Safety and Social Responsibility Committee.
c Member of the Compensation Committee.
d Member of the Nominating Committee.
* Shares held represent less than 1% of the total number of outstanding
shares of AES Common Stock.
(1) Shares beneficially owned and deemed to be outstanding include AES Common
Stock issued or issuable, on or before April 1, 1997, (a) upon exercise of
outstanding options, (b) upon exercise of warrants, (c) under the Deferred
Compensation Plan for Executive Officers, (d) under the Deferred
Compensation Plan for Directors, (e) upon conversion of subordinated
debentures, (f) under the Profit Sharing and Stock Ownership Plan, and (g)
under the Supplemental Retirement Plan.
(2) Includes (a) the following shares issuable upon exercise of options: Mr.
Sant -- 428,449 shares; Mr. Bakke -- 226,870 shares; Mr. Woodcock -- 80,707
shares; Mr. Tribone -- 141,799 shares; Ms. Assevero -- 2,761 shares; Dr.
Emerson -- 7,695 shares; Mr. Jungers -- 5,687 shares; Dr. Linden -- 495
shares; Mr. Train -- 5,687 shares; Mr. Unterberg -- 5,687 shares; Mr.
Waterman -- 5,687 shares; all directors and executive officers as a
group -- 1,363,808 shares; (b) the following shares issuable under the
Deferred Compensation Plan for Executive Officers: Mr. Sant -- 14,021
shares; all executive officers as a group -- 14,021 shares; (c) the
following units issuable under the Deferred Compensation Plan for
Directors: Dr. Emerson -- 3,593; Mr. Jungers -- 40,360; Dr.
Linden -- 27,878; Mr. Train -- 57,611; Mr. Unterberg -- 57,838; Mr.
Waterman -- 57,556; all directors as a group -- 258,857; (d) the following
shares held by the Profit Sharing and Stock Ownership Plan: Mr.
Sant -- 146,212 shares; Mr. Bakke -- 139,479 shares; Mr. Hemphill -- 99,356
shares; Mr. Woodcock -- 81,457 shares; Mr. Tribone -- 27,883 shares; all
executive officers as a group -- 702,133 shares; and (e) the following
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units issuable under the Supplemental Retirement Plan: Mr. Sant -- 1,727;
Mr. Bakke -- 2,151; Mr. Hemphill -- 649; Mr. Woodcock -- 733; Mr.
Tribone -- 404; all executive officers as a group -- 7,056.
(3) The percentage of shares after the Amalgamation is based on an assumed
issuance of approximately 2.4 million shares of AES Common Stock in the
Amalgamation.
(4) Includes 7,550,146 shares held jointly by Mr. Sant and his wife. Also
includes 403,241 shares held by his wife, 146,195 shares held in an IRA for
the benefit of Mr. Sant, and 64,871 shares held in an IRA for the benefit
of his wife. In addition, includes 1,128,751 shares held by The Summit
Foundation, of which Mr. Sant disclaims beneficial ownership.
(5) Includes 6,834,658 shares held jointly by Mr. Bakke and his wife, 31,530
shares held by his children, 449,043 shares held by his wife and 181,383
shares held by the Mustard Seed Foundation, of which Mr. Bakke disclaims
beneficial ownership.
(6) Includes 26,390 shares held by Mr. Junger's wife and 282,742 shares held by
FJF, Inc.
(7) Includes 188,147 shares held by Mr. Train's wife.
(8) Includes 4,826 shares held by Mr. Unterberg's wife.
(9) Includes 2,370 and 46 shares, held in IRAs for Mr. Waterman and his wife,
respectively, 622 shares held in a trust of which Mr. Waterman is trustee,
and 275,373 shares held in a family trust.
(10) Includes 8,148 shares held in an IRA for the benefit of Mr. Hemphill. Mr.
Hemphill also holds exercisable options to purchase 4,000 shares of AES
Chigen Class B Common Stock.
(11) Includes 1,468,921 shares held jointly by Mr. Woodcock and his wife,
288,600 shares held in a trust for the benefit of the Woodcock family and
119,200 shares held in trusts for the benefit of Mr. Woodcock's children.
(12) Includes 33,536 shares held jointly by one executive officer and his wife.
Includes 76,657 shares held jointly by another executive officer and his
wife, and 1,988 and 1,256 shares held in IRAs for the benefit of the
executive officer and his wife, respectively. Includes 598,338 shares held
jointly by another executive officer and his wife, and 40,558 shares held
in trust for his children. Includes 27 shares held by another executive
officer's wife. Such executive officer also holds 2,000 shares of AES
Chigen Class A Common Stock jointly with his wife, and options to purchase
100,000 shares of AES Chigen Class B Common Stock. Includes 3,090 shares
held in IRAs for the benefit of another executive officer and his wife and
600 shares held in trust for his children. Includes 2,110 shares held by
another executive officer for his children.
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<PAGE> 81
AES CHIGEN
SELECTED FINANCIAL DATA
The selected financial data presented below for the period from December 7,
1993 (inception) to November 30, 1994 and the fiscal year ended November 30,
1995 for AES Chigen were derived from the audited consolidated financial
statements contained in AES Chigen's Annual Report on Form 10-K for the year
ended November 30, 1995 and incorporated by reference herein. The selected
financial data presented below for the nine months ended August 31, 1995 and
August 31, 1996 were derived from unaudited quarterly consolidated financial
statements contained in AES Chigen's Quarterly Report on Form 10-Q at and for
the nine months ended August 31, 1995 and August 31, 1996 and incorporated
herein by reference. The unaudited quarterly consolidated financial statements
include all adjustments which are, in the opinion of AES Chigen, necessary for a
fair statement of the interim results. All such adjustments are of a normal
recurring nature. Results for interim periods are not necessarily indicative of
results to be expected for the full year. The data below should be read in
conjunction with the audited consolidated financial statements and unaudited
quarterly consolidated condensed financial statements of AES Chigen, and the
related notes thereto, incorporated by reference herein.
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 7, 1993
(INCEPTION) TO FISCAL YEAR ENDED NINE MONTHS ENDED NINE MONTHS ENDED
NOVEMBER 30, 1994 NOVEMBER 30, 1995 AUGUST 31, 1995 AUGUST 31, 1996
----------------- ----------------- ----------------- -----------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues..................... $ -- $ 1.4 $ 0.9 $ 7.0
Net income/(loss)............ (0.4) 2.1 1.6 1.9
Net income/(loss) per
share...................... (0.03) 0.12 0.09 0.12
BALANCE SHEET DATA:
Total assets................. $ 210.9 $ 229.9 $ 227.2 $ 270.3
Loans from minority
partners................... -- 7.0 -- 35.3
</TABLE>
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<PAGE> 82
AES CHIGEN
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 1, 1997 certain information
known to AES Chigen regarding ownership of AES Chigen Class A Common Stock and
AES Chigen Class B Common Stock by all persons who own more than five percent
(5%) of each such class. The information in the table relating to ownership of
AES Chigen Class A Common Stock is based solely on AES Chigen's review of
filings made with the Commission pursuant to rules promulgated under Section 13
of the Exchange Act.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL % OF
BENEFICIAL OWNER OWNERSHIP % OF CLASS COMMON STOCK
----------------------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Class B Common Stock......... The AES Corporation 7,500,000 100% 47.9%
1001 N. 19th Street
Arlington, Virginia 22209
Class A Common Stock......... Weiss, Peck & Greer, L.L.C. 1,627,200 (1) 19.9% 10.4%
One New York Plaza
New York, New York 10004-1950
Class A Common Stock......... Wanger Asset 1,455,000 (2) 17.8% 9.3%
Management, L.P.
227 West Monroe Street
Suite 3000
Chicago, Illinois 60606
Class A Common Stock......... John W. Bristol & Co., Inc. 941,477 (3) 11.5% 6.0%
233 Broadway
New York, New York 10279
Class A Common Stock......... Acorn Investment Trust, 810,000 (2) 9.9% 5.2%
Series Designated Acorn Fund
227 West Monroe Street
Suite 3000
Chicago, Illinois 60606
</TABLE>
- ---------------
(1) Weiss, Peck & Greer, L.L.C., a registered broker-dealer under the Exchange
Act and a registered adviser under the Investment Advisers Act of 1940, as
amended ("IAA"), held 1,627,200 shares of AES Chigen Class A Common Stock at
December 31, 1996 for the discretionary accounts of certain clients. Weiss,
Peck & Greer expressly disclaims beneficial ownership of such shares.
(2) Wanger Asset Management, L.P., a registered broker-dealer under the Exchange
Act and a registered adviser under the IAA, reported that it had beneficial
ownership of or investment discretion over 1,455,000 shares of AES Chigen
Class A Common Stock at December 31, 1996. This amount includes the 810,000
shares of AES Chigen Class A Common Stock held by Acorn Investment Trust,
Series Designated Acorn Fund.
(3) John W. Bristol & Co., Inc., a registered adviser under the IAA, reported
that it had investment discretion over 941,477 shares of AES Chigen Class A
Common Stock at December 31, 1996.
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<PAGE> 83
The following table sets forth, as of February 1, 1997, the beneficial
ownership of AES Chigen Class A Common Stock and AES Chigen Class B Common Stock
by each director and named executive officer, as well as all directors and
executive officers as a group. Unless otherwise indicated, each of the persons
and each person in the group listed below has sole voting and dispositive power
with respect to the shares shown.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
AES CHIGEN AES CHIGEN
CLASS A % OF CLASS B % OF
POSITIONS HELD COMMON STOCK AES CHIGEN COMMON STOCK AES CHIGEN
WITH BENEFICIALLY CLASS A BENEFICIALLY CLASS B
NAME AGE AES CHIGEN OWNED SHARES OWNED(1)(2) SHARES
- --------------------------- --- ------------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Roger W. Sant.............. 65 Chairman of the Board and
Class B Director -0- -0- -0- -0-
Dennis W. Bakke............ 51 Vice Chairman and Class B
Director -0- -0- -0- -0-
Robert F. Hemphill, Jr.(c). 53 Vice Chairman and Class B
Director -0- -0- 6,000 *
Thomas I. Unterberg(ac).... 65 Class B Director -0- -0- -0- -0-
Thomas A. Tribone.......... 44 Class B Director -0- -0- -0- -0-
William Dykes(abd)......... 64 Class A Director -0- -0- -0- -0-
Xiliang Feng(abd).......... 76 Class A Director -0- -0- -0- -0-
Dr. Victor Hao Li(abd)..... 54 Class A Director 1,000 * -0- -0-
William H. Taft, IV(abcd).. 50 Class A Director 1,000 * -0- -0-
Paul T. Hanrahan........... 39 President and Chief
Executive Officer 2,000(3) * 185,275 2.3%
Edward C. Hall, III........ 37 Executive Vice President -0- -0- 115,945 1.5%
Jeffery A. Safford......... 38 Vice President, Chief
Financial Officer and
Secretary 2,000(4) * 49,046 *
Thomas Wu.................. 35 Vice President -0- -0- 35,986 *
James R. Reiney, Jr........ 55 Vice President 1,800 * 10,000 *
Kerry Yeager............... 45 Vice President 3,300 * 21,122 *
All directors and executive
officers as a group (15
persons)................. 11,100 * 423,374 5.3%
</TABLE>
- ---------------
a Member of the Audit and Human Resources Committees.
b Member of the Nominating Committee.
c Member of the Stock Purchase Committee.
d Member of the Special Committee.
- - Shares held represent less than 1% of the total number of outstanding shares
of AES Chigen Class A Common Stock or AES Chigen Class B Common Stock.
(1) Shares beneficially owned and deemed to be outstanding include AES Chigen
Class B Common Stock issued or issuable, on or before April 1, 1997, upon
exercise of outstanding stock options.
(2) Includes the following shares of AES Chigen Class B Common Stock issuable
upon exercise of options: Mr. Hall -- 115,945; Mr. Hanrahan -- 185,275; Mr.
Hemphill -- 6,000; Mr. Safford -- 49,046; Mr. Wu -- 35,986; Mr.
Reiney -- 10,000; and Mr. Yeager -- 21,122.
(3) The 2,000 shares of AES Chigen Class A Common Stock are held jointly by Mr.
Hanrahan and his wife; Mr. Hanrahan and his wife have agreed not to exercise
voting rights with respect to these shares.
(4) Includes 1,000 shares of AES Chigen Class A Common Stock held jointly by Mr.
Safford and his wife, 400 shares of AES Chigen Class A Common Stock held in
an IRA for the benefit of Mr. Safford, and 600 shares of AES Chigen Class A
Common Stock held in an IRA for the benefit of his wife.
76
<PAGE> 84
The following table sets forth, as of February 1, 1997, the beneficial
ownership of AES Common Stock by each director and named executive officer of
AES Chigen (other than holdings of Roger W. Sant (Chairman of the Board and
Class B Director), Dennis W. Bakke (Vice Chairman and Class B Director), Robert
F. Hemphill, Jr. (Vice Chairman and Class B Director), Thomas A. Tribone (Class
B Director) and Thomas I. Unterberg (Class B Director) with respect to each of
whom information is provided under "The AES Corporation Security Ownership of
Certain Beneficial Owners and Management" above) who beneficially owns shares of
AES Common Stock, as well as such directors and executive officers as a group.
Unless otherwise indicated, each of the persons in the group listed below has
sole voting and dispositive power with respect to the shares shown.
<TABLE>
<CAPTION>
SHARES OF
AES COMMON % OF SHARES % OF SHARES
STOCK BEFORE AFTER
BENEFICIALLY AMALGAMATION AMALGAMATION
NAME POSITIONS HELD WITH AES CHIGEN OWNED(1)(2) (1)(2) (3)
- --------------------- ---------------------------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
William H. Taft,
IV................. Class A Director 462 (4) * *
Paul T. Hanrahan..... President and Chief Executive Officer 40,839 (5) * *
Edward C. Hall, Executive Vice President 18,052 (6) * *
III................
Jeffery A. Safford... Vice President, Chief Financial Officer 19,019 (7) * *
and Secretary
Kerry Yeager......... Vice President 8,703 * *
All directors and
executive officers
as a group
(15 persons)................................................. 21,443,982 27.59% 26.78%
</TABLE>
- ---------------
* Shares held represent less than 1% of the total number of outstanding shares
of AES Common Stock.
(1) Shares beneficially owned and deemed to be outstanding include AES Common
Stock issued or issuable , on or before April 1, 1997 (a) upon exercise of
outstanding options under The AES Corporation Incentive Stock Option Plan
and The AES Corporate Stock Option Plan for Outside Directors, (b) under The
AES Corporation Deferred Compensation Plan for Executive Officers and (c)
under The AES Corporation Deferred Compensation Plan for Directors, and
include shares of AES Common Stock allocated under The AES Corporation
Profit Sharing and Stock Ownership Plan.
(2) Includes (a) the following shares issuable upon exercise of options under
The AES Corporation Incentive Stock Option Plan: Mr. Hanrahan -- 20,409
shares; Mr. Hall -- 9,725 shares; Mr. Safford -- 5,701 shares; Mr.
Yeager -- 2,590 shares; all directors and executive officers as a
group -- 841,230 shares; and (b) the following shares allocated under The
AES Corporation Profit Sharing and Stock Ownership Plan: Mr.
Hanrahan -- 16,343; Mr. Hall -- 7,316 shares; Mr. Safford -- 8,718 shares;
Mr. Yeager -- 4,410 shares; all directors and executive officers as a
group -- 449,717 shares.
(3) The percentage of shares after the Amalgamation is based on an assumed
issuance of approximately 2.4 million shares of AES Common Stock in the
Amalgamation.
(4) Includes 462 shares held by Mr. Taft for the benefit of his children.
(5) Includes 4,060 shares held jointly by Mr. Hanrahan and his wife and 27
shares held by his wife.
(6) Includes 1,011 shares held jointly by Mr. Hall and his wife.
(7) Includes 1,600 shares held jointly by Mr. Safford and his wife, and 3,000
shares held in IRAs for the benefit of Mr. Safford and his wife.
77
<PAGE> 85
DESCRIPTION OF AES CAPITAL STOCK
The authorized capital stock of AES consists of 100,000,000 shares of AES
Common Stock and 1,000,000 shares of AES Preferred Stock.
AES COMMON STOCK
As of February 1, 1997, there were 77,437,564 shares of AES Common Stock
outstanding which were held of record by 743 stockholders. Assuming that there
are 8,171,268 shares of AES Chigen Class A Common Stock outstanding at the
Effective Time (which assumes that no outstanding options on AES Chigen Class A
Common Stock are exercised) and that the Exchange Ratio is 0.29, there will be
approximately 79,817,545 shares of AES Common Stock outstanding after giving
effect to the issuance of shares of AES Common Stock in the Amalgamation.
The holders of AES Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding AES Preferred Stock, the holders of AES Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the Board of Directors of AES out of funds legally
available therefor. In the event of liquidation, dissolution or winding up of
AES, the holders of AES Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to prior distribution rights of
the AES Preferred Stock, if any, then outstanding. The AES Common Stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the AES Common Stock. All
outstanding shares of AES Common Stock are fully paid and non-assessable and
shares of AES Common Stock offered hereby will be fully paid and non-assessable.
AES PREFERRED STOCK
The Board of Directors of AES has the authority to issue the AES Preferred
Stock in one or more classes or series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any class or
series or the designation of such class of series, without further vote or
action by the stockholders. AES Preferred Stock, if issued, will not be entitled
to any preemptive or similar rights. The issuance of AES Preferred Stock may
have the effect of delaying, deferring or preventing a change in control of AES
without further action by the stockholders and may adversely affect the voting
and other rights of the holders of AES Common Stock. At present, AES has no
plans to issue any of the AES Preferred Stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for AES Common Stock is First Chicago
Trust Company of New York.
DESCRIPTION OF CERTAIN PROVISIONS OF
AES'S CERTIFICATE OF INCORPORATION AND BY-LAWS
AES's Certificate of Incorporation and By-Laws contain several provisions
that may make the acquisition of control of AES by means of a tender offer, open
market purchases, a proxy fight or otherwise more difficult. Set forth below is
a description of certain of these provisions in AES's Certificate of
Incorporation and By-Laws.
SPECIAL MEETINGS OF STOCKHOLDERS. AES's By-Laws provide that, unless
otherwise prescribed by law, special meetings of stockholders may be called by a
resolution adopted by a majority of the entire Board of Directors, the Chairman
of the Board or the President and shall be called by the Chairman of the Board
or the President upon written request of stockholders owning at least 10% of
stock entitled to vote. Only such business as shall be specified in the notice
of stockholders of the special meeting shall be considered.
78
<PAGE> 86
STOCKHOLDER NOMINATION OF DIRECTORS. AES's By-Laws contain a procedure for
stockholder nomination of directors. The By-Laws provide that any record owner
of stock entitled to be voted generally in the election of directors may
nominate one or more persons for election as a director at a stockholders
meeting only if written notice is given to the Secretary of AES of the intent to
make such nomination. The notice must be given, with respect to an annual
meeting, not later than 90 days in advance of such annual meeting and with
respect to a special meeting, not later than the close of business on the
seventh day following the earlier of (a) the date on which notice of such
special meeting is first given to stockholders and (b) the date on which a
public announcement of such meeting is first made. Each notice must include (i)
the name and address of each stockholder who intends to appear in person or by
proxy to make the nomination and of the person or persons to be nominated; (ii)
a description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming them) pursuant to which the
nomination is to be made by the stockholder; (iii) such other information
regarding each nominee proposed by such stockholder as would have been included
in a proxy statement filed pursuant to Rule 14a-8 under the Exchange Act; and
(iv) the consent of each nominee to serve if elected. The presiding officer of
the meeting may refuse to acknowledge the nomination of any person not made in
compliance with this procedure.
The procedure for stockholder nomination of directors described above may
have the effect of precluding a nomination for election of directors at a
particular meeting if the required procedure is not followed.
ELIMINATION OF LIABILITY; INDEMNIFICATION. Except as set forth below,
AES's Certificate of Incorporation eliminates the liability of AES's directors
to AES or its stockholders for monetary damages resulting from breaches of their
fiduciary duties as directors. Directors remain liable for breaches of their
duty of loyalty to AES or its stockholders, as well as for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law and transactions from which a director derives improper personal benefit.
AES's Certificate of Incorporation also does not absolve directors of liability
under Section 174 of the Delaware General Corporation Law (the "GCL"), which
makes directors personally liable for unlawful dividends or unlawful stock
repurchases or redemptions if the unlawful conduct is willful or results from
negligence.
Under AES's By-Laws, and in accordance with Section 145 of the GCL, AES
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than any action
or suit by or in the right of AES to procure a judgment in its favor, a
"derivative action") by reason of the fact that such person is or was a director
or officer of or employed by AES, or is or was serving in such capacity or as an
agent at the request of AES for another entity, to the full extent authorized by
Delaware law, against expenses (including, but not limited to, attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with the defense or settlement of such action, suit or proceeding
if such person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of AES, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe was
unlawful. AES shall indemnify persons in a derivative action under the same
conditions, except that no indemnification is permitted without judicial
approval if the person is adjudged to be liable to AES in the performance of his
or her duty. Agents of AES may be similarly indemnified at the discretion of the
Board of Directors.
Under Section 145 of the GCL, a similar standard of care is applicable in
the case of derivative actions, except that indemnification only extends to
expenses (including attorneys' fees) incurred in connection with the defense of
settlement of such an action and then, where the person is adjudged to be liable
to AES, only if and to the extent that the Court of Chancery of the State of
Delaware or the court in which such action was brought determines that such
person is fairly and reasonably entitled to such indemnity and only for such
expenses as the court shall deem proper.
Pursuant to AES's By-Laws, a person eligible for indemnification may have
the expenses incurred in connection with any matter described above paid in
advance of a final disposition by AES. However, such advances will only be made
upon the delivery of an undertaking by or on behalf of the indemnified person to
repay all amounts so advanced if it is ultimately determined that such person is
not entitled to indemnification.
79
<PAGE> 87
In addition, under AES's By-Laws, AES may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
AES or of another corporation against any liability asserted against and
incurred by such person in such capacity, or arising out of the person's status
as such whether or not AES would have the power or the obligation to indemnify
such person against such liability under the provisions of AES By-Laws.
AES CHIGEN'S RELATIONSHIP WITH AES
AES owns 7,500,000 shares of AES Chigen Class B Common Stock, representing
approximately 48% of AES Chigen's outstanding shares. As a result of such
ownership, AES has the right to elect one-half of AES Chigen's Board of
Directors. AES Chigen and AES have entered into a number of agreements, which
are described below. These agreements were not negotiated on an arm's-length
basis. Any amendment of these agreements or waiver by AES Chigen of its rights
under these agreements would have to be approved by a majority of the Class A
Directors. Also set forth below is a description of AES's current intentions
with respect to AES Chigen and the China power market assuming the Amalgamation
is consummated.
STOCK PURCHASE AND SHAREHOLDER'S AGREEMENT
AES Chigen and AES entered into the Stock Purchase and Shareholder's
Agreement pursuant to which AES Chigen issued to AES 7,500,000 shares of AES
Chigen Class B Common Stock in consideration of: (i) the investment by AES of
$50 million in AES Chigen; (ii) the assignment (subject to obtaining necessary
third-party consents) to AES Chigen of AES's direct or indirect interests in all
letters of intent and preliminary agreements with PRC government entities and
other third parties in respect of the development of electric power generation
projects in China; and (iii) AES's agreement not to compete, and to cause each
of its controlled subsidiaries not to compete, with AES Chigen in China for at
least ten years. The Stock Purchase and Shareholder's Agreement provides that
until the occurrence of certain events AES shall not acquire any shares of the
AES Chigen Class A Common Stock without obtaining a waiver from AES Chigen
approved by a majority of the Class A Directors. The Stock Purchase and
Shareholder's Agreement also provides that until the fifth anniversary of the
date of the Services Agreement (as defined below) AES will apply the after-tax
proceeds of all performance fees received by AES with respect to AES Chigen's
projects to the purchase of additional shares of AES Chigen Class B Common
Stock, subject to certain exceptions. AES has not received any such performance
fees pursuant to the Services Agreement. See " -- Services Agreement." The Stock
Purchase and Shareholder's Agreement will be terminated if the Amalgamation is
consummated.
SERVICES AGREEMENT
Pursuant to a Services Agreement dated December 29, 1993 between AES Chigen
and AES (the "Services Agreement"), AES provides to AES Chigen project
development services, construction management services and operations and
maintenance services necessary for AES Chigen to perform its obligations in
connection with the development, construction, ownership, acquisition,
maintenance and operation of electric power generation projects in the PRC.
As compensation for its services under the Services Agreement, AES receives
a payment equal to the salaries and certain benefits of persons performing
services on behalf of AES under the Services Agreement, plus 45% thereof to
cover corporate overhead and similar indirect costs. AES also receives 50% of
any development fee, construction success fee or operations and maintenance
performance fee received by AES Chigen in respect of projects for which AES has
performed services. Because these arrangements were not negotiated on an
arm's-length basis, it is possible that AES Chigen could obtain similar services
on more favorable terms from third parties.
AES has received payments under the Services Agreement of approximately
$2.0 million, $4.1 million and $2.3 million in 1994, 1995 and 1996,
respectively.
80
<PAGE> 88
The Services Agreement has an initial term of five years. The Services
Agreement will be automatically renewed for three additional five-year terms
unless AES Chigen elects not to renew the Services Agreement by written notice
to AES given not less than three months prior to the end of the initial term or
either of the first two renewal terms. AES expects to continue to provide
services to AES Chigen under the Services Agreement after the Amalgamation so
long as AES Chigen continues to develop, construct and operate power facilities
in China.
NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
As part of the consideration for issuance to AES of 7,500,000 shares of AES
Chigen Class B Common Stock, AES and AES Chigen entered into a Non-Competition
and Non-Disclosure Agreement, dated as of December 29, 1993 and amended and
restated as of February 1, 1994 (the "Non-Competition Agreement"). The
Non-Competition Agreement provides that AES will not, and will not permit any
subsidiary to, develop, construct, own, manage, operate, control, invest in,
lend to, or acquire an interest in, or otherwise engage or participate in any
electric power generation project in China, for a period equal to the greater of
(i) ten years and (ii) three years after the earlier of (a) termination or
non-renewal of the Services Agreement for any reason and (b) the permitted sale,
conveyance or transfer by AES of all of its shares of AES Chigen Class B Common
Stock to an unaffiliated party or parties. The Non-Competition Agreement will be
terminated if the Amalgamation is consummated.
AES AFFILIATES' AGREEMENTS
Roger W. Sant, the Chairman of the Board and a director of AES, and Dennis
W. Bakke, the President, Chief Executive Officer and a director of AES, and each
other director and executive officer of AES (the "AES Affiliates"), have entered
into agreements with AES Chigen (the "AES Affiliates' Agreements") pursuant to
which each AES Affiliate has agreed that until such date as all of the shares of
AES Chigen Class B Common Stock have been converted to shares of AES Chigen
Class A Common Stock, such AES Affiliate will not acquire, offer to acquire, or
agree to acquire any shares of AES Chigen Class A Common Stock or rights or
options to acquire any shares of AES Chigen Class A Common Stock, or make or in
any way participate in any solicitation of proxies to vote or seek to advise,
encourage or influence any person or entity with respect to the voting of any
AES Chigen Class A Common Stock. This restriction does not apply to any such
action if any person (other than such AES Affiliate, AES or a subsidiary of AES)
publicly announces or proposes to the Board of Directors or management of AES
Chigen any tender or exchange offer, merger, consolidation, solicitation of
proxies or similar transaction involving the AES Chigen Class A Common Stock, or
any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in
one transaction or series of transactions) by AES Chigen, any subsidiary of AES
Chigen or any joint venture in which AES Chigen or any subsidiary invests which
involves aggregate consideration equal to 50% or more of the aggregate book
value of all the assets of AES Chigen determined on a consolidated basis. The
AES Affiliate's Agreement of Thomas I. Unterberg, a director of AES and of AES
Chigen, provides that the foregoing restrictions will not restrict any
market-making or investment banking activities of Unterberg Harris, of which he
is a Managing Director.
Waivers of restrictions on purchasing AES Chigen Class A Common Stock under
the AES Affiliates' Agreement entered into by Paul T. Hanrahan, President and
Chief Executive Officer of AES Chigen, were granted in 1995 to permit Mr.
Hanrahan to purchase 2,000 shares of AES Chigen Class A Common Stock.
Each AES Affiliates' Agreement will have no further relevance if the
Amalgamation is consummated, because all AES Chigen Common Stock will be owned
by AES.
DUAL STATUS OF OFFICERS
Messrs. Sant and Bakke, in addition to serving as Chairman and Vice
Chairman of AES Chigen, respectively, serve as executive officers of AES. Mr.
Hanrahan devotes substantially all of his time serving as President and Chief
Executive Officer of AES Chigen, but continues as a Vice President of AES and
devotes some of his time to AES's activities in Asia. Mr. Safford devotes
substantially all of his time serving as Vice
81
<PAGE> 89
President, Chief Financial Officer and Secretary of AES Chigen but continues to
work for AES, which, from time to time, requires him to devote a portion of his
time to other AES matters. Messrs. Hall and Yeager devote substantially all of
their time serving as Executive Vice President and Vice President of AES Chigen,
respectively, but also continue to work for AES, which, from time to time,
requires them to devote a portion of their time to other AES matters. While
Messrs. Hanrahan, Safford and Hall are expected to devote substantially all of
their time to AES Chigen's business, AES Chigen and AES have not established any
fixed allocation of their time. AES Chigen and AES acknowledge that the dual
status of the aforesaid persons with AES Chigen and AES may, from time to time,
require attention by an individual or individuals to matters for AES rather than
AES Chigen's business in the future. In the event that such circumstances arise,
AES Chigen intends to shift responsibilities of other officers, or to appoint
additional officers, and to take such other action as may be necessary to avoid
an adverse effect on AES Chigen's business. Furthermore, AES has agreed that it
will adopt similar staffing strategies to avoid, to the extent possible,
conflicting demands on such officers.
MATERIAL EFFECTS OF THE AMALGAMATION
After the Amalgamation, AES Chigen will be subject to the covenants (the
"AES Debt Covenants") contained in AES's debt instruments applicable to
subsidiaries, including the documents governing its 10-1/4% Subordinated Notes
due 2006, 9 3/4% Senior Subordinated Notes due 2000 and $425 million credit
facility due 1999. If the Amalgamation occurs, the material limitations
applicable to AES Chigen will include those described below.
Limitation on Subsidiary Investments and Mergers. Under the AES Debt
Covenants, AES may not permit any subsidiary with a direct or indirect interest
in a power generation facility (as defined in the relevant agreements) to make
any investment in, or to consolidate or merge with, any other entity with a
direct or indirect interest in any other power generation facility or other
business.
Immediately prior to the expected consummation of the Amalgamation, AES
Chigen intends to contribute the net proceeds of the 2006 Notes remaining after
the funding of an interim reserve account and a debt service reserve account,
along with certain of its existing funds, to its subsidiaries to provide funding
for potential projects and other future projects, as well as additional funding
for current projects. See "Recent Developments -- AES Chigen." It is anticipated
that these amounts will not in the aggregate be more than approximately $95
million. Under the AES Debt Covenants, as a general matter, after exhaustion of
these amounts, no additional AES Chigen funds would be available to fund
investment in additional power projects or to fund the capital requirements and
construction cost overruns for current projects. As a consequence, opportunities
for investment, along with the associated risks, that would otherwise be
available to AES Chigen may instead be taken by other investors, including AES.
See " -- AES's Plans for AES Chigen and the China Market." Additional capital
requirements for AES Chigen-invested projects would have to be funded by other
parties, including AES, which would result in a dilution of AES Chigen's
interest in any such project. In addition, due to the application of the AES
Debt Covenants, cash flow generated from projects would not be permitted to be
invested in any other project. As a result, to the extent these funds are not
required to pay expenses incurred by AES Chigen, they may accumulate over time.
AES Chigen is permitted, pursuant to the terms of the Indenture under which the
2006 Notes were issued, to pay a portion of such funds as dividends to AES,
provided that AES Chigen satisfies certain conditions.
In addition, under the AES Debt Covenants, investment could not be made in
a project directly by AES Chigen (as opposed to through one of its
subsidiaries). Accordingly, prior to the Amalgamation, AES Chigen intends to
transfer its interests in certain potential projects, such as Yangcheng Sun
City, Jinhua Golden China and Nanpu Southern Delta, to wholly-owned subsidiaries
of AES Chigen. In the case of each of these projects, the consent of AES
Chigen's partners in such project and the examination and approval of the
relevant PRC government authority are required to effect the transfers of AES
Chigen's interest. There can be no assurance that such consents and approvals
will be obtained in order to permit investments to be made in these projects
following the Amalgamation.
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Limitation on Indebtedness. Under the AES Debt Covenants, AES Chigen and
its subsidiaries would be effectively prohibited from incurring additional
indebtedness (as defined in the relevant instruments), except that a subsidiary
would under some circumstances be permitted to incur indebtedness for the
purpose of financing a power project as long as such indebtedness did not have
recourse to AES, AES Chigen or another subsidiary.
Asset Sales. Both the AES Debt Covenants and the covenant contained in the
Indenture relating to the 2006 Notes applicable to AES Chigen require the
repayment or purchase of indebtedness under specified circumstances involving
asset dispositions. Insofar as separate repayments are required at the AES and
AES Chigen levels with respect to a single asset sale, this covenant may tend to
cause AES Chigen not to make an asset sale under circumstances where it
otherwise would.
Limitation on Investment Following Project Default. Under the AES Debt
Covenants, an AES subsidiary is not permitted to make an investment in a project
company following the occurrence of a condition permitting the acceleration of
indebtedness relating to the project or any failure to pay such indebtedness at
its final maturity.
AES'S PLANS FOR AES CHIGEN AND THE CHINA MARKET
Although, as discussed under "Material Effects of the Amalgamation",
certain AES Debt Covenants will limit the operations of AES Chigen if the
Amalgamation is consummated, AES nevertheless may continue to pursue the
development of power generation facilities in China through other subsidiaries
and structures within the restrictions imposed by the AES Debt Covenants. AES
will consider the allocation of its capital and resources to the development of
power generation facilities in such countries, including China and many others,
which in AES's view offer the most attractive returns and opportunities.
COMPARISON OF SHAREHOLDERS' AND STOCKHOLDERS' RIGHTS
GENERAL
As a result of the Amalgamation, holders of shares of AES Chigen Class A
Common Stock will become stockholders of AES and the rights of all such former
AES Chigen shareholders will thereafter be governed by AES's Certificate of
Incorporation, AES's By-Laws and the GCL. The rights of the holders of shares of
AES Chigen Class A Common Stock are presently governed by the Memorandum of
Association of AES Chigen (the "AES Chigen Charter"), the Bye-Laws of AES Chigen
(the "AES Chigen Bye-Laws") and the Companies Act. The following summary sets
forth the material differences among the rights of the stockholders of AES and
the shareholders of AES Chigen and sets forth the material differences between
AES's Certificate of Incorporation and the AES Chigen Charter, AES's By-Laws and
the AES Chigen Bye-Laws and the GCL and the Companies Act. This summary is
qualified by reference to the full text of each of such documents, the GCL and
the Companies Act. For information as to how such documents may be obtained, see
"Available Information."
COMPARISON OF BERMUDA AND DELAWARE CORPORATE LAW
The Companies Act, under which AES Chigen is incorporated, differs in
certain material respects from the provisions of the GCL. Set forth below is a
summary of such differences. The following statements are summaries, and do not
purport to deal with all aspects of Bermuda or Delaware law that may be relevant
to AES Chigen and its shareholders.
VOTING RIGHTS WITH RESPECT TO EXTRAORDINARY CORPORATE TRANSACTIONS
BERMUDA. Bermuda law permits an amalgamation between two or more Bermuda
companies (or between one or more Bermuda exempted companies and one or more
foreign corporations) subject, unless the bye-laws otherwise provide, to
obtaining a majority vote of three fourths of the shareholders of each such
company present and voting in person or by proxy at a meeting called for the
purpose. AES Chigen's Bye-
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Laws provide for a lesser vote. See "The Class A Meeting and the Special
Meeting." "Short form" amalgamations are permitted between a holding company and
one or more of its wholly-owned subsidiary companies or between two or more
wholly-owned subsidiary companies of the same holding company subject to
approval of the amalgamation by a resolution of the directors of each
amalgamating company.
DELAWARE. Approval of mergers and consolidations and of sales, leases or
exchanges of all or substantially all of the property or assets of a corporation
requires the approval of the holders of a majority of the outstanding shares
entitled to vote, except that no vote of stockholders of the corporation
surviving a merger is necessary if: (i) the merger does not amend the
certificate of incorporation of the corporation, (ii) each outstanding share
immediately prior to the merger is to be an identical share after the merger,
and (iii) either no common stock of the corporation and no securities or
obligations convertible into common stock are to be issued in the merger, or the
common stock to be issued in the merger plus that initially issuable on
conversion of other securities issued in the merger does not exceed 20% of the
common stock of the corporation immediately before the merger.
APPRAISAL RIGHTS
BERMUDA. Under Bermuda law, a dissenting shareholder of a company
participating in an amalgamation (other than an amalgamation between a company
and its wholly-owned subsidiary or between two or more subsidiaries of the same
holding company) may, in certain circumstances, receive cash in the amount of
the fair value of his shares (as determined by a court), in lieu of the
consideration he would otherwise receive in any such transaction.
DELAWARE. Stockholders are entitled to demand appraisal of their shares in
the case of a merger or a consolidation, except where (i) they are stockholders
of the surviving company and the merger did not require their approval under the
GCL or (ii) the corporation's shares are either listed on a national securities
exchange or NASDAQ or held of record by more than 2,000 stockholders as of the
record date for the vote on such merger or consolidation. Appraisal rights are
available in either (i) or (ii) above, however, if the stockholders are required
by the terms of the merger or consolidation to accept any consideration other
than (a) stock of the corporation surviving or resulting from the merger or
consolidation, (b) shares of stock of another corporation which at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or NASDAQ or held of record by more than 2,000 stockholders,
(c) cash in lieu of fractional shares or (d) any combination of the foregoing.
Appraisal rights are not available in the case of a sale, lease, exchange or
other disposition by a company of all or substantially all of its property and
assets.
DERIVATIVE SUITS
BERMUDA. The Bermuda courts ordinarily would be expected to follow English
precedent, which would permit a shareholder to commence a derivative action in
the name of the company to remedy a wrong done to the company only (a) where the
act complained of is alleged to be beyond the corporate power of the company or
illegal; (b) where the act complained of is alleged to constitute a fraud
against the minority shareholders by those controlling the company; provided,
that the majority shareholders have used their controlling position to prevent
the company from taking action against the wrongdoers; (c) where an act requires
approval by a greater percentage of the company's shareholders than actually
approved it; or (d) where there is an absolute necessity to waive the general
rule that a shareholder may not bring such an action in order that there not be
a violation of the company's memorandum of association or bye-laws. The actions
summarized above are generally recognized as exceptions to the rule in Foss v.
Harbottle, under which only the company could initiate an action.
There is a statutory remedy under section 111 of the Companies Act, which
provides that a shareholder may seek redress of the court as long as he can
establish that the company's affairs are being conducted, or have been
conducted, in a manner oppressive or prejudicial to the interests of some part
of the shareholders, including himself. The court would also have to be
satisfied that to wind up the company would unfairly prejudice that part of the
shareholders, but otherwise the facts would justify the making of a winding-up
order on the ground that it was just and equitable that the company should be
wound up. If the court is satisfied on
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these two grounds it can make such order as it thinks fit, whether for
regulating the conduct of the company's affairs in future, or for the purchase
of the shares of any shareholders of the company by other shareholders of the
company or by the company. This remedy has not yet been interpreted by the
Bermuda courts and therefore it is not known to what extent the court will
exercise its discretion. However, the term "oppressive" as used in the previous
statute in relation to minority interests has been interpreted restrictively by
the English courts in Jermyn Street Turkish Baths, Ltd. There is also provision
under section 161(g) of the Companies Act for the court to wind up a company if
it is of the opinion that it is just and equitable that the company should be so
wound up. However, the grounds for making such an order are relatively limited.
DELAWARE. The plaintiff must have been a stockholder of the corporation at
the time of the transaction of which he complains or his stock thereafter must
have devolved upon him by operation of law.
SPECIAL MEETINGS OF STOCKHOLDERS
BERMUDA. Under Bermuda law, an annual general meeting must be held once
every calendar year; a special meeting of shareholders may be convened by the
Directors at any time and must be convened upon the requisition of shareholders
holding not less than one-tenth of the paid up capital of the company carrying
the right to vote at general meetings.
DELAWARE. Stockholders generally do not have the right to call meetings of
stockholders unless such right is granted in the certificate of incorporation or
by-laws. However, if a corporation fails to hold its annual meeting within a
period of 30 days after the date designated therefor, or if no date has been
designated for a period of 13 months after its last annual meeting, the Delaware
Court of Chancery may order a meeting to be held upon the application of a
stockholder. The AES By-Laws provide that special meetings of the stockholders
shall be called at the request in writing of stockholders owning ten percent
(10%) or more of the outstanding voting stock. See " -- Charter and By-Law
Provisions -- Special Meetings of Stockholders."
ACTION BY CONSENT
BERMUDA. Action by written consent of shareholders is permitted where the
written resolution is signed by all of the shareholders who would be entitled to
attend and vote at a meeting, with the exception of a resolution to remove an
auditor or a director before the expiration of his term of office.
DELAWARE. Unless otherwise specified in a corporation's certificate of
incorporation, action required or permitted to be taken by stockholders at an
annual or special meeting may be taken by stockholders without a meeting,
without notice and without a vote, if consents, in writing, setting forth the
action, are signed by stockholders with not less than the minimum number of
votes that would be necessary to authorize the action at a meeting. All consents
must be dated. No consent is effective unless, within 60 days of the earliest
dated consent delivered to the corporation, written consents signed by a
sufficient number of holders to take action are delivered to the corporation.
AMENDMENTS TO CHARTER
BERMUDA. Amendments to the memorandum of association of a Bermuda company
must be submitted to a general meeting of the shareholders and shall be
effective only to the extent approved by the shareholders at such meeting and,
except for the alteration of share capital, by the Bermuda Minister of Finance.
Amendments to the bye-laws of a Bermuda company must be submitted to a general
meeting of the shareholders and shall be effective only to the extent approved
by the shareholders at such meeting.
DELAWARE. Amendments to the certificate of incorporation require the
affirmative vote of the holders of a majority of the outstanding shares entitled
to vote thereon or such greater vote as is provided for in the certificate of
incorporation; a provision in the certificate of incorporation requiring the
vote of a greater number or proportion of the directors or of the holders of any
class of stock than is required by the GCL may not be amended, altered or
repealed except by such greater vote. See " -- Charter and By-Law Provisions --
Amendments to Charter and By-Laws."
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TENDER OFFER STATUTES
BERMUDA. Bermuda does not currently have a tender offer statute. However,
Bermuda law provides that where an offer is made for shares in a company by
another company and, within four months of the offer, the holders of not less
than 90% in value of the shares which are the subject of the offer accept, the
offeror may by notice, given within two months after the expiration of the said
four months, require the dissenting shareholders to transfer their shares on the
terms of the offer. Dissenting shareholders may apply to a court within one
month of such notice objecting to the transfer and the court may give such order
as it thinks fit.
DELAWARE. Generally, Section 203 of the GCL prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the time of the
transaction in which the person became an interested stockholder, unless (i)
prior to such time, the transaction or the business combination is approved by
the board of directors of the corporation, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the outstanding
voting stock (excluding for purposes of determining the number of shares
outstanding, shares owned by directors who are also officers and by certain
employee plans) or (iii) on or after such time the business combination is
approved by the board and by the affirmative vote of a least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder. Such
"business combinations" include mergers, assets sales and other transactions
resulting in a financial benefit to the interested stockholder. An "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years, did own) 15% or more of the corporation's voting stock.
LIMITATIONS ON DIRECTOR LIABILITY
BERMUDA. Under Bermuda law, a director must observe the statutory duty of
care which requires such director to act honestly and in good faith with a view
to the best interests of the company and exercise the care, diligence and skill
that a reasonably prudent person would exercise in comparable circumstances.
Directors are also subject to common law fiduciary duties which require
directors to act in what they reasonably believe to be the best interests of the
company and for a proper purpose. Bermuda law renders void any provision in the
bye-laws or any contract between a company and any such director exempting him
from or indemnifying him against any liability in respect of any fraud or
dishonesty of which he may be guilty in relation to the company. The AES Chigen
Bye-Laws contain certain provisions limiting the liability of directors as
permitted under Bermuda law. See " -- Charter and By-Law
Provisions -- Limitations on Director Liability."
DELAWARE. Under Delaware law, a corporation may include in its certificate
of incorporation a provision eliminating or limiting the liability of a director
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, provided that such provision may not eliminate or
limit the liability of a director: (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) certain acts concerning unlawful payments of dividends or stock
purchases or redemptions under Section 174 of the GCL; or (iv) for any
transaction from which a director derived an improper personal benefit. The AES
Certificate of Incorporation contains a provision limiting the liability of its
directors as permitted under Delaware law. See " -- Charter and By-Law
Provisions -- Limitations on Director Liability."
INDEMNIFICATION OF DIRECTORS AND OFFICERS
BERMUDA. Under Bermuda law, a company is permitted to indemnify any
officer or director, out of the funds of the company, against (i) any liability
incurred by him in defending any proceedings, whether civil or criminal, in
which judgment is given in his favor, or in which he is acquitted, or in
connection with any application under relevant Bermuda legislation in which
relief from liability is granted to him by the court and (ii) any loss or
liability resulting from negligence, default, breach of duty or breach of trust,
save for fraud and dishonesty. The AES Chigen Bye-Laws contain certain
provisions regarding the indemnification of officers and directors. See
" -- Charter and By-Law Provisions -- Indemnification of Directors and
Officers."
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DELAWARE. Under Delaware law a corporation is permitted to indemnify any
of its officers, directors and certain others against any liability incurred in
any civil, criminal, administrative or investigative proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal proceeding,
had no reasonable cause to believe his conduct was unlawful. In addition, under
Delaware law, to the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
proceeding referred to above or in defense of any claim, issue or matter
therein, he must be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith. The AES By-Laws
contain provisions regarding the indemnification of their officers, directors,
agents and employees. See " -- Charter and By-Law Provisions -- Indemnification
of Directors and Officers."
INSPECTION OF BOOKS AND RECORDS; SHAREHOLDER AND STOCKHOLDER LISTS
BERMUDA. Bermuda law provides the general public with a right of
inspection of a Bermuda company's public documents at the office of the
Registrar of Companies in Bermuda, and provides a Bermuda company's shareholders
with a right of inspection of such company's Bye-Laws, minutes of general
(shareholder) meetings and audited financial statements. The register of
shareholders is also open to inspection by shareholders free of charge and, upon
payment of a small fee, by any other person. A Bermuda company is required to
maintain its share register in Bermuda but may establish a branch register
outside of Bermuda. A Bermuda company is required to keep at its registered
office a register of its directors and officers which is open for inspection by
members of the public without charge. Bermuda law does not, however, provide a
general right for shareholders to inspect or obtain copies of any other
corporate records.
DELAWARE. Any stockholder of record, upon written demand under oath
stating the purpose thereof, has the right during the corporation's usual hours
for business to inspect for any proper purpose the corporation's stock ledger, a
list of its stockholders, and its other books and records, and to make copies or
extracts therefrom.
CHARTER AND BY-LAW PROVISIONS
AES's Certificate of Incorporation and By-Laws differ in certain material
respects from the provisions of the AES Chigen Charter and AES Chigen Bye-laws.
The following summary sets forth such differences. The following summary is
qualified by reference to the full text of such documents and does not purport
to deal with all aspects of such documents that may be relevant to AES Chigen
and its shareholders.
LIMITATIONS ON DIRECTOR LIABILITY
AES CHIGEN. The AES Chigen Bye-laws provide that each shareholder agrees
to waive any claim or right of action he may have, whether individually or by or
in the right of AES Chigen against any director of AES Chigen on account of any
action taken by such director, or the failure of such director to take any
action in the performance of his duties with or for AES Chigen; provided,
however, that such waiver shall not apply to any claims or rights of action
arising out of the willful negligence, willful default, fraud or dishonesty of
such director.
AES. AES's Certificate of Incorporation limits director liability as
described under " -- Comparison of Bermuda and Delaware Corporate
Law -- Limitations on Director Liability."
INDEMNIFICATION OF DIRECTORS AND OFFICERS
AES CHIGEN. The AES Chigen Bye-laws generally provide that the officers
and directors of AES Chigen and their heirs shall be indemnified and secured
harmless out of the assets of AES Chigen from and against all actions, costs,
charges, losses, damages and expenses which they or their heirs may incur by
reason of any act done or omitted in the execution of their duty in their
respective offices; provided, that such indemnity shall not extend to any matter
in respect of any willful negligence, willful default, fraud or dishonesty which
may attach to any of such persons.
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AES. AES's By-Laws generally provide that AES's officers, directors and
certain others will be indemnified by AES to the fullest extent permitted under
the laws of the State of Delaware against all expenses (including attorneys'
fees, judgments, fines, penalties and amounts paid in settlement) actually and
reasonably incurred by such person in connection with the defense or settlement
of any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, to which such person is a
party by reason of the fact that such person was or is a director or officer of
AES. The indemnification does not apply to any action or suit by or in the right
of AES to procure a judgment in its favor (a "derivative action") in respect of
any claim, issue or matter as to which such person has been adjudged to be
liable to AES unless the Delaware Court of Chancery or other court determines
that such person is entitled to indemnity for expenses.
AMENDMENTS TO CHARTER AND BY-LAWS
AES CHIGEN. Any amendment of the AES Chigen Memorandum of Association and
any rescission, alteration or amendment of the AES Chigen Bye-Laws or adoption
of a new Bye-Law requires: (i) approval by the Board of Directors (including,
until the Time of Conversion, as defined in the Bye-Laws, the affirmative vote
of at least one Class A Director and one Class B Director); (ii) approval by the
shareholders at a general meeting; and (iii) until the Time of Conversion,
separate approval by the holders of a majority of the issued shares of each of
the AES Chigen Class A Common Stock and the AES Chigen Class B Common Stock. Any
amendment of the AES Chigen Memorandum of Association also requires the consent
of the Bermuda Minister of Finance, except for an alteration of share capital.
AES. AES's Certificate of Incorporation provides that it may be amended in
the manner prescribed by the GCL; therefore, in accordance with Section 242 of
the GCL, it may be amended by a vote of holders of a majority of the outstanding
stock entitled to vote thereon. AES's By-Laws contain a provision whereby such
By-Laws may be amended or repealed by the affirmative vote of a majority of the
stockholders entitled to vote thereon. AES's By-Laws may also be amended or
repealed by a majority of the directors then in office, provided that the
stockholders may determine by majority vote that any action taken by them with
respect to the By-Laws may not be amended or repealed by the Board of Directors.
SPECIAL MEETINGS OF STOCKHOLDERS
AES CHIGEN. The AES Chigen Bye-laws provide that a special meeting of
shareholders may be called by shareholders as provided under the Companies Act.
The Companies Act provides that a special meeting may be called by the holders
of 10% of the paid-up capital of a company which carries the right to attend and
vote at general meetings.
AES. AES's By-Laws provide that the holders of at least 10% of the
outstanding voting stock of AES may request that the Chairman of the Board or
the President call a special meeting of stockholders.
SHAREHOLDER PROPOSALS
Any holder of AES Chigen Class A Common Stock who meets the requirements of
the proxy rules under the Exchange Act may submit to AES Chigen's Board of
Directors proposals for inclusion in the proxy materials to be submitted to the
shareholders in connection with an annual general meeting. Shareholders wishing
to have a proposal included in AES Chigen's proxy materials shall comply with
the applicable requirements of the Exchange Act and the rules and regulations
thereunder and shall have the rights provided by Rule 14a-8 under such Act. Any
such proposal should be submitted in writing by notice delivered or mailed,
postage prepaid, to the Secretary, AES China Generating Co. Ltd., 9/F., Allied
Capital Resources Building, 32-38 Ice House Street, Central, Hong Kong. In order
to be eligible under Rule 14a-8 for inclusion in AES Chigen's proxy statement
and accompanying proxy for the 1997 Annual General Meeting shareholder proposals
must have been received by AES Chigen on or before November 1, 1996. If the
Amalgamation is consummated, AES Chigen will have no 1997 Annual General
Meeting.
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LEGAL MATTERS
The legality of the AES Common Stock being offered hereby has been passed
upon for AES by Chadbourne & Parke LLP, 30 Rockefeller Plaza, New York, New York
10112.
EXPERTS
The consolidated financial statements and related financial statement
schedules of AES for the year ended December 31, 1995 incorporated in this Proxy
Statement/Prospectus by reference to the Final Supplemental Prospectus in
connection with AES's Registration Statement on Form S-3 (Registration No.
333-01286) have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of Light Servicos de Electricidade S.A. for the
years ended December 31, 1995 and 1994 incorporated in this Proxy
Statement/Prospectus by reference from the Current Report on Form 8-K of AES
filed on June 12, 1996, have been audited by Deloitte Touche Tohmatsu, Rio de
Janeiro, 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.
The consolidated financial statements of AES Chigen incorporated in this
Proxy Statement/Prospectus by reference to AES Chigen's Annual Report on Form
10-K for the year ended November 30, 1995 have been audited by Deloitte Touche
Tohmatsu, Hong Kong, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
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APPENDIX A
AMENDED AND RESTATED AGREEMENT AND
PLAN OF AMALGAMATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF AMALGAMATION, dated as of
November 12, 1996 (this "Agreement"), by and among THE AES CORPORATION, a
Delaware corporation ("AES"), AES CHINA GENERATING CO. LTD., a Bermuda company
("Chigen"), and AES ACQUISITION CO. LTD., a Bermuda company ("Sub"),
W I T N E S S E T H :
WHEREAS, AES and Chigen entered into an Agreement and Plan of Amalgamation,
dated as of November 12, 1996 (the "Original Amalgamation Agreement"), pursuant
to which AES and Chigen agreed that upon the terms and subject to the conditions
of the Original Amalgamation Agreement and in accordance with the Bermuda
Companies Act 1981, as amended (the "Companies Act"), a Bermuda company to be
formed as a wholly-owned subsidiary of AES would be amalgamated with and into
Chigen (the "Amalgamation"); and
WHEREAS, AES and Chigen now wish to amend the Original Amalgamation
Agreement to (a) include Sub as a party thereto, (b) provide for certain
representations, warranties, covenants and other agreements to be made by Sub in
connection with the Amalgamation and (c) make certain modifications to the
Original Amalgamation Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree that the terms, covenants
and provisions of the Original Amalgamation Agreement are hereby modified,
amended and restated in their entirety as follows:
ARTICLE I
THE AMALGAMATION
SECTION 1.01. The Amalgamation. At the Effective Time (as defined in
Section 1.03 below), and upon the terms and subject to the conditions hereof,
Sub shall be amalgamated with and into Chigen in accordance with the provisions
of the Companies Act. At and after the Effective Time, Chigen shall continue in
the form of the amalgamated company (the "Amalgamated Company") and shall
operate under the name "AES China Generating Co. Ltd.".
SECTION 1.02. Closing. The closing of the Amalgamation will take place at
10:00 a.m. on a date to be specified by AES or Sub, which may be on, but shall
be no later than the third business day after, the day on which there shall have
been satisfaction or waiver of the conditions set forth in Article V (the
"Closing Date"), at the offices of Chadbourne & Parke LLP, 30 Rockefeller Plaza,
New York, New York 10112, unless another date or place is agreed to in writing
by the parties hereto.
SECTION 1.03. Effective Time. On the date hereof, or as soon as
practicable thereafter, the parties shall file an application for the consent of
the Bermuda Minister of Finance, and on the Closing Date, or as soon as
practicable thereafter, the parties shall file an application for registration
of the Amalgamation with the Bermuda Registrar of Companies and any other
appropriate documents (together, the "Bermuda Applications") executed in
accordance with the relevant provisions of the Companies Act and shall make all
other filings or recordings required under the Companies Act. The Amalgamation
shall become effective at such time as a certificate of amalgamation (the
"Certificate of Amalgamation") is duly issued by the Bermuda Registrar of
Companies (the time the Amalgamation becomes effective being the "Effective
Time").
SECTION 1.04. Effects of the Amalgamation. The effect of the Amalgamation
shall be as provided in the applicable provisions of the Companies Act.
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SECTION 1.05. Memorandum of Association and Bye-laws. (a) The memorandum
of association of Chigen as in effect immediately prior to the Effective Time
shall be the memorandum of association of the Amalgamated Company until
thereafter changed or amended as provided therein or by applicable law.
(b) The Bye-laws of Chigen shall be the bye-laws of the Amalgamated
Company, until thereafter changed or amended as provided therein or by
applicable law. The registration number of the Amalgamated Company in Bermuda
after the Effective Time shall be the same registration number as that of Chigen
immediately prior to the Effective Time.
SECTION 1.06. Directors. The persons set forth in Exhibit A attached
hereto shall be the directors of the Amalgamated Company, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
SECTION 1.07. Officers. The officers of Chigen immediately prior to the
Effective Time shall be the officers of the Amalgamated Company, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE AMALGAMATION ON THE CAPITAL STOCK OF THE
CONSTITUENT COMPANIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Effect on Capital Stock. As of the Effective Time, by
virtue of the Amalgamation and without any action on the part of the holders of
any shares of Class A Common Stock, par value $0.01 per share, of Chigen (the
"Class A Common Stock"), or Class B Common Stock, par value $0.01 per share, of
Chigen (the "Class B Common Stock" and together with the Class A Common Stock,
the "Chigen Common Stock") or the holder of any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each share of the capital stock of Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of Common
Stock of the Amalgamated Company.
(b) Cancellation of Treasury Stock and AES Owned Stock. Each share of
Chigen Common Stock that is owned by any subsidiary of Chigen and each
share of Chigen Common Stock that is owned by AES, Sub or any other
subsidiary of AES shall automatically be canceled and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
(c) Cancellation of Class A Common Stock. Subject to Section 2.01(d),
each issued and outstanding share of Class A Common Stock (other than
shares to be canceled in accordance with Section 2.01(b)) shall be canceled
in consideration of the right to receive AES Common Stock in the ratio of
(i) 0.2900 of a share of AES Common Stock or (ii) should the average
closing price of AES Common Stock on the New York Stock Exchange (the
"NYSE") (with fractions expressed as a decimal rounded to the nearest one
ten-thousandth) over the 15 consecutive trading day period ending at the
close of trading on the third trading day immediately prior to the date of
the Chigen Special Meeting (the "Average Closing Price") be less than
$45.00, such fraction of a share of AES Common Stock (expressed as a
decimal rounded to the nearest one ten-thousandth) as is determined by
dividing $13.05 by the Average Closing Price (the "Exchange Ratio" or the
"Amalgamation Consideration"). As of the Effective Time, all such shares of
Class A Common Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares of Class A Common Stock shall
cease to have any rights with respect thereto, except the right to receive
the Amalgamation Consideration, without interest.
(d) Shares of Dissenting Shareholders. Notwithstanding anything in
this Agreement to the contrary, any issued and outstanding shares of Class
A Common Stock held by a person who did not vote in favor of the
Amalgamation and who complies with all the provisions of Bermuda law
concerning the right of holders of Class A Common Stock to dissent from the
Amalgamation and require appraisal of their shares of Class A Common Stock
(such shareholder, a "Dissenting Shareholder", and such shares,
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"Dissenting Shares") shall be canceled in consideration for the right to
receive such consideration as may be payable to such Dissenting Shareholder
upon completion of the Amalgamation pursuant to the laws of Bermuda. Chigen
shall give AES (i) prompt notice of any demands for appraisal of shares of
Class A Common Stock received by Chigen and (ii) the opportunity to
participate in and direct all negotiations and proceedings with respect to
any such demands. Chigen shall not, without the prior written consent of
AES, make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such demands.
SECTION 2.02. Payment for Cancellation of Class A Common Stock in the
Amalgamation. The manner of making payment for the cancellation of Class A
Common Stock in the Amalgamation shall be as follows:
(a) At the Effective Time, AES shall make available to an exchange
agent selected by AES and reasonably acceptable to Chigen (the "Exchange
Agent"), for the benefit of those persons who immediately prior to the
Effective Time were the holders of Class A Common Stock, a sufficient
number of certificates representing shares of AES Common Stock required to
effect the delivery of the aggregate Amalgamation Consideration required to
be issued pursuant to Section 2.01 (the certificates representing shares of
AES Common Stock comprising such aggregate Amalgamation Consideration being
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the shares of AES Common
Stock contemplated to be issued pursuant to Section 2.01. The Exchange Fund
shall not be used for any other purpose.
(b) Promptly after the Effective Time, the Exchange Agent shall mail
to each registered holder (other than Dissenting Shareholders) of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Class A Common Stock (the "Certificates") (i) a
form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent) and (ii)
instructions for use in effecting the surrender of the Certificates for
payment therefor. Upon surrender of Certificates for cancellation to the
Exchange Agent, together with such letter of transmittal duly executed and
any other required documents, the holder of such Certificates shall be
entitled to receive for each of the shares of Class A Common Stock
represented by such Certificates the Amalgamation Consideration and the
Certificates so surrendered shall forthwith be canceled. Until so
surrendered, Certificates shall represent solely the right to receive the
Amalgamation Consideration and any cash in lieu of fractional shares of AES
Common Stock as contemplated by Section 2.03 with respect to each of the
shares of Class A Common Stock represented thereby. No dividends or other
distributions that are declared after the Effective Time on shares of AES
Common Stock and payable to the holders of record thereof after the
Effective Time will be paid to persons entitled by reason of the
Amalgamation to receive shares of AES Common Stock until such persons
surrender their Certificates. Upon such surrender, there shall be paid to
the person in whose name shares of AES Common Stock are issued any
dividends or other distributions having a record date after the Effective
Time and payable with respect to such shares of AES Common Stock between
the Effective Time and the time of such surrender. After such surrender
there shall be paid to the person in whose name shares of AES Common Stock
are issued any dividends or other distributions on such shares of AES
Common Stock which shall have a record date after the Effective Time and
prior to such surrender and a payment date after such surrender and such
payment shall be made on such payment date. In no event shall the persons
entitled to receive such dividends or other distributions be entitled to
receive interest on such dividends or other distributions. If any cash or
any certificate representing shares of AES Common Stock is to be paid to or
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such exchange
that the Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange shall pay to the Exchange Agent any transfer or other taxes
required by reason of the issuance of certificates for such shares of AES
Common Stock in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Exchange Agent nor any party
hereto shall be liable to a
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holder of Class A Common Stock for any shares of AES Common Stock or
dividends thereon or, in accordance with Section 2.03, proceeds of the sale
of fractional interests, delivered to a public official pursuant to
applicable escheat law. The Exchange Agent shall not be entitled to vote or
exercise any rights of ownership with respect to shares of AES Common Stock
held by it from time to time hereunder, except that it shall receive and
hold all dividends or other distributions paid or distributed with respect
to such shares of AES Common Stock for the account of the persons entitled
thereto.
(c) Subject to the requirements of applicable law, certificates
surrendered for exchange by any person constituting an "affiliate" of
Chigen for purposes of Rule 145 of the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the
"Securities Act") shall not be exchanged for certificates representing
shares of AES Common Stock until AES has received from such person a
written "affiliate" agreement in a form reasonably acceptable to AES and
Chigen. Chigen shall use reasonable efforts to cause each such person to
deliver such written agreement to AES on or prior to the Closing Date.
(d) Any portion of the Exchange Fund which remains unclaimed by the
former shareholders of Chigen for one year after the Effective Time shall
be delivered to AES, upon demand of AES, and any former shareholders of
Chigen shall thereafter look only to AES for payment of their claim for the
Amalgamation Consideration for the shares or for any cash in lieu of
fractional shares of AES Common Stock.
(e) If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the
Amalgamated Company, the execution of an indemnity agreement by such person
and/or the posting by such person of a bond in such reasonable amount as
the Amalgamated Company may reasonably direct, as indemnity against any
claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of AES Common Stock, cash in lieu of fractional
shares of AES Common Stock and unpaid dividends and distributions on shares
of AES Common Stock deliverable in respect thereof pursuant to this
Agreement.
SECTION 2.03. No Fractional Shares. No fractional shares of AES Common
Stock shall be issued in the Amalgamation and no fractional share interests will
entitle the owner thereof to vote or to any rights of a stockholder of AES. In
lieu of any such fractional securities, each holder of shares of Class A Common
Stock who would otherwise have been entitled to a fraction of a share of AES
Common Stock upon surrender of Certificates for cancellation pursuant to this
Article II, after aggregating all shares of AES Common Stock which such holder
would be entitled to receive under Section 2.01(c), will be paid an amount in
cash (without interest) equal to the closing price per share of AES Common Stock
on the trading day prior to the day on which the Effective Time occurs
multiplied by the fraction of a share of AES Common Stock to which such holder
would otherwise be entitled. As soon as practicable after the determination of
the amount of cash to be paid to former shareholders of Chigen in lieu of any
fractional interests, the Exchange Agent shall make available in accordance with
this Agreement such amounts to such former shareholders.
SECTION 2.04. Transfer of Shares after the Effective Time. No transfers
of shares of Class A Common Stock shall be made on the share transfer books of
Chigen after the close of business on the day prior to the date of the Effective
Time.
SECTION 2.05. Stock Options. Pursuant to the AES China Generating Co.
Ltd. Incentive Stock Option Plan (the "Option Plan"), all outstanding options
issued thereunder (the "Options") shall, as of the Effective Time, automatically
and without any action on the part of the holders thereof, become options for
AES Common Stock. The Option Plan shall remain in full force and effect after
the Effective Time unless otherwise amended or terminated in accordance with the
plan document. The date of grant for each option shall be the date on which the
corresponding Option was originally granted. At the Effective Time, AES shall
reserve for issuance the number of shares of AES Common Stock that will become
issuable upon the exercise of the options pursuant to this Section 2.05. Nothing
in this Section 2.05 shall affect the schedule of vesting (or the acceleration
thereof) with respect to the Options. As soon as practicable after the Effective
Time, AES shall file a registration statement or registration statements on Form
S-8 (or any successor form), or
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another appropriate form with respect to the shares of AES Common Stock subject
to the options, and shall use its best efforts to maintain the effectiveness of
such registration statement or registration statements (and maintain the current
status of the prospectus contained therein) for so long as any options remain
outstanding. It is the intention of the parties that, subject to applicable law,
the options qualify following the Effective Time as "incentive stock options"
(as defined in Section 422 of the United States Internal Revenue Code of 1986,
as amended (the "Code")) to the extent that the Options qualified as incentive
stock options prior to the Effective Time and, accordingly, the provisions of
this Section 2.05 shall be deemed amended to the extent necessary to maintain
such status of the options.
SECTION 2.06. Adjustments to Exchange Ratio, etc. The exchange ratios set
forth in Sections 2.01 and 5.02(f) and any floor amounts shall be adjusted to
reflect fully the effect of any stock split (including a consolidation) of AES
Common Stock or a dividend payable in AES Common Stock, or any other
distribution of securities or dividend (in cash or otherwise) to holders of AES
Common Stock (including, without limitation, such a distribution made in
connection with a recapitalization, reclassification, merger, consolidation,
reorganization or similar transaction, but excluding any regular quarterly
dividend paid in cash) occurring or having a record date after the date hereof
and prior to the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of Chigen. Chigen represents
and warrants to AES as follows:
(a) Organization, Standing and Corporate Power. Chigen is a company
duly organized, validly existing and in compliance under the laws of
Bermuda and has the requisite corporate power and authority to carry on its
business as now being conducted. Chigen is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified, licensed or in good standing
(individually or in the aggregate) would not have a Material Adverse Effect
(as defined in Section 7.03(c) below) in respect of Chigen.
(b) Subsidiaries. All the outstanding shares of capital stock,
partnership interests or other equity interests owned by Chigen in each
subsidiary in which Chigen has a direct or indirect interest are, directly
or indirectly, free and clear of all Liens (as defined in Section 7.03(b)
below).
(c) Capital Structure. The authorized capital stock of Chigen is
substantially as described in the Chigen SEC Documents (as defined in
Section 3.01(e) below). All outstanding shares of capital stock of Chigen
are, and all shares which may be issued will be, when issued, duly
authorized, validly issued and fully paid and not subject to preemptive
rights. There are no bonds, debentures, notes or other indebtedness of
Chigen having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders
of Chigen may vote. Except as set forth above, as of the date of this
Agreement, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind
to which Chigen is a party or by which it is bound obligating Chigen to
issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of Chigen or
obligating Chigen to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking. There are not any outstanding contractual obligations of
Chigen to repurchase, redeem or otherwise acquire any shares of capital
stock of Chigen.
(d) Authority; Noncontravention. Chigen has the requisite corporate
power and authority to enter into this Agreement and, subject to the
approval of the Amalgamation and this Agreement by the requisite vote of
the holders of the outstanding shares of Chigen, to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Chigen and the consummation by Chigen of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Chigen, subject, in the case of this
Agreement, to approval of the
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Amalgamation and this Agreement by the requisite vote of the holders of the
outstanding shares of Chigen Common Stock. This Agreement has been duly
executed and delivered by Chigen and, assuming this Agreement constitutes
the valid and binding obligation of AES and Sub, this Agreement constitutes
the valid and binding obligation of Chigen, enforceable against Chigen in
accordance with its terms. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon any of
the properties or assets of Chigen or any of its subsidiaries under, (i)
the Memorandum of Association or Bye-laws of Chigen or the comparable
charter or organizational documents of any of its subsidiaries, (ii) any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable
to Chigen or any of its subsidiaries or their respective properties or
assets or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Chigen or any of
its subsidiaries or their respective properties or assets, other than, in
the case of clauses (ii) or (iii), any such conflicts, violations,
defaults, rights or Liens that individually or in the aggregate would not
(x) have a Material Adverse Effect in respect of Chigen, (y) impair in any
material respect the ability of Chigen to perform its obligations under
this Agreement or (z) prevent the consummation of any of the transactions
contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any U.S.
federal, state or local government or foreign government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity"), is
required by Chigen or any of its subsidiaries in connection with the
execution and delivery of this Agreement by Chigen or the consummation by
Chigen of the transactions contemplated by this Agreement, except for (i)
the filing with the United States Securities and Exchange Commission (the
"SEC") and the SEC's review of (x) the proxy statement relating to the
approval by Chigen's shareholders of the Amalgamation and this Agreement
(as amended or supplemented from time to time, the "Proxy Statement") and
(y) such other filings under the Securities Exchange Act of 1934, as
amended (together with the rules and regulations promulgated thereunder,
the "Exchange Act"), as may be required in connection with this Agreement
and the transactions contemplated by this Agreement, (ii) any filings made
in compliance with the rules and regulations of the NYSE and the Nasdaq
National Market System, (iii) the filing of the Bermuda Applications, and
the appropriate documents with the relevant authorities of other
jurisdictions in which Chigen is qualified to do business, (iv) such
filings as may be required by any applicable state securities or "blue sky"
laws or state takeover laws, (v) such filings, consents, approvals, orders,
registrations and declarations as may be required under the laws of any
foreign country in which Chigen or any of its subsidiaries conducts any
business or owns any assets, (vi) the consent of the Bermuda Minister of
Finance to amalgamate Chigen with Sub, (vii) the issuance by the Bermuda
Registrar of Companies of the Certificate of Amalgamation, and (viii) such
other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would
not, individually or in the aggregate (a) have a Material Adverse Effect in
respect of Chigen, (b) impair in any material respect the ability of Chigen
to perform its obligations under this Agreement or (c) prevent or
significantly delay the consummation of the transactions contemplated by
this Agreement.
(e) SEC Documents; Financial Statements. Chigen has filed all
required reports, forms and other documents with the SEC since February 23,
1994 (the "Chigen SEC Documents"). As of their respective dates, (i) the
Chigen SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
applicable to such Chigen SEC Documents, and (ii) none of the Chigen SEC
Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading. Except to the extent that information
contained in any Chigen SEC Document has been revised or superseded by a
later-filed Chigen SEC Document filed and publicly available prior to the
date of this Agreement, none of
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the Chigen SEC Documents contains any untrue statement of a material fact
or omits to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Chigen included in the Chigen SEC Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") (except, in the case of unaudited statements, as
permitted by Form 10-Q) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of Chigen and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the Chigen SEC Documents filed and publicly available prior to
the date of this Agreement, and except for Chigen's planned offering of
notes due 2006 (the "Chigen Debt Offering") and except for liabilities and
obligations incurred in the ordinary course of business consistent with
past practice since the date of the most recent consolidated balance sheet
included in the Chigen SEC Documents filed and publicly available prior to
the date of this Agreement and except for liabilities and obligations which
would not, individually or in the aggregate, have a Material Adverse Effect
in respect of Chigen, neither Chigen nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of Chigen and its consolidated subsidiaries or in the notes
thereto.
(f) Absence of Certain Changes or Events. Except as disclosed in the
Chigen SEC Documents filed and publicly available prior to the date of this
Agreement, and, except for the Chigen Debt Offering, since November 30,
1995, Chigen has conducted its business only in the ordinary course, and
there has not been (i) any Material Adverse Change (as defined in
sec. 7.03(c) below) in respect of Chigen, (ii) any split, combination or
reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, (iii) (x) any
granting by Chigen to any officer of Chigen of any increase in
compensation, except in the ordinary course of business consistent with
prior practice, as was required under employment agreements in effect as of
the date of the most recent audited financial statements included in the
Chigen SEC Documents filed and publicly available prior to the date of this
Agreement, (y) any granting by Chigen to any such officer of any increase
in severance or termination pay, except as was required under employment,
severance or termination agreements in effect as of the date of the most
recent audited financial statements included in the Chigen SEC Documents
filed and publicly available prior to the date of this Agreement or (z) any
entry by Chigen or any of its subsidiaries into any employment, severance
or termination agreement with any such officer, (iv) any damage,
destruction or loss, whether or not covered by insurance, that has or
reasonably could be expected to have a Material Adverse Effect in respect
of Chigen or (v) any change in accounting methods, principles or practices
by Chigen materially affecting its assets, liabilities or business, except
insofar as may have been required by a change in GAAP.
(g) Litigation. Except as disclosed in the Chigen SEC Documents filed
and publicly available prior to the date of this Agreement, there is no
suit, action or proceeding pending or, to the knowledge of Chigen,
threatened against Chigen or any of its subsidiaries that, individually or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect in respect of Chigen; it being understood that this representation
shall not include any litigation of the nature described in Section
5.02(a)(i) through (iv).
(h) Compliance with Applicable Laws. Each of Chigen and its
subsidiaries has in effect all foreign governmental approvals,
authorizations, certificates, filings, franchises, licenses, notices,
permits and rights, including all authorizations under environmental laws
("Permits"), necessary for it to own, lease or operate its properties and
assets and to carry on its business as now conducted, and there has
occurred no default under any such Permit, except for the lack of Permits
and except for defaults under Permits which such lack or default
individually or in the aggregate would not have a Material Adverse Effect
in respect of Chigen. Except as disclosed in the Chigen SEC Documents filed
and publicly available prior to
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the date of this Agreement, Chigen and its subsidiaries are in compliance
with all applicable statutes, laws, ordinances, rules, orders and
regulations of any Governmental Entity, except for any noncompliance which
individually or in the aggregate would not have a Material Adverse Effect
in respect of Chigen.
(i) Brokers; Schedule of Fees and Expenses. No broker, investment
banker or financial advisor or other person, other than Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), the fees and
expenses of which will be paid by Chigen, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Chigen. Chigen has provided AES true
and correct copies of all agreements between Chigen and Merrill Lynch.
(j) Opinion of Financial Advisor. Chigen has received the opinion of
Merrill Lynch, to the effect that, as of the date of this Agreement, the
consideration to be received in the Amalgamation by the holders of Class A
Common Stock is fair to the holders of Class A Common Stock from a
financial point of view, and a complete and correct copy of such opinion
has been, or promptly upon receipt thereof will be, delivered to AES.
(k) Board Recommendation. At a meeting duly called and held in
compliance with Chigen's Bye-laws, (i) a Special Committee of the Board of
Directors of Chigen comprised of the directors elected by the holders of
the Class A Common Stock (the "Special Committee") has adopted a resolution
approving the Amalgamation and recommended that the Board of Directors of
Chigen approve this Agreement and the transactions contemplated hereby,
(ii) the Board of Directors of Chigen has adopted a resolution (a)
approving the Amalgamation, based on a determination that the Amalgamation
is in the best interests of Chigen and the holders of Class A Common Stock,
and (b) approving and adopting this Agreement and the transactions
contemplated hereby and recommending approval and adoption of this
Agreement and the transactions contemplated hereby by the holders of Class
A Common Stock.
SECTION 3.02. Representations and Warranties of AES. AES and Sub
represent and warrant to Chigen as follows:
(a) Organization, Standing and Corporate Power. AES is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware, Sub is an exempted company duly organized, validly existing and
in compliance under the laws of Bermuda and each of them has the requisite
corporate power and authority to carry on its business as now being
conducted. Each of AES and Sub is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not have a Material Adverse Effect in respect of AES. AES
has delivered to Chigen complete and correct copies of its certificate of
incorporation and by-laws, and the memorandum of association and bye-laws
of Sub, in each case as amended to the date of this Agreement.
(b) Capital Structure. The authorized capital stock of AES is
substantially as described in the AES SEC Documents (as defined in Section
3.02(d) below). AES does not own any shares of the Class A Common Stock of
Chigen.
(c) Authority; Noncontravention. AES and Sub have all requisite
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of AES and Sub. This Agreement has been duly
executed and delivered by AES and Sub and, assuming this Agreement
constitutes the valid and binding obligation of Chigen, this Agreement
constitutes a valid and binding obligation of AES and Sub, enforceable
against AES and Sub, as applicable, in accordance with its terms. The
execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
of any obligation or to loss of a material
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benefit under, or result in the creation of any Lien upon any of the
properties or assets of AES under, (i) the certificate of incorporation or
by-laws of AES or the memorandum of association or bye-laws of Sub, (ii)
any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license
applicable to AES or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to AES or Sub or
their respective properties or assets, other than, in the case of clauses
(ii) or (iii), any such conflicts, violations, defaults, rights or Liens
that (a) will have been waived prior to the Effective Time or (b) would not
individually or in the aggregate (x) have a Material Adverse Effect in
respect of AES, (y) impair in any material respect the ability of AES and
Sub to perform their respective obligations under this Agreement or (z)
prevent the consummation of any of the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by AES or Sub in connection with the execution and delivery of
this Agreement or the consummation by AES or Sub, as the case may be, of
any of the transactions contemplated by this Agreement, except for (i) the
filing with the SEC of (x) the Registration Statement (as defined in
Section 4.01 below), and (y) such other filings under the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated by this Agreement, (ii) the SEC order declaring the
Registration Statement effective pursuant to Section 8(a) of the Securities
Act, (iii) any filings made in compliance with the rules and regulations of
the NYSE and the Nasdaq National Market System, (iv) the filing of the
Bermuda Applications, and the appropriate documents with the relevant
authorities of other states in which Chigen is qualified to do business,
(v) such filings as may be required by any applicable state securities or
"blue sky" laws or state takeover laws, (vi) the consent of the Bermuda
Minister of Finance to amalgamate Chigen with Sub, (vii) the issuance by
the Bermuda Registrar of Companies of the Certificate of Amalgamation, and
(viii) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained
or made would not, individually or in the aggregate (a) have a Material
Adverse Effect in respect of AES, (b) impair the ability of AES or Sub to
perform their respective obligations under this Agreement or (c) prevent or
significantly delay the consummation of any transaction contemplated by
this Agreement.
(d) SEC Documents; Financial Statements. AES has filed all required
reports, forms and other documents with the SEC since January 1, 1994 (the
"AES SEC Documents"). As of their respective dates, (i) the AES SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, applicable to such
AES SEC Documents, and (ii) none of the AES SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent that information contained in any AES SEC
Document has been revised or superseded by a later-filed AES SEC Document
filed and publicly available prior to the date of this Agreement, none of
the AES SEC Documents contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of AES
included in the AES SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except, in the case of unaudited statements, as
permitted by Form 10-Q) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of AES and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the AES SEC Documents filed and publicly available prior to
the date of this Agreement, and except for liabilities and obligations
incurred in the ordinary course of business consistent with past practice
since the date of the most recent consolidated balance sheet included in
the AES SEC Documents filed and publicly available prior to the date of
this Agreement and except for liabilities and obligations which would not,
individually or in the aggregate, have a Material Adverse Effect in respect
of AES, neither AES nor any of its
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subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set
forth on a consolidated balance sheet of AES and its consolidated
subsidiaries or in the notes thereto.
(e) Absence of Certain Changes or Events. Except as disclosed in the
AES SEC Documents filed and publicly available prior to the date of this
Agreement, since December 31, 1995 AES has conducted its business only in
the ordinary course, and there has not been (i) any Material Adverse Change
in respect of AES, (ii) any split, combination or reclassification of any
of its capital stock or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, (iii) any damage, destruction or loss, whether
or not covered by insurance, that has or reasonably could be expected to
have a Material Adverse Effect in respect of AES or (iv) any change in
accounting methods, principles or practices by AES materially affecting its
assets, liabilities or business, except insofar as may have been required
by a change in GAAP.
(f) Litigation. Except as disclosed in the AES SEC Documents filed
and publicly available prior to the date of this Agreement, there is no
suit, action or proceeding pending or, to the knowledge of AES, threatened
against AES or any of its subsidiaries that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect
in respect of AES.
(g) Brokers. No broker, investment banker, financial advisor or other
person, the fees and expenses of which will be paid by AES, is entitled to
any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of AES or Sub.
(h) Interim Operations of Sub. Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby and has not engaged in
any business activities or conducted any operations other than in
connection with the transactions contemplated hereby.
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.01. Registration Statement; Proxy Statement. (a) (i) As
promptly as practicable after the execution of this Agreement, AES and Chigen
shall prepare and file with the SEC a preliminary proxy statement for use in
connection with the Chigen Class A Meeting (as defined in Section 4.02 below)
and the Chigen Special Meeting (as defined in Section 4.02 below) (the "Proxy
Statement") and, once the SEC has reviewed the Proxy Statement, a registration
statement on Form S-4 (together with all amendments thereto, the "Registration
Statement") in connection with the registration under the Securities Act of the
shares of AES Common Stock to be issued to the holders of the Class A Common
Stock pursuant to the Amalgamation. AES, Sub and Chigen shall cooperate with
each other in connection with any other filings with the SEC that any of them is
obligated to make as a result of the transactions contemplated hereby. AES and
Chigen each shall use all reasonable efforts to cause the Registration Statement
to become effective (and to maintain such effectiveness until the AES Common
Stock covered thereby has been issued) and the Proxy Statement to be reviewed by
the SEC staff as promptly as practicable. Prior to the effective date of the
Registration Statement, AES shall take all or any action required under any
applicable federal or state securities laws in connection with the issuance of
shares of AES Common Stock pursuant to the Amalgamation. Each of Chigen and AES
shall pay its own expenses incurred in connection with the Registration
Statement, the Proxy Statement, the Chigen Class A Meeting and the Chigen
Special Meeting, including, without limitation, the fees and disbursements of
their respective counsel, accountants and other representatives, except that
Chigen and AES each shall pay one-half of any printing expenses incurred in
connection therewith and Chigen shall pay any filing fees with respect to the
filing of the Proxy Statement with the SEC. Such fee shall be reimbursed to
Chigen in the event this Agreement is terminated. Chigen shall furnish all
information concerning Chigen as AES may reasonably request in connection with
such actions and the preparation of the Registration Statement. As promptly as
practicable after the Proxy Statement has been reviewed by the SEC and the
Registration Statement shall have become effective, Chigen shall mail the Proxy
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Statement to its shareholders. The Proxy Statement shall include the
recommendation of the Special Committee and the recommendation of the Board of
Directors of Chigen in favor of the Amalgamation, unless the Special Committee
has, in accordance with the terms of this Agreement, withdrawn or modified its
recommendation or approval of this Agreement.
(ii) No amendment or supplement to the Registration Statement or the Proxy
Statement will be made by AES or Chigen without the other's approval, which
shall not be unreasonably withheld. AES and Chigen each will advise the other,
promptly after it receives notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment has been filed,
the issuance of any stop order, the suspension of the qualification of the AES
Common Stock issuable in connection with the Amalgamation for offering or sale
in any jurisdiction, or any request by the SEC for amendment of the Registration
Statement or the Proxy Statement or comments thereon and responses thereto or
requests by the SEC for additional information.
(iii) AES shall promptly prepare and submit to the NYSE a listing
application covering the shares of AES Common Stock issuable in the
Amalgamation, and shall use its reasonable best efforts to obtain, prior to the
Effective Time, approval for the listing of such AES Common Stock, subject to
official notice of issuance, and Chigen shall cooperate fully with AES with
respect to such listing.
(b) AES represents, warrants and agrees that none of the information
supplied or to be supplied by AES for inclusion or incorporation by reference in
the Registration Statement (including the Proxy Statement) shall, at (i) the
time the Registration Statement is filed with the SEC or declared effective,
(ii) the time the Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to the shareholders of Chigen, (iii) the time of the
Chigen Class A Meeting and the Chigen Special Meeting and (iv) the Effective
Time, contain any untrue statement of a material fact or any statement which, at
such time and in light of the circumstances under which it is made, is false or
misleading with respect to any material fact, or omit to state any material fact
required to be stated therein, or necessary in order to make the statements
therein not false or misleading. If at any time prior to the Effective Time any
event or circumstance relating to AES or any subsidiary of AES, or their
respective officers or directors, should be discovered by AES which should be
set forth in an amendment or a supplement to the Registration Statement or the
Proxy Statement, AES shall promptly inform Chigen of such event or circumstance.
Notwithstanding the foregoing, AES makes no representation or warranty with
respect to any information which is supplied for inclusion or incorporation by
reference in the Registration Statement (including the Proxy Statement) by
Chigen or any of its representatives and which is contained therein. All
documents that AES is responsible for filing with the SEC in connection with the
transactions contemplated hereby will comply as to form and substance in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act.
(c) Chigen represents, warrants and agrees that none of the information
supplied or to be supplied by Chigen for inclusion or incorporation by reference
in the Registration Statement (including the Proxy Statement) shall, at the
respective times the Registration Statement is filed with the SEC or declared
effective or the Proxy Statement contained in the Registration Statement is
first published, sent or given to the holders of Class A Common Stock, and at
the Effective Time, contain any untrue statement of a material fact or any
statement which, at such time and in light of the circumstances under which it
is made, is false or misleading with respect to any material fact, or omit to
state any material fact required to be stated therein, or necessary in order to
make the statements therein not false or misleading. If at any time prior to the
Effective Time any event or circumstance relating to Chigen or any subsidiary of
Chigen, or their respective officers or directors, should be discovered by
Chigen which should be set forth in an amendment or supplement to the
Registration Statement or the Proxy Statement, Chigen shall promptly inform AES
of such event of circumstance. Notwithstanding the foregoing, Chigen makes no
representation or warranty with respect to any information which is supplied for
inclusion or incorporation by reference in the Registration Statement (including
the Proxy Statement) by AES or Sub or any of their representatives and which is
contained therein. All documents that Chigen is responsible for filing with the
SEC in connection with the transactions contemplated hereby will comply as to
form and substance in all material respects with the applicable requirements of
the Securities Act and the Exchange Act.
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(d) Chigen, AES and Sub each hereby (i) consents to the use of its name
and, on behalf of its subsidiaries and affiliates, the names of such
subsidiaries and affiliates, and to the inclusion of financial statements and
business information relating to such party and its subsidiaries and affiliates
(in each case, to the extent required by applicable securities laws), in the
Registration Statement and the Proxy Statement, (ii) agrees to use all
reasonable efforts to obtain the written consent of any person or entity
retained by it which may be required to be named (as an expert or otherwise) in
the Registration Statement or the Proxy Statement, and (iii) agrees to cooperate
fully, and agrees to use all reasonable efforts to cause its subsidiaries and
affiliates to cooperate fully, with any legal counsel, investment banker,
accountant or other agent or representative retained by any of the parties
specified in clause (i) above in connection with the preparation of any and all
information required, as determined after consultation with each party's
counsel, to be disclosed by applicable securities laws in the Registration
Statement or the Proxy Statement.
SECTION 4.02. Shareholders' Meetings. Chigen shall call a special class
meeting of the holders of Class A Common Stock (the "Chigen Class A Meeting")
and a special general meeting of its shareholders (the "Chigen Special Meeting")
as promptly as practicable for the purpose of voting upon the approval of this
Agreement and the Amalgamation and Chigen shall use all commercially reasonable
efforts to hold the Chigen Class A Meeting and the Chigen Special Meeting as
soon as practicable after the date on which the Registration Statement becomes
effective. Unless the Special Committee has, in accordance with the terms of
this Agreement, withdrawn or modified its recommendation or approval of this
Agreement, Chigen shall use all commercially reasonable efforts to solicit from
its shareholders proxies in favor of the approval of this Agreement and the
Amalgamation, and shall take all other action reasonably necessary or advisable
to secure the vote or consent of shareholders required by the Companies Act to
obtain such approvals. AES shall vote its shares of Class B Common Stock in
favor of this Agreement and the transactions contemplated hereby.
SECTION 4.03. No Solicitation. (a) Chigen shall not, nor shall it permit
any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, Chigen or any of its subsidiaries to, (i) solicit or
initiate, or encourage the submission of, any Takeover Proposal (as hereinafter
defined) or (ii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Takeover Proposal; provided, however,
that, if in the opinion of the Special Committee, after consultation with
counsel, such failure to act would be inconsistent with its fiduciary duties to
Chigen or the holders of Class A Common Stock under applicable law, Chigen may,
in response to an unsolicited Takeover Proposal, and subject to compliance with
Section 4.03(c), (a) furnish information with respect to Chigen to any person
pursuant to a confidentiality agreement and (b) participate in negotiations
regarding such Takeover Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any executive officer of Chigen or any of its subsidiaries or any
investment banker, attorney or other advisor or representative of Chigen or any
of its subsidiaries, whether or not such person is purporting to act on behalf
of Chigen or any of its subsidiaries or otherwise, shall be deemed to be a
breach of this Section 4.03(a) by Chigen. For purposes of this Agreement,
"Takeover Proposal" means any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of a substantial
amount of assets of Chigen or any of its subsidiaries (other than investors in
the ordinary course of business) or of over 20% of any class of equity
securities of Chigen or any of its subsidiaries or any tender offer or exchange
offer that if consummated would result in any person beneficially owning 20% or
more of any class of equity securities of Chigen or any of its subsidiaries, or
any amalgamation, consolidation, business combination, sale of substantially all
assets, recapitalization, liquidation, dissolution or similar transaction
involving Chigen or any of its subsidiaries other than the transactions
contemplated by this Agreement, or any other transaction the consummation of
which would reasonably be expected to impede, interfere with, prevent or
materially delay the Amalgamation or which would reasonably be expected to
dilute materially the benefits to AES of the transactions contemplated hereby.
(b) Except as set forth herein or as required by Bermuda law, the Special
Committee shall not (i) withdraw or modify, or propose to withdraw or modify, in
a manner adverse to AES or Sub, the approval or recommendation by such Special
Committee of the Amalgamation or this Agreement, (ii) approve or
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recommend, or propose to approve or recommend, any Takeover Proposal or (iii)
enter into any agreement with respect to any Takeover Proposal. Notwithstanding
the foregoing, if in the opinion of the Special Committee, after consultation
with counsel, failure to do any of the foregoing would be inconsistent with its
fiduciary duties to Chigen or the holders of the Class A Common Stock under
applicable law, the Special Committee may (subject to the terms of this and the
following sentences) withdraw or modify its approval or recommendation of the
Amalgamation or this Agreement, approve or recommend a Superior Proposal (as
hereinafter defined), or enter into an agreement with respect to a Superior
Proposal, in each case relating to the receipt of a Superior Proposal at any
time after the second business day following AES's receipt of written notice (a
"Notice of Superior Proposal") advising AES that the Special Committee has
received a Superior Proposal, specifying the material terms and conditions of
such Superior Proposal and identifying the person making such Superior Proposal;
provided that Chigen shall not enter into an agreement with respect to a
Superior Proposal unless Chigen shall have furnished AES with written notice no
later than 12:00 noon, New York City time, one day in advance of any date that
it intends to enter into such agreement (it being understood that such time
periods may be concurrent). In addition, if Chigen proposes to enter into an
agreement with respect to any Takeover Proposal, it shall concurrently with
entering into such agreement pay, or cause to be paid, to AES the Expenses (as
defined in Section 4.07(b) below). For purposes of this Agreement, a "Superior
Proposal" means any bona fide Takeover Proposal to acquire, directly or
indirectly, for consideration consisting of cash and/or securities, more than
50% of the shares of Class A Common Stock then outstanding or all or
substantially all the assets of Chigen and otherwise on terms which the Special
Committee determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation) to be more favorable to
Chigen or the holders of the Class A Common Stock than the Amalgamation.
(c) In addition to the obligations of Chigen set forth in Section 4.03(b),
Chigen shall immediately advise AES orally and in writing of any request for
information or of any Takeover Proposal, or any inquiry with respect to or which
could lead to any Takeover Proposal, the material terms and conditions of such
request, Takeover Proposal or inquiry, and the identity of the person making any
such Takeover Proposal or inquiry. Chigen will keep AES fully informed of the
status and details (including amendments or proposed amendments) of any such
request, Takeover Proposal or inquiry.
(d) Nothing contained in this Section 4.03 shall prohibit Chigen from
taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) under the Exchange Act or from making any disclosure to the holders of
Class A Common Stock if, in the opinion of the Special Committee, after
consultation with counsel, failure to so disclose would be inconsistent with its
fiduciary duties to Chigen or the holders of Class A Common Stock under
applicable law; provided that Chigen does not, except as permitted by Section
4.03(b), withdraw or modify, or propose to withdraw or modify, its position with
respect to the Amalgamation or approve or recommend, or propose to approve or
recommend, a Takeover Proposal.
(e) For the purposes of determining compliance with the terms of this
Agreement, the parties hereto agree that the failure to take, following receipt
of a Takeover Proposal, an action which the Special Committee reasonably
believes is likely to result in a Superior Proposal would be deemed to be a
breach of the Special Committee's fiduciary duties.
SECTION 4.04. Access to Information; Confidentiality. Chigen shall, and
shall cause each of its subsidiaries to, afford to AES, and to AES' officers,
employees, accountants, counsel, financial advisers and other representatives,
reasonable access during normal business hours during the period prior to
Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, Chigen shall, and
shall cause each of its subsidiaries to, furnish promptly to AES (a) a copy of
each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state securities
laws and (b) all other information concerning its business, properties and
personnel as AES may reasonably request.
SECTION 4.05. Reasonable Efforts; Notification. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use all reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things
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necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Amalgamation and the transactions
contemplated hereby, including (i) approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of any of the transactions
contemplated hereby, including seeking to have any stay or temporary restraining
order entered by any court or other Governmental Entity vacated or reversed and
(iv) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated hereby, and to fully carry out the
purposes of, this Agreement. In connection with and without limiting the
foregoing, Chigen and its Board of Directors shall (i) take all reasonable
actions to ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to the Amalgamation, this Agreement, or any
of the other transactions contemplated hereby, and (ii) if any state takeover
statute or similar statute or regulation becomes applicable to the Amalgamation,
this Agreement, or the transactions contemplated hereby, take all reasonable
actions to ensure that the Amalgamation and the transactions contemplated hereby
may be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Amalgamation, this Agreement and the transactions contemplated hereby.
Notwithstanding the foregoing, Chigen, the Special Committee and the Board of
Directors of Chigen shall not be prohibited from taking any action permitted by
the terms of this Agreement.
(b) Each of the parties shall give prompt notice to the other parties of
(i) any material representation or warranty made by it contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect or any such material representation or warranty that is not so
qualified becoming untrue or inaccurate in any material respect or (ii) the
failure by it to comply with or satisfy in any material respect any material
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
SECTION 4.06. Employee Benefit Plans. AES and Chigen agree that any
employee benefit or compensation plans, agreements or arrangements, including
"employee benefit plans" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), to which Chigen or any
subsidiary of Chigen is a party (together, the "Chigen Benefit Plans") in effect
at the date of this Agreement shall remain in effect until otherwise amended or
terminated after the Effective Time. To the extent the Chigen Benefit Plans are
amended or terminated, it is the current nonbinding intent of the parties that
employee benefit plans which are no less favorable, in the aggregate, than the
Chigen Benefit Plans shall be provided to the employees of Chigen.
Notwithstanding the foregoing, Options shall be treated in the manner provided
in Section 2.05 and the parties shall take all actions necessary and appropriate
to merge the AES China Generating Co. Ltd. Profit Sharing and Employee Stock
Ownership Plan (the "Chigen Profit Sharing Plan") into The AES Corporation
Profit Sharing and Stock Ownership Plan.
SECTION 4.07. Fees and Expenses. (a) Except as provided below and in
Section 4.01, all fees and expenses incurred in connection with the
Amalgamation, this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such fees or expenses, whether or not the
Amalgamation is consummated.
(b) Chigen shall pay, or cause to be paid, in same day funds to AES all of
AES's out-of-pocket expenses referred to in Section 4.07(a) in an amount up to
but not to exceed $750,000 (the "Expenses") upon demand if (i) AES terminates
this Agreement under Section 6.01(d) as a result of the occurrence of an event
under clause (ii) or (iii) of Section 6.01(d), (ii) Chigen terminates this
Agreement pursuant to Section 6.01(e) or (iii) prior to the termination of this
Agreement (other than by Chigen pursuant to Section 6.01(f)), a Takeover
Proposal shall have been made and within one year of such termination, Chigen
enters into an agreement with respect to, approves or recommends or takes any
action to facilitate, such Takeover Proposal. The amount of Expenses so payable
shall be the amount set forth in an estimate delivered by AES, subject to
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upward or downward adjustment (not to be in excess of the amount set forth
above) upon delivery of reasonable documentation therefor.
SECTION 4.08. Public Announcements. AES and Chigen will consult with each
other before issuing, and provide each other the opportunity to review and
comment upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Amalgamation, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable law, court process
or by obligations pursuant to any listing agreement with any national securities
exchange or national securities quotation system. The parties agree that the
initial press release to be issued with respect to the transactions contemplated
by this Agreement shall be in the form heretofore agreed to by the parties.
SECTION 4.09. Indemnification; Insurance. (a) Chigen shall not, and for a
period of six years from and after the Effective Time AES and the Amalgamated
Company shall not, amend the provisions of the Bye-Laws providing for the
indemnification of directors and officers of Chigen in any manner adverse to
such directors and officers.
(b) For a period of six years after the Effective Time, AES shall cause to
be maintained in effect the current policies of directors' and officers'
liability insurance maintained by Chigen (provided that AES may substitute
therefor policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims arising from
facts or events which occurred before the Effective Time to the extent
available.
The provisions of this Section 4.09 are intended to be for the benefit of,
and shall be enforceable by, each indemnified party, his or her heirs and
representatives.
SECTION 4.10. Termination of the Stock Purchase and Shareholder's
Agreement. Each of the Stock Purchase and Shareholder's Agreement, dated as of
December 29, 1993, by and between AES and Chigen, and the NonCompetition and
Non-Disclosure Agreement, dated as of December 29, 1993, and amended and
restated as of February 1, 1994, by and between AES and Chigen, shall be
terminated as of the Effective Time.
ARTICLE V
CONDITIONS TO THE AMALGAMATION
SECTION 5.01. Conditions to the Obligations of Each Party. The
obligations of Chigen, AES and Sub to consummate the Amalgamation are subject to
the satisfaction of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite votes of the shareholders of
Chigen in accordance with the Companies Act and Chigen's Bye-laws;
(b) no Governmental Authority shall have enacted, issued, promulgated,
enforced or entered any order, executive order, stay, decree, judgment or
injunction (each an "Order") or statute, rule or regulation which is in
effect and which has the effect of making the Amalgamation illegal or
otherwise prohibiting consummation of the Amalgamation;
(c) the Registration Statement shall have been declared effective, and
no stop order suspending the effectiveness of the Registration Statement
shall be in effect;
(d) AES and Chigen shall have received from the NYSE evidence that the
shares of AES Common Stock to be issued to the shareholders of Chigen in
the Amalgamation shall be listed on the NYSE immediately following the
Effective Time;
(e) Chigen shall have received the consent of the Bermuda Minister of
Finance to amalgamate with Sub;
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(f) all other consents, authorizations, orders and approvals of (or
filings or registrations with) any third party or governmental commission,
board or other regulatory body required in connection with the execution,
delivery and performance of this Agreement shall have been obtained or
made, except for filings in connection with the Amalgamation and any other
documents required to be filed after the Effective Time and except where
the failure to have obtained or made any such consent, authorization,
order, approval, filing or registration would not have a Material Adverse
Effect in respect of Chigen or AES following the Effective Time; and
(g) AES and Chigen shall have received (i) an opinion of Chadbourne &
Parke LLP, special counsel to AES, in form and substance reasonably
acceptable to AES and reasonably acceptable to Skadden, Arps, Slate,
Meagher & Flom LLP, special counsel to Chigen, substantially to the effect
that the Amalgamation will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and that
AES and Chigen will each be a party to that reorganization within the
meaning of Section 368(b) of the Code and (ii) an opinion from Conyers,
Dill & Pearson, Bermuda counsel to Chigen, to the effect that all necessary
corporate action has been taken to effect the Amalgamation and, upon
issuance of the Certificate of Amalgamation, the Amalgamation will be
effective.
SECTION 5.02. Conditions to the Obligations of AES and Sub. The
obligations of AES and Sub to consummate the Amalgamation are subject to the
satisfaction or waiver by AES of the following further conditions:
(a) there shall not be threatened or pending by any Governmental
Entity any suit, action or proceeding, (i) challenging the acquisition by
AES of Chigen, seeking to restrain or prohibit the consummation of the
Amalgamation or the performance of any of the other transactions
contemplated by this Agreement, or seeking to obtain from Chigen or AES,
any damages that are material in relation to Chigen and its subsidiaries
taken as whole, (ii) seeking to prohibit or limit the ownership or
operation by Chigen, AES or any of their respective subsidiaries of a
material portion of the business or assets of Chigen and its subsidiaries,
taken as a whole, or AES and its subsidiaries, taken as a whole, or to
compel Chigen or AES to dispose of or hold separate any material portion of
the business or assets of Chigen and its subsidiaries, taken as a whole, or
AES and its subsidiaries, taken as a whole, as a result of the Amalgamation
or any of the other transactions contemplated by this Agreement, (iii)
seeking to prohibit AES or any other subsidiary of AES from effectively
controlling in any material respect the business or operations of Chigen
and its subsidiaries, taken as a whole, or (iv) which otherwise is
reasonably likely to have a Material Adverse Effect in respect of Chigen;
(b) there shall not be any statute, rule, regulation, judgment, order
or injunction enacted, entered, enforced, promulgated or deemed applicable
to the Amalgamation, or any other action shall be taken by any Governmental
Entity or court, that is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (i) through
(iv) of paragraph (a) above;
(c) there shall not have occurred any Material Adverse Change in
respect of Chigen;
(d) all of the representations and warranties of Chigen set forth in
this Agreement that are qualified as to materiality shall be true and
correct and all such representations and warranties that are not so
qualified shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Closing Date;
(e) Chigen shall not have failed to perform in any material respect
any material obligation or to comply in any material respect with any
material agreement or covenant of Chigen to be performed or complied with
by it under this Agreement;
(f) the fraction of a share of AES Common Stock to be received with
respect to each share of Class A Common Stock pursuant to Section 2.01(c)
shall not be more than 0.3100 of a share;
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(g) the Board of Directors of Chigen shall have approved amendments to
the Bye-Laws of Chigen in form reasonably acceptable to AES, and directed
that after the Effective Time they be submitted to the sole shareholder of
Chigen for approval; and
(h) the number of Dissenting Shares (as defined in Section 2.01(d))
shall not be more than 10% of the total issued and outstanding shares of
Class A Common Stock.
SECTION 5.03. Conditions to the Obligations of Chigen. The obligation of
Chigen to consummate the Amalgamation is subject to the satisfaction or waiver
by Chigen of the following further conditions:
(a) all of the representations and warranties of AES set forth in this
Agreement that are qualified as to materiality shall be true and correct
and all such representations and warranties that are not so qualified shall
be true and correct in all material respects, in each case as of the date
of this Agreement and as of the Closing Date;
(b) AES shall not have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or covenant of AES to be performed or complied with by it under
this Agreement; and
(c) Merrill Lynch shall not have withdrawn the Opinion.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01. Termination. This Agreement may be terminated and the
Amalgamation and the other transactions contemplated hereby may be abandoned at
any time prior to the Effective Time, notwithstanding any requisite approval and
adoption of this Agreement and the transactions contemplated hereby, as follows:
(a) by mutual written consent duly authorized by the Boards of
Directors (including the Special Committee) of each of AES and Chigen;
(b) by either AES or Chigen: (i) if as a result of the failure,
occurrence or existence of any of the conditions set forth in Article V of
this Agreement the Amalgamation shall not have occurred on or before April
30, 1997; provided, however, that the right to terminate this Agreement
pursuant to this Section 6.01(b)(i) shall not be available to any party
whose failure to perform any of its obligations under this Agreement
results in the failure, occurrence or existence of any such condition; or
(ii) if any Governmental Entity shall have issued an Order permanently
enjoining, restraining or otherwise prohibiting the Amalgamation and such
Order shall have become final and nonappealable;
(c) by AES in the event of a breach by Chigen of any representation,
warranty, covenant or other agreement contained in this Agreement or any
other development which (i) would give rise to the failure of a condition
set forth in Section 5.02(d) or 5.02(e) and (ii) cannot be or has not been
cured within 30 days after the giving of written notice to Chigen;
(d) by AES if (i) the Special Committee shall have withdrawn or
modified in a manner adverse to AES its approval or recommendation of the
Amalgamation or this Agreement, (ii) the Special Committee shall have
approved or recommended any Takeover Proposal (including any Superior
Proposal in accordance with Section 4.03(b) of this Agreement) or (iii)
Chigen shall have entered into any agreement with respect to any Takeover
Proposal (including any Superior Proposal in accordance with Section
4.03(b) of this Agreement);
(e) by AES or Chigen if Chigen enters into a definitive agreement in
accordance with Section 4.03, provided that Chigen has complied with all
provisions thereof, including the notice provisions therein, and provided
that Chigen makes simultaneous payment of the Expenses; or
(f) by Chigen in the event of a breach by AES in any material respect
of any representation, warranty, covenant or other agreement contained in
this Agreement, which (i) would give rise to the
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failure of a condition set forth in Section 5.03(a) or 5.03(b) and (ii)
cannot be or has not been cured within 30 days after the giving of written
notice to AES, except, in any case, such failures which, in the aggregate,
would not have a Material Adverse Effect in respect of AES.
SECTION 6.02. Effect of Termination. In the event of termination of this
Agreement by either Chigen or AES as provided in Section 6.01, this Agreement
shall forthwith become void and have no effect, without any liability or
obligation on the part of AES or Chigen, other than the provisions of Section
3.01(i), Section 3.02(g), Section 4.01, Section 4.07, this Section 6.02 and
Article VII and except to the extent that such termination results from the
willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
SECTION 6.03. Amendment. This Agreement may be amended by the parties at
any time. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties.
SECTION 6.04. Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) waive compliance with any
of the agreements or conditions contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 6.05. Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 6.01, an amendment
of this Agreement pursuant to Section 6.03, an extension or waiver pursuant to
Section 6.04, or any other action pursuant to this Agreement shall, in order to
be effective, require, in the case of Chigen, action by the Special Committee,
or action by the duly authorized designee of such Special Committee. Any action
permitted to be taken by Chigen pursuant to this Agreement may be taken by the
Special Committee on behalf of Chigen.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. Nonsurvival of Representations and Warranties; Effect of
Breach of Representation or Warranty. (a) None of the representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive after the Effective Time. This Section 7.01(a) shall not
limit any covenant or agreement of the parties which by its terms contemplates
performance after such date.
(b) For all purposes of this Agreement, Chigen shall be deemed not to have
breached any of its representations and warranties if any senior officer of AES
(other than any such senior officer who is also an officer of Chigen) has
knowledge of such breach at the time this Agreement is delivered by AES. No
party hereto shall have any liability for damages to the other parties for the
breach of any of its representations or warranties contained herein, whether
before or after the Effective Time; it being understood that the other parties'
sole remedy shall be to not consummate the Amalgamation and/or terminate this
Agreement, in either instance in accordance with the terms of this Agreement.
Notwithstanding anything to the contrary contained in the previous sentence,
this Section 7.01(b) shall not limit AES's rights under Section 4.07(b).
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SECTION 7.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to AES or Sub, to:
The AES Corporation
1001 N. 19th Street
Arlington, VA 22209
Facsimile: (703) 528-4510
Attention: William R. Luraschi, Esq.
with copies to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, NY 10112
Facsimile: (212) 541-5369
Attention: Philip D. Beaumont, Esq.
(b) if to Chigen, to:
AES China Generating Co. Ltd.
9-F Allied Capital Resources Building
32-38 Ice House Street
Central Hong Kong
Facsimile: 011-852-2530-1673
Attention: Special Committee of the
Class A Directors
with copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Facsimile: (212) 735-2000
Attention: David J. Friedman, Esq.
SECTION 7.03. Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
(b) "Liens" means any and all pledges, claims, liens or encumbrances
and security interests of any kind or nature whatsoever;
(c) "Material Adverse Change" or "Material Adverse Effect" means, when
used in connection with Chigen or AES, any change or effect that is
materially adverse to the business, financial condition or results of
operations of such party and its subsidiaries taken as a whole;
(d) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
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(e) a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board
of Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person;
(f) "Superior Proposal" has the meaning assigned thereto in Section
4.03(b); and
(g) "Takeover Proposal" has the meaning assigned thereto in Section
4.03(a).
SECTION 7.04. Interpretation. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 7.05. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 7.06. Entire Agreement; No Third-Party Beneficiaries. This
Agreement constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter of this Agreement and except for the provisions of Section
4.06 and Section 4.09, are not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
SECTION 7.07. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof, except that all provisions in this Agreement relating to the
authorization, effectuation and manner and effect of the Amalgamation shall be
governed by the laws of Bermuda.
SECTION 7.08. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 7.09. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York or in any New York state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of New York or
any New York state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a federal or state court sitting in the
State of New York.
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IN WITNESS WHEREOF, AES, Sub and Chigen have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
THE AES CORPORATION
By: /s/ Barry J. Sharp
------------------------------------
Name: Barry J. Sharp
Title: Vice President and Chief
Financial Officer
AES ACQUISITION CO. LTD.
By: /s/ Dennis W. Bakke
------------------------------------
Name: Dennis W. Bakke
Title: President and Chairman
AES CHINA GENERATING CO. LTD.
By: /s/ Jeffery A. Safford
------------------------------------
Name: Jeffery A. Safford
Title: Vice President and Chief
Financial Officer
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EXHIBIT A
DIRECTORS OF THE AMALGAMATED COMPANY
<TABLE>
<CAPTION>
NAME ADDRESS
------------------------------------------------ -------------------------
<S> <C>
Roger W. Sant................................... c/o The AES Corporation
1001 North 19th Street
Arlington, Virginia 22209
Dennis W. Bakke................................. c/o The AES Corporation
1001 North 19th Street
Arlington, Virginia 22209
Robert F. Hemphill, Jr.......................... c/o The AES Corporation
1001 North 19th Street
Arlington, Virginia 22209
</TABLE>
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<PAGE> 119
APPENDIX B
As of November 12, 1996
The Special Committee of the Board of Directors
AES China Generating Co. Ltd.
3/F (W), Golden Bridge Plaza
No. 1 (A) Jianguomenwai Avenue
Beijing 100020, People's Republic of China
Gentlemen:
AES China Generating Co., Ltd. (the "Company") and The AES Corporation
("AES") propose to enter into an Agreement and Plan of Amalgamation (the
"Agreement") pursuant to which the Company will be amalgamated with a
wholly-owned subsidiary of AES (the "Amalgamation") in which each outstanding
share (the "Shares") of the Company's Class A common stock, par value $0.01 per
share, will be cancelled and converted into the right to receive (i) 0.29 shares
of the common stock of AES (the "AES Shares") or (ii) should the average closing
price of the AES Shares on the New York Stock Exchange over the 15 consecutive
trading day ending at the close of trading on the third trading day immediately
prior to the date of the special meeting of the Company's shareholders to
consider the Amalgamation (the "Average Closing Price") exceed $50.00 or be less
than $45.00, such fraction of an AES Share (expressed as a decimal rounded to
the nearest one ten-thousandth) as is determined by dividing $13.05 (if the
Average Closing Price is less than $45.00) or $14.50 (if the Average Closing
Price is greater than $50.00) by the Average Closing Price.
You have asked us whether, in our opinion, the proposed consideration to be
received by the holders of the Shares in the Amalgamation is fair to such
holders from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's Annual Report and Form 10-K (including the
financial information included therein) for each of the two fiscal years in
the period ended November 30, 1995, the Company's Form 10-Q (including the
unaudited financial information included therein) for each of the quarterly
periods ending August 31, 1996, May 31, 1996 and February 28, 1996, the
Company's initial public offering prospectus dated February 24, 1994 and
the Company's Form S-3 Registration Statement dated October 16, 1996;
(2) Reviewed AES' Annual Report and Form 10-K (including the financial
information included therein) for each of the five fiscal years in the
period ended December 31, 1995 and AES' Form 10-Q (including the unaudited
financial information included therein) for each of the quarterly periods
ending March 31, 1996 and June 30, 1996;
(3) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and prospects of the
Company and AES, furnished to us by the Company and AES;
(4) Conducted discussions with members of senior management of the
Company and AES concerning their respective businesses and prospects;
(5) Reviewed the historical market prices and trading activity for the
Shares and the AES Shares and compared them with those of certain publicly
traded companies which we deemed to be comparable to the Company and AES,
respectively;
(6) Compared the results of operations of the Company and AES with
those of certain companies which we deemed to be comparable to the Company
and AES, respectively;
(7) Compared the proposed financial terms of the Amalgamation with the
financial terms of certain other mergers and acquisitions which we deemed
to be relevant;
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(8) Reviewed a draft of the Agreement dated November 9, 1996, which
you have advised us will be identical in all material respects to the
Agreement as executed; and
(9) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
deemed necessary.
In preparing our opinion, we have with your consent relied on the accuracy
and completeness of all information supplied or otherwise made available to us
by the Company and AES, and we have not independently verified such information
or undertaken an independent appraisal of the assets or liabilities of the
Company or AES. With respect to the financial forecasts furnished by the Company
and AES, we have assumed that they have been reasonably prepared and reflect the
best currently available estimates and judgment of the Company's and AES'
management as to the expected future financial performance of the Company or
AES, as the case may be. Our opinion necessarily is based upon market, economic,
financial and other conditions as they exist and can be evaluated as of the date
hereof.
In connection with the preparation of this opinion, we have not been
authorized by the Company, the Board of Directors or the Special Committee of
the Board of Directors to solicit, nor have we solicited, third-party
indications of interest for the acquisition of all or any part of the Company.
We have acted as financial advisor to the Company with respect to the
Amalgamation and will receive a fee from the Company for our services. We have,
in the past, provided financing services to the Company and have received fees
for the rendering of such services. In addition, in the ordinary course of our
business, we or our affiliates may actively trade the Shares and the AES Shares
for our or our affiliates' own account and for the account of customers and,
accordingly, may at any time hold a long or short position in such securities.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed consideration to be received by the holders of the Shares in the
Amalgamation is fair to such holders from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
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<PAGE> 121
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under AES's By-Laws, and in accordance with Section 145 of the Delaware
General Corporation Law (the "GCL"), AES shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than any action or suit by or in the right of AES to
procure a judgment in its favor, which is hereinafter referred to as a
"derivative action") by reason of the fact that such person is or was a
director, officer or employee of AES, or is or was serving in such capacity or
as agent at the request of AES for another entity, to the full extent authorized
by Delaware law, against expenses (including, but not limited to, attorneys'
fees), judgments, fines and amounts actually and reasonably incurred in
connection with the defense or settlement of such action, suit or proceeding if
such person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of AES, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe was unlawful.
Agents of AES may be similarly indemnified, at the discretion of the Board of
Directors.
Under Section 145 of the GCL, a similar standard of care is applicable in
the case of derivative actions, except that indemnification only extends to
expenses (including attorneys' fees) incurred in connection with the defense or
settlement of such an action and then, where the person is adjudged to be liable
to AES, only if and to the extent that the Court of Chancery of the State of
Delaware or the court in which such action was brought determines that such
person is fairly and reasonably entitled to such indemnity and only for such
expenses as the court shall deem proper.
Pursuant to AES's By-Laws, a person eligible for indemnification may have
the expenses incurred in connection with any matter described above paid in
advance of a final disposition by AES. However, such advances will only be made
upon the delivery of an undertaking by or on behalf of the indemnified person to
repay all amounts so advanced if it is ultimately determined that such person is
not entitled to indemnification.
In addition, under AES's By-Laws, AES may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
AES or of another corporation against any liability asserted against and
incurred by such person in such capacity, or arising out of the person's status
as such whether or not AES would have the power or the obligation to indemnify
such person against such liability under the provisions of AES's By-Laws.
ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------
<C> <S>
2.1 Amended and Restated Agreement and Plan of Amalgamation dated as of November 12,
1996 among The AES Corporation, AES Acquisition Co. Ltd. and AES China Generating
Co. Ltd. (included as Appendix A to the Proxy Statement/Prospectus).
3.1 Amended and Restated Certificate of Incorporation of the AES Corporation
(incorporated by reference to Exhibit 3.1 to the Registration Statement on Form
S-1 (Registration No. 33-40483)).
3.2 By-laws of The AES Corporation, as amended.
5. Opinion of Chadbourne & Parke LLP regarding the legality of the securities being
registered.
8. Opinion of Chadbourne & Parke LLP regarding tax matters.
23.1 Consent of Independent Public Accountants for The AES Corporation, Deloitte &
Touche LLP.
23.2 Consent of Independent Auditors for AES China Generating Co. Ltd., Deloitte Touche
Tohmatsu.
23.3 Consent of Independent Auditors for Light Servicos de Electridade S.A., Deloitte
Touche Tohmatsu.
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------
<C> <S>
23.4 Consent of Chadbourne & Parke, LLP (included in its opinions filed as Exhibits 5
and 8 hereto).
23.5 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
24 Power(s) of Attorney.
99.1 AES Chigen Proxy Card.
</TABLE>
ITEM 22. UNDERTAKINGS.
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 to Section 13(a) or Section 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 herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The registrant undertakes that every prospectus: (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in
connection with an offering of securities subject to Rule 415, will be filed as
part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant 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
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of
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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.
The undersigned 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Arlington, Commonwealth
of Virginia, on February 27, 1997.
THE AES CORPORATION
By: /s/ DENNIS W. BAKKE
------------------------------------
Name: Dennis W. Bakke
Title: President and Chief
Executive Officer
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 February 27, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ ROGER W. SANT* Chairman of the Board
- ---------------------------------------------
(Roger W. Sant)
/s/ DENNIS W. BAKKE President, Chief Executive Officer (principal
- --------------------------------------------- executive officer) and Director
(Dennis W. Bakke)
Director
- ---------------------------------------------
(Vickie-Ann Assevero)
/s/ DR. ALICE F. EMERSON* Director
- ---------------------------------------------
(Dr. Alice F. Emerson)
/s/ ROBERT F. HEMPHILL, JR.* Director
- ---------------------------------------------
(Robert F. Hemphill, Jr.)
/s/ FRANK JUNGERS* Director
- ---------------------------------------------
(Frank Jungers)
/s/ DR. HENRY R. LINDEN* Director
- ---------------------------------------------
(Dr. Henry R. Linden)
Director
- ---------------------------------------------
(John H. McArthur)
/s/ RUSSELL E. TRAIN* Director
- ---------------------------------------------
(Russell E. Train)
/s/ THOMAS I. UNTERBERG* Director
- ---------------------------------------------
(Thomas I. Unterberg)
/s/ ROBERT H. WATERMAN, JR.* Director
- ---------------------------------------------
(Robert H. Waterman, Jr.)
/s/ BARRY J. SHARP Vice President and Chief Financial Officer
- --------------------------------------------- (principal financial and accounting officer)
(Barry J. Sharp)
*By: /s/ WILLIAM R. LURASCHI
-----------------------------------------
William R. Luraschi Attorney-in-fact
</TABLE>
II-4
<PAGE> 125
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE IN
SEQUENTIAL
NUMBERING
EXHIBIT NO. DESCRIPTION SYSTEM
- ------------ ----------------------------------------------------------------------- ----------
<C> <S> <C>
2.1 Amended and Restated Agreement and Plan of Amalgamation dated as of
November 12, 1996 among The AES Corporation, AES Acquisition Co. Ltd.
and AES China Generating Co. Ltd. (included as Appendix A to the Proxy
Statement/Prospectus). ................................................
3.1 Amended and Restated Certificate of Incorporation of the AES
Corporation (incorporated by reference to Exhibit 3.1 to the
Registration Statement on Form S-1 (Registration No. 33-40483)). ......
3.2 By-laws of The AES Corporation, as amended. ...........................
5. Opinion of Chadbourne & Parke LLP regarding the legality of the
securities being registered. ..........................................
8. Opinion of Chadbourne & Parke LLP regarding tax matters. ..............
23.1 Consent of Independent Public Accountants for The AES Corporation,
Deloitte & Touche LLP. ................................................
23.2 Consent of Independent Auditors for AES China Generating Co. Ltd.,
Deloitte Touche Tohmatsu. .............................................
23.3 Consent of Independent Auditors for Light Servicos de Electridade S.A.,
Deloitte Touche Tohmatsu. .............................................
23.4 Consent of Chadbourne & Parke, LLP (included in its opinions filed as
Exhibits 5 and 8 hereto). .............................................
23.5 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated. ........
24 Power(s) of Attorney. .................................................
99.1 AES Chigen Proxy Card. ................................................
</TABLE>
<PAGE> 1
Exhibit 3.2
Date of last amendment: May 28, 1996
BY-LAWS
OF
THE AES CORPORATION
ARTICLE I
OFFICES
Section 1.01. Registered Office. The registered office shall be at 1013
Centre Road in the City of Wilmington in the State of Delaware.
Section 1.02. Additional Offices. The Corporation may also have offices and
places of business at such other places, within or without the State of
Delaware, as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01. Time and Place. All meetings of stockholders shall be held at
such time and place within or without the State of Delaware as shall be stated
in the notice of the meeting, or in a duly executed waiver of notice thereof.
Section 2.02. Annual meetings of stockholders shall be held on the first
Friday of June of each year, if not a legal holiday, and if a legal holiday,
then on the next succeeding business day not a legal holiday, or at such other
date and time as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting. At the annual meeting, the
stockholders shall elect a Board of Directors, and transact any other business
as may properly come before the meeting, notice of which was given in the
notice of the meeting. At each election of directors, every holder of stock
entitled to vote shall have the right to vote, in person or by proxy, the
number of shares owned by him for as many persons as there are directors to be
elected and for whose election he has a right to vote. Directors shall be
elected by a plurality of votes cast at an election.
Section 2.03. The Secretary shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting
<PAGE> 2
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 2.04. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the Chairman of the Board, the President or by
resolution adopted by a majority of the entire Board of Directors and shall be
called by the Chairman of the Board or the President at the request in writing
of stockholders owning ten percent (10%) or more of the stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.
Section 2.05. Written notice of the annual meeting or any special meeting of
stockholders stating the place, date and hour of the meeting shall be given in
accordance with Section 4.01 to each stockholder entitled to vote at such
meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 2.06. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 2.07. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Certificate of
Incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, or the officer presiding over the
meeting, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjournment at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given in accordance with Section 2.01 or 2.05 as the case may be, to each
stockholder of record entitled to vote at the meeting.
Section 2.08. At any meeting at which a quorum is present, the vote of the
holders of a majority of the stock entitled
<PAGE> 3
to vote on the subject matter, present in person or represented by proxy, shall
be the act of the stockholders, unless the subject matter is such that, by
express provision of the statutes, the Certificate of Incorporation or these
By-Laws, a different vote is required, in which case such express provision
shall govern and control the decision of such subject matter. The stockholders
present at a duly convened meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave
less than a quorum.
Section 2.09. If a vote is to be taken by ballot, each ballot shall state the
number of shares voted and the name of the stockholder or proxy voting.
Section 2.10. Whenever a vote of stockholders at a meeting thereof is required
or permitted to be taken for or in connection with any corporate action by any
provision of the statutes, the meeting and vote of stockholders may be
dispensed with if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize to take such
action at a meeting at which all shares entitled to vote thereat were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous consent shall be given to those stockholders who
have not consented in writing.
Section 2.11. Each meeting of the stockholders, whether annual or special,
shall be presided over by the Chairman of the Board if present, and if he or
she is not present or declines to preside by the President if present. If
neither officer specified in the preceding sentence is present, the meeting
shall be presided over by the person designated in writing by the Chairman of
the Board, or if the Chairman of the Board has made no designation, by the
person designated by the President, or if the President has made no
designation, by the person designated by the Board of Directors. If neither
officer specified in the first sentence of this Section 2.11 is present, and no
one designated by the Chairman of the Board or the President or the Board of
Directors is present, the meeting may elect any stockholder of record who is
entitled to vote for directors, or any person present holding a proxy for such
a stockholder, to preside. The Secretary of the Company (or in his or her
absence any Assistant Secretary) shall be the Secretary of any such meeting; in
the absence of the Secretary and Assistant Secretaries, any person may be
elected by the meeting to act as Secretary of the meeting.
Section 2.12. Any voting proxy given by a stockholder must be: in writing,
executed by the stockholder, or, in lieu thereof, to the extent permitted by
law, may be transmitted
<PAGE> 4
in a telegram, cablegram or other means of electronic transmission setting
forth or submitted with information from which it can be determined that the
telegram, cablegram or other electronic transmission was authorized by the
stockholder. A copy, facsimile transmission or other reliable reproduction of a
written or electronically-transmitted proxy authorized by this Section 2.12 may
be substituted for or used in lieu of the original writing or electronic
transmission to the extent permitted by law.
Section 2.13. The directors shall appoint one or more inspectors of election
and of the vote at any time prior to the date of any meeting of stockholders at
which an election is to be held or a vote is to be taken. In the event any
inspector so appointed is absent from such meeting or for any other reason
fails to act as such at the meeting, the person presiding at such meeting
pursuant to these By-Laws may appoint a substitute who shall have all the
powers and duties of such inspector. The inspector or inspectors so appointed
shall act at such meeting, make such reports thereof and take such other action
as shall be provided by law and as may be directed by the person presiding over
the meeting. Each inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability.
Section 2.14. The directors may, at any time prior to any annual or special
meeting of the stockholders, adopt an order of business for such meeting which
shall be the order of business to be followed at such meeting. The date and
time of the opening and the closing of the polls for each matter upon which the
stockholders will vote at such meeting shall be announced at such meeting by
the person presiding over such meeting.
Section 2.15. At any meeting of stockholders a stock vote shall be taken on
any resolution or other matter presented to the meeting for action if so
ordered by the person presiding over the meeting or on the demand of any
stockholder of record entitled to vote at the meeting or any person present
holding a proxy for such a stockholder. Such order or demand for a stock vote
may be made either before or after a vote has been taken on such resolution or
other matter in a manner other than by stock vote and before or after the
result of the vote taken otherwise than by stock vote has been announced. The
result of a stock vote taken in accordance with this By-Law shall supersede the
result of any vote previously taken in any manner other than by stock vote.
ARTICLE III
MATTERS RELATING TO THE BOARD OF DIRECTORS
<PAGE> 5
Directors
Section 3.01. The business of the Corporation shall be managed by its Board of
Directors, which may exercise all such powers of the Corporation and do all
such lawful acts and things as are not by statute, the Certificate of
Incorporation or these By-Laws directed or required to be exercised or done by
the stockholders.
Section 3.02. The number of directors of the Corporation which shall
constitute the whole Board shall be fixed at ten, or such other numbers as may
be determined by written resolution of the Board of Directors. The directors
shall be elected at the annual meeting of the stockholders, except as provided
in Section 3.04, and each director elected shall hold office until his or her
successor is elected and qualified or until his or her earlier resignation or
removal. Directors need not be stockholders of the Corporation.
Section 3.03. Any director of the Corporation may resign at any time either by
oral tender of resignation at any meeting of the Board of Directors or by
delivering written notice thereof to the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein, and unless
otherwise specified with respect thereto the acceptance of such resignation
shall not be necessary to make it effective.
Section 3.04. Any director may be removed for cause, at any time, by the
affirmative vote of the holders of record of a majority of all the shares of
capital stock entitled to vote at a special meeting of the stockholders called
for such purpose. Vacancies in the Board of Directors created by the death,
resignation or removal of directors and newly created directorships resulting
from any increase in the authorized number of directors may be filled only by
the affirmative vote of a majority of the remaining directors. If the directors
remaining in office shall be unable, by majority vote, to fill such vacancy
within 60 days of the occurrence thereof, the Chairman of the Board or the
President may call a special meeting of the stockholders at which such vacancy
shall be filled. Any director so chosen shall hold office until the next annual
election and until his or her successor is duly elected and qualified or until
his or her earlier resignation or removal. If there are no directors in office,
then an election of directors may be held in the manner provided by statute.
Meetings of the Board of Directors
Section 3.05. The Board of Directors of the Corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
<PAGE> 6
Section 3.06. The Board of Directors shall meet as soon as practicable after
the annual election of directors, for the purpose of organization and the
transaction of other business including the election of officers. No notice of
such meeting shall be required. Such organization meeting may, however, be held
at any other time or place which shall be specified in a notice given as
hereinafter provided for special meetings of the Board, or in a consent and
waiver of notice thereof signed by all the directors.
Section 3.07. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board. Any business of the Corporation may be transacted at any such
regular meeting.
Section 3.08. Special meetings of the Board of Directors shall be called by
the Secretary, on three days; notice to each director as provided in Article
IV, either on the request of the Chairman of the Board, the President or on the
written request of two directors.
Section 3.09. At all meetings of the Board of Directors, a majority of the
directors then in office shall constitute a quorum for the transaction of
business, and the act of a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by statute, the Certificate of
Incorporation or these By-Laws. If a quorum shall not be present at any meeting
of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 3.10. Unless otherwise restricted by the Certificate of Incorporation
or these By-Laws, any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting, if all members of the Board or such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the Board or such committee.
Section 3.11. Members of the Board of Directors or any committee designated by
the Board pursuant to Section 3.12 may participate in a meeting of such Board
or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at such meeting.
Committees of Directors
<PAGE> 7
Section 3.12. The Board of Directors may, by resolution passed by the
affirmative vote of a majority of the directors, designate one or more
committees, each committee to consist of two or more of the directors of the
Corporation. The Board may by like vote designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. Any such committee, to the extent
provided in the adopting resolution, shall have and may exercise the powers of
the Board of Directors in the management of the business and affairs of the
Corporation except as limited by the General Corporation Law of the State of
Delaware, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
Board of Directors.
Section 3.13. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
Compensation
Section 3.14. Directors, and members of any committee of the Board of
Directors, shall be entitled to such reasonable compensation for their services
as directors and members of each such committee as shall be fixed from time to
time by resolution of the Board of Directors, and shall also be entitled to
reimbursement for any reasonable expenses incurred in attending such meetings.
Any directors receiving compensation under these provisions shall not be barred
from serving the Corporation in any other capacity and receiving reasonable
compensation for such other services.
ARTICLE IV
NOTICES
Section 4.01. Whenever, under the provisions of the statutes, the Certificate
of Incorporation or these By-Laws, notice e is required to be given to any
director or stockholder, it shall not be construed to mean personal notice, but
such notice may be given in writing, by mail, addressed to such director, or
stockholder, at his or her address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to
be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram, cable or facsimile
transmission.
Section 4.02. Whenever any notice is required to be given under the provisions
of the statutes, the Certificate of Incorporation or of these By-Laws, a
waiver thereof in writing, signed by the person or persons entitled to said
<PAGE> 8
notice, whether before or after the time stated therein, shall be deemed
equivalent to such notice. Attendance in person or by proxy of a person at
a meeting of stockholders shall constitute a waiver of notice of such meeting,
except when the stockholder attends a meeting for the express purpose of
objecting and does so object at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Any director attending a meeting of the Board of Directors without
protesting, prior to the meeting or at its commencement, any lack of notice
shall be conclusively deemed to have waived notice if such meeting.
ARTICLE V
OFFICERS
Section 5.01. The Board of Directors at its first meeting after each meeting
of stockholders at which directors are elected, shall elect a Chairman of the
Board, a President, one or more Vice Presidents, a Secretary and a Treasurer,
each of whom shall hold office until the first meeting of the Board after the
next annual meeting of the stockholders and until his or her successor is
elected and qualified. At any time, the Board of Directors may also appoint one
or more Assistant Secretaries, Assistant Treasurers and such other officers and
agents as in its judgment the business of the Corporation may require and who
shall perform such duties as the Board shall from time to time determine.
Except for the Chairman of the Board, no officer of the Corporation need be a
member of the Board of Directors. Two or more offices, except President and
Secretary, may be held by the same person.
Section 5.02. The compensation of all officers and agents of the Corporation
shall be fixed by the Board of Directors except to the extent such power shall
be delegated, by resolution of the Board, to a committee of directors, to the
Chairman of the Board or to the President.
Section 5.03. Any officer or agent of the Corporation may be removed at any
time, either with or without cause, by the Board of Directors in its sole
discretion. Any vacancy occurring in any office of the Corporation may be
filled at any time by the Board of Directors.
The Chairman of the Board
Section 5.04. The Chairman of the Board shall be the Chief Executive Officer
of the Company and shall preside at all meetings of the Board of Directors, and
shall have such other powers and duties as may from time to time be assigned by
the Board of Directors.
<PAGE> 9
The President
Section 5.05. The President shall be the Chief Operating Officer of the
Corporation. Subject to the authority of the Board of Directors, the President
shall have general and active charge, control and supervision of all the
business and affairs of the Corporation. The President shall perform such other
duties as the Board may from time to time prescribe.
The Vice Presidents
Section 5.06. The several Vice Presidents may be designated by such title or
titles and in such order of seniority as the Board of Directors may determine.
They shall perform such duties and exercise such powers as the Board of
Directors or the President may from time to time prescribe.
The Secretary and Assistant Secretaries
Section 5.7. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors;
attend all meetings of the Board of Directors and all meetings of the
stockholders and record the proceedings of all such meetings in a book kept for
that purpose; perform like duties for the standing committees when required;
keep and account for all books, documents, papers and records of the
Corporation, except those for which some other officer or agent is properly
accountable; and perform such other duties as may be prescribed from time to
time by the Board of Directors or the President. The Secretary shall have
custody of the corporate seal of the Corporation and shall, and any Assistant
Secretary shall, have authority to affix the same to any instrument requiring it
and, when so affixed, it may be attested by the signature of the Secretary or
such Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by his or her signature.
Section 5.08. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries, shall perform such duties and exercise such powers as
the Board of Directors, the President or the Secretary may from time to time
prescribe.
The Treasurer and Assistant Treasurers
Section 5.09. The Treasurer shall have the custody of the corporate funds and
securities and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by
<PAGE> 10
the Board of Directors. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the President, shall render to the President
and to the Board, whenever the President or the Board shall require, an account
of all his or her transactions as Treasurer.
Section 5.10. The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers, shall perform such duties and exercise such powers as the
Board of Directors, the President or the Treasurer may from time to time
prescribe.
ARTICLE VI
MATTERS RELATING TO THE STOCK OF THE CORPORATION
Section 6.01. The certificates for shares of the Corporation shall be in such
form as shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Every holder of shares of capital stock of the Corporation shall be entitled to
have a certificate in the form approved by the Board of Directors, signed by
the Chairman of the Board or the President or a Vice President and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary,
certifying the number of such shares owned by him or her.
Section 6.02. Where any such certificate is signed either by a transfer agent
or an assistant transfer agent, or by a transfer clerk acting on behalf of the
Corporation and by a registrar, the signature of any such Chairman of the
Board, President, Vice President, Treasurer, Assistant Treasurer, Secretary or
Assistant Secretary may be facsimile. In case any such officer who has signed,
or whose facsimile signature has been affixed on, any such certificate shall
cease to be such officer, whether because of resignation, removal or otherwise,
before such certificate has been issued or delivered by the Corporation, such
certificate may nevertheless be issued and delivered by the Corporation with
the same effect as if such officer had not ceased to be such at the date of
such delivery.
Section 6.03. In case any certificate of stock shall be lost, stolen or
destroyed, the Board of Directors, in its discretion, or any officer or
officers thereunto duly authorized by the Board, may authorize the issuance of
a substitute certificate in place of the certificate so lost, stolen or
destroyed; provided, however, that in each such case the applicant for a
substitute certificate shall furnish evidence to the Corporation which the
Board of Directors, or any office or officers authorized as aforesaid,
determines is satisfactory, of the loss, theft or destruction of such
<PAGE> 11
certificate and of the ownership thereof, and also such security or indemnity
as may be required by the Board.
Section 6.04. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate of stock duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the proper officers of the Corporation or of the transfer agent to
issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 6.05. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 6.06. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the General
Corporation Law of the State of Delaware.
ARTICLE VII
GENERAL PROVISIONS
Dividends
Section 7.01. Dividends upon the capital stock of the Corporation, subject to
the provisions of the Certificate of Incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of capital stock,
subject to the applicable provisions, if any, of the Certificate of
Incorporation.
<PAGE> 12
Section 7.02. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Fiscal Year
Section 7.03. The fiscal year of the Corporation shall be the calendar year
unless otherwise fixed by resolution of the Board of Directors.
Deposits
Section 7.04. The Board of Directors shall select banks, trust companies, or
other depositories in which all funds of the Corporation not otherwise employed
shall, from time to time, be deposited to the credit of the Corporation. All
checks and drafts on the Corporation's bank accounts and all other instruments
for the payment of money shall be signed by such officer or officers or other
person or persons as shall be thereunto authorized from time to time by the
Board of Directors.
Voting Securities Held by the Corporation
Section 7.05. Unless otherwise ordered by the Board of Directors, the
President shall have full power and authority on behalf of the Corporation to
attend and to act and to vote at any meeting of security holders of other
corporations in which the Corporation may hold securities. At such meeting the
President shall possess and may exercise any and all rights and powers incident
to the ownership of such securities which the Corporation might have possessed
and exercised if it had been present. The Board of Directors may, from time to
time, confer like powers upon any other person or persons.
Section 7.06. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
<PAGE> 13
Section 8.01. (A) Any person who was or is a party or is threatened to be made a
party to or was or is involved (as a witness or otherwise) in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than any action or suit by or in the
right of the Corporation to procure a judgment in its favor (a "derivative
action")) by reason of the fact that he or she is or was a director, officer or
employee of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, shall be indemnified by the Corporation, to
the extent authorized by the laws of the State of Delaware as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than such laws permitted prior to such amendment),
against all expenses (including, but not limited to, attorneys' fees, judgments,
fines, penalties and amounts paid in settlement) actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action, suit or proceeding. In the event of any derivative action, such persons
shall be indemnified by the Corporation under the same conditions and to the
same extent as specified above, except that no indemnification is permitted in
respect of any claim, issue or matter as to which such persons shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper. The indemnification expressly provided by statute
in a specific case shall not be deemed exclusive of any other rights to which
any person indemnified may be entitled under any lawful agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(B) The right to indemnification conferred in this Article VIII is and shall be
a contract right. The right to indemnification conferred in this Article VIII
shall include the right to be paid by the Corporation the expenses (including
attorneys' fees and retainers therefor) reasonably incurred in connection with
any such proceeding in advance of its final disposition, such advances to be
paid by the Corporation within 20 days after the receipt by the
<PAGE> 14
Corporation of a statement or statements from a director, officer or employee of
the Corporation requesting such advance or advances from time to time; provided,
however, the payment of such expenses incurred by a director, officer or
employee in his or her capacity as a director, officer or employee in advance of
the final disposition of a proceeding shall be made only upon delivery to the
Corporation of an undertaking by or on behalf of such director, officer or
employee to repay all amounts so advanced if it shall ultimately be determined
that such director, officer or employee is not entitled to be indemnified under
this Article VIII or otherwise.
(C) To obtain indemnification under this Article VIII, an indemnitee shall
submit to the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to such person and is
reasonably necessary to determine whether and to what extent the indemnitee is
entitled to indemnification.
(D) The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture; trust or other enterprise including
service with respect to employee benefit plans, against any expense, liability
or loss, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the General Corporation Law
of the State of Delaware. To the extent that the Corporation maintains any
policy or policies providing such insurance, each such director, officer or
employee, and each such agent to which rights to indemnification have been
granted as provided in paragraph (E) of this Article VIII, shall be covered by
such policy or policies in accordance with its or their terms to the maximum
extent of the coverage thereunder for any such director, officer, employee or
agent.
(E) The Corporation may, to the extent authorized from time to time by the Board
of Directors, grant rights to indemnification, and rights to be paid by the
Corporation the expenses incurred in connection with any proceeding in advance
of its final disposition, to any agent of the Corporation to the fullest extent
of the provisions of this Article VIII with respect to the indemnification and
advancement of expenses of directors, officers and employees of the Corporation.
ARTICLE IX
NOMINATION OF DIRECTORS
Section 9.01. Any stockholder or record may nominate one or more persons for
election as director at a meeting only if
<PAGE> 15
written notice of such stockholder's intent to make such nomination or
nominations has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation not later than (a)
with respect to an election to be held at an annual meeting of stockholders,
ninety (90) days in advance of such meeting; and (b) with respect to an election
to be held at a special meeting of stockholders for the election of directors,
the close of business on the seventh day following the earlier of (i) the date
on which notice of such meeting is first given to stockholders and (ii) the date
on which a public announcement of such meeting is first made. Each such notice
shall include: (1) the name and address of each stockholder of record who
intends to appear in person or by proxy to make the nomination and of the person
or persons to be nominated; (2) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (3) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission; and (4) the consent of each nominee to serve
as a director of the Corporation if so elected. The person presiding at the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
ARTICLE X
AMENDMENTS
Section 10.01. These By-Laws may be amended or repealed by the affirmative vote
of a majority of the stockholders entitled to vote thereon or a majority of the
directors then in office at any regular meeting of the stockholders or of the
Board of Directors, respectively, or at any special meeting of the stockholders
or of the Board of Directors, respectively, if notice of such proposed
alteration or repeal be contained in the notice of such meeting. The
stockholders may determine by majority vote that any action taken by them with
respect to adoption, amendment or repeal of any part of these By-Laws shall not
be subject to subsequent amendment or repeal by the Board of Directors, provided
that any such determination shall be set forth in the appropriate place in the
text of these By-Laws.
<PAGE> 1
Exhibit 5
[Letterhead of Chadbourne & Parke LLP]
February 27, 1997
The AES Corporation
1001 North 19th Street
Arlington, Virginia 22209
Re: Registration Statement on Form S-4
Dear Sirs:
We have acted as counsel to The AES Corporation, a Delaware
corporation (the "Company"), in connection with the filing by the Company of a
Registration Statement on Form S-4 (the "Registration Statement") with the
Securities and Exchange Commission, covering up to 2,548,693 shares (the
"Shares") of common stock, par value $.01 per share, of the Company to be
issued and sold pursuant to the Amended and Restated Amalgamation Agreement
dated as of November 12, 1996 (the "Amalgamation Agreement") by and among the
Company, AES China Generating Co. Ltd., a Bermuda company ("AES Chigen"), and
AES Acquisition Co. Ltd., a Bermuda company ("AES Sub").
In rendering this opinion, we have examined the Company's
Certificate of Incorporation and By-laws, each as amended to date, minutes of
proceedings and consents of the Board of Directors of the Company, the form of
Company
<PAGE> 2
The AES Corporation -2- February 27, 1997
common stock certificate, and originals or copies of such documents,
instruments, records, and certificates of public officials and officers of the
Company as we have deemed necessary. In connection with such examination, we
have assumed the genuineness of all signatures and the authenticity of all
documents submitted to us as copies, and we have also made such other
investigations of fact and law as we have deemed relevant in connection with the
opinion set forth below. In rendering this opinion, we have relied upon the
accuracy of the certificates, documents, instruments, certificates, and records
we have examined as to the matters of fact covered thereby.
Based on the foregoing, we are of the opinion that, when the
Registration Statement becomes effective, the Shares, when issued in accordance
with the terms of the Amalgamation Agreement, will be duly and validly issued,
fully-paid and non-assessable.
We hereby consent to the use of our name in the Registration
Statement under the caption "Legal Matters" and we also hereby consent to the
filing of this opinion as an exhibit to the Registration Statement.
Sincerely,
CHADBOURNE & PARKE LLP
<PAGE> 1
Exhibit 8
[Letterhead of Chadbourne & Parke LLP]
February 27, 1997
The AES Corporation
1001 North 19th Street
Arlington, Virginia 22209
Dear Sirs:
We have acted as counsel to The AES Corporation ("AES") in
connection with the proposed amalgamation (the "Amalgamation") of AES
Acquisition Co. Ltd., a Bermuda corporation and a wholly-owned subsidiary of AES
("AES Sub") with and into AES China Generating Co. Ltd., a Bermuda corporation
("AES Chigen") upon the terms and subject to the conditions set forth in the
Amended and Restated Agreement and Plan of Amalgamation dated as of November 12,
1996 (the "Amalgamation Agreement").
We have assisted in the preparation of the section headed
"Material Tax Consequences - United States Federal Income Taxation" contained
in the Proxy Statement- Prospectus of AES (the "Proxy Statement-Prospectus")
filed as
<PAGE> 2
-2- February 27, 1997
part of the Registration Statement of AES on Form S-4
(the "Registration Statement").
In rendering our opinion we have examined and relied upon the
accuracy and completeness of the facts, information, covenants and
representations contained in originals or copies, certified or otherwise
identified to our satisfaction, of the Amalgamation Agreement, the Proxy
Statement-Prospectus and such other documents as we have deemed necessary or
appropriate as a basis for the opinion set forth below. We have assumed that the
Amalgamation will be consummated in accordance with the Amalgamation Agreement
and as described in the Proxy Statement-Prospectus.
In rendering our opinion, we have considered the applicable
provisions of the Internal Revenue Code of 1986, as amended, Treasury
Regulations promulgated thereunder, pertinent judicial authorities, interpretive
rulings of the Internal Revenue Service and such other authorities as we have
considered relevant, in each case as in effect on the date hereof.
Based solely on the foregoing, we are of the opinion that the
material United States Federal income tax consequences of the Amalgamation are
as set forth under the heading "Material Tax Consequences - United States
Federal Income Taxation" in the Proxy Statement-Prospectus. The
<PAGE> 3
-3- February 27, 1997
United States Federal income tax consequences with respect to a particular
shareowner of AES Chigen may depend upon that shareowner's particular
circumstances and tax situation, and, therefore, the discussion under the
heading "Material Tax Consequences - United States Federal Income Taxation" in
the Proxy Statement-Prospectus may not address all Federal income tax issues
with respect to a particular shareowner.
Except as set forth above, we express no opinion as to the tax
consequences, whether Federal, state, local or foreign, of the Amalgamation or
of any transactions related thereto. We hereby consent to the filing of this
opinion with the Securities and Exchange Commission as an exhibit to the
Registration Statement and the reference to our firm under the heading
"Material Tax Consequences - United States Federal Income Taxation". In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.
Very truly yours,
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The AES Corporation on Form S-4 of our report dated February 20, 1996, except
for Note 14, as to which the date is May 30, 1996, appearing in Registration
Statement No. 333-01286 of The AES Corporation on Form S-3, as amended, and of
our report on the consolidated financial statement schedules dated February 20,
1996, appearing in the Annual Report on Form 10-K of The AES Corporation, for
the year ended December 31, 1995, and to the reference to us under the heading
"Experts" in the Proxy Statement/Prospectus, which is part of this Registration
Statement.
DELOITTE & TOUCHE LLP
Washington, D.C.
February 27, 1997
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The AES Corporation on Form S-4 of our report dated January 25, 1996,
incorporated by reference in the Annual Report on Form 10-K of AES China
Generating Co. Ltd. for the year ended November 30, 1995, and to the reference
to us under the heading "Experts" in the Proxy Statement/Prospectus, which is
part of this Registration Statement.
DELOITTE TOUCHE TOHMATSU
Hong Kong
February 27, 1997
<PAGE> 1
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The AES Corporation on Form S-4 of our report (based on our audit which was
performed in accordance with auditing standards generally accepted in Brazil) on
the financial statements of LIGHT - Servicos de Eletricidade S.A. as of December
31, 1995 and 1994 and for the years then ended, prepared in conformity with
accounting principles generally accepted in Brazil, dated January 24, 1996,
except for note 27, for which the date is May 1996 (which expresses an
unqualified opinion and includes a reference to other auditors who audited the
financial statements of Eletropaulo Eletricidade de Sao Paulo S.A. as of and for
the years ended December 31, 1995 and 1994, whose report thereon has been
furnished to us, and our opinion on LIGHT - Servicos de Eletricidade S.A.,
insofar as it relates to the amounts included for such company, is based solely
on the report of such other auditors) appearing in the Current Report on Form
8-K of The AES Corporation dated May 30, 1996, and to the reference to us under
the heading "Experts" in the Proxy Statement/Prospectus, which is part of this
Registration Statement.
DELOITTE TOUCHE TOHMATSU
Auditores Independentes
Rio de Janeiro, Brazil
February 27, 1997
<PAGE> 1
Exhibit 23.5
[Merrill Lynch letterhead]
Investment Banking Group
World Financial Center
North Tower
New York, New York 10281-1324
February 25, 1997
We hereby consent to the use of our opinion letter dated as of November
12, 1996 to the Special Committee of the Board of Directors of AES China
Generating Co. Ltd. (the "Company") included as Appendix B to the Proxy
Statement/Prospectus which forms a part of the Registration Statement on Form
S-4 relating to the proposed amalgamation of the Company with a wholly owned
subsidiary of The AES Corporation and to the references to such opinion in such
Proxy Statement/Prospectus under the caption "Opinion of the Special Committee's
Financial Advisor." In giving such consent, we do not admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we thereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
The undersigned, acting in the capacity or capacities stated
opposite their respective names below, hereby severally constitute and appoint
DENNIS W. BAKKE, BARRY J. SHARP and WILLIAM R. LURASCHI and each of them
severally, the attorneys-in-fact of the undersigned with full power to them and
each of them to approve and sign for and in the name of the undersigned in the
capacities indicated below the Registration Statement on Form S-4 (the
"Registration Statement") relating to shares of Common Stock, par value $.01 per
share (the "Common Stock"), of The AES Corporation, a Delaware corporation
("AES"), issuable to the holders of shares of Class A Common Stock, par value
$.01 per share, of AES China Generating Co. Ltd., a Bermuda company ("Chigen"),
in connection with the merger of a special purpose subsidiary of AES with and
into Chigen, any and all exhibits, amendments and supplements thereto, including
any and all new or revised prospectuses relating thereto or supplements thereto
and including any additional registration statements relating to the same
offering of the Common Stock as the Registration Statement that are filed
pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and any other
documents necessary, appropriate or desirable in connection therewith, and to
file the same and to do and perform each and every act and thing necessary,
appropriate or desirable in connection therewith.
This Power of Attorney may be executed in counterparts, which
together shall constitute one and the same instrument.
<TABLE>
<CAPTION>
Signature Position with Date
--------- ------------- ----
AES
---
<S> <C> <C>
/s/ Roger W. Sant Chairman of the November 11, 1996
- --------------------------- Board and Director
Roger W. Sant
/s/ Dennis W. Bakke President, Chief November 11, 1996
- --------------------------- Executive Officer and
Dennis W. Bakke Director (Principal
Executive Officer)
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
- --------------------------- Director November , 1996
Vicki-Ann Assevero
/s/ Alice F. Emerson Director November 11, 1996
- ---------------------------
Dr. Alice F. Emerson
/s/ Robert F. Hemphill, Jr. Director November 11, 1996
- ---------------------------
Robert F. Hemphill, Jr.
/s/ Frank Jungers Director November 11, 1996
- ---------------------------
Frank Jungers
/s/ Henry R. Linden Director November 11, 1996
- ---------------------------
Dr. Henry R. Linden
/s/ Russell E. Train Director November 11, 1996
- ---------------------------
Russell E. Train
/s/ Thomas I. Unterberg Director November 11, 1996
- ---------------------------
Thomas I. Unterberg
/s/ Robert H. Waterman, Jr. Director November 11, 1996
- ---------------------------
Robert H. Waterman, Jr.
/s/ Barry J. Sharp Vice President November 11, 1996
- --------------------------- and Chief
Barry J. Sharp Financial
Officer
(Principal
Financial and
Accounting
Officer)
</TABLE>
2
<PAGE> 1
PROXY
AES CHINA
GENERATING CO. LTD.
Special Class Meeting of the Holders of Class A Common Stock to be held Monday,
March 31, 1997 at 1 p.m. and Special General Meeting of Shareholders,
immediately following the Special Class Meeting, at 1001 North 19th Street,
Arlington, Virginia 22209.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Mr. Jeffery A. Safford, Mr. Paul T. Hanrahan and Mr. Edward C.
Hall, III, or any of them as proxies, with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as designated below, all
the shares of Class A Common Stock of AES China Generating Co. Ltd. held of
record by the undersigned at close of business on February 18, 1997 at the
Special Class Meeting of the Holders of Class A Common Stock and the Special
General Meeting of Shareholders, each to be held on March 24, 1997, and at any
adjournments and postponements thereof.
<TABLE>
<S> <C>
PROPOSAL at the Special Class Meeting and the Special General Meeting: To adopt and approve the Amended and Restated
Amalgamation Agreement pursuant to which AES Acquisition
Co. Ltd. will amalgamate with and into AES China
Generating Co. Ltd.
</TABLE>
The Board of Directors recommends a vote FOR the Proposal at the Special Class
Meeting of the Holders of Class A Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors recommends a vote FOR the Proposal at the Special General
Meeting of Shareholders.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on other side)
<PAGE> 2
(continued from other side)
The submission of this proxy if properly executed revokes all other proxies.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL
ABOVE AT EACH OF THE MEETINGS.
Receipt of the Notice of Special Class Meeting of Holders of Class A Common
Stock and Special General Meeting of Shareholders and accompanying Proxy
Statement/Prospectus is hereby acknowledged.
DATE: , 1997
------------------------------
------------------------------------------
(Signature of Shareholder)
Please sign exactly as your
name appears at left.
PLEASE BE CERTAIN YOU DATE THIS PROXY AT THE TIME YOU SIGN IT.
