Filed pursuant to Rule 424(b)(2) under the Securities Act of 1933, as amended
relating to Registration Statement No. 333-15487
Prospectus Supplement
(To Prospectus Dated December 4, 1996)
4,113,164 SHARES
THE AES CORPORATION
COMMON STOCK
($.01 PAR VALUE)
All of the 4,113,164 shares of Common Stock, $.01 par value (the "Common
Stock"), of The AES Corporation (the "Company"), offered hereby are being sold
by the Company. The Common Stock is listed on the New York Stock Exchange under
the symbol "AES." On July 16, 1997, the last reported sale price for the Common
Stock, as reported on the New York Stock Exchange Composite Tape, was $82.75 per
share. See "Common Stock Price Ranges and Dividends."
SEE "RISK FACTORS" ON PAGE 5 OF THE ACCOMPANYING PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE
COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
Per Share ...... $ 79.750 $ 1.951 $ 77.799
Total(3) ....... $ 328,024,829 $ 8,024,783 $ 320,000,046
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1993, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $250,000.
(3) The Company has granted the Underwriter an option, exercisable within 30
days after the date of this Prospectus Supplement, to purchase up to an
additional 616,974 shares of Common Stock, on the same terms as set forth
above, solely to cover over-allotments, if any. If such option is exercised
in full, the Price to Public, Underwriting Discount and Proceeds to Company
will be $377,228,505, $9,228,499 and $368,000,006, respectively. See
"Underwriting."
The shares of Common Stock are offered subject to receipt and acceptance by the
Underwriter, to prior sale and to the Underwriter's right to reject any order in
whole or in part and to withdraw, cancel or modify the offer without notice. It
is expected that delivery of the shares of Common Stock will be made at the
office of Salomon Brothers Inc, Seven World Trade Center, New York, New York, or
through the facilities of The Depository Trust Company, on or about July 22,
1997.
- ----------------------------
SALOMON BROTHERS INC
-----------------------------------------------------------------------
The date of this Prospectus Supplement is July 17, 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING AND SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION OF
A PENALTY BID. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements under the captions "The Company," "Risk Factors,"
"Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" included or incorporated by reference in the accompanying Prospectus
and elsewhere in this Prospectus Supplement and the accompanying Prospectus
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 ("Reform Act"). Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance and achievements of AES, or
industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among other things, the following factors, as
well as those factors discussed in the section entitled "Risk Factors" in the
accompanying Prospectus and those discussed elsewhere in AES's filings with the
Securities and Exchange Commission (the "Commission"), including its Current
Report on Form 8-K dated February 26, 1996: changes in company-wide operation
and availability compared to AES's historical performance; changes in AES's
historical operating cost structure, including changes in various costs and
expenses; political and economic considerations in certain non-U.S. countries
where AES is conducting or is seeking to conduct business; restrictions on
foreign currency convertibility and remittance abroad, exchange rate
fluctuations and developing legal systems; regulation and restrictions;
legislation intended to promote competition in U.S. and non-U.S. electricity
markets; tariffs; governmental approval processes; environmental matters;
construction, operating and fuel risks; load growth, dispatch and transmission
constraints; conflict of interest of contracting parties; and adherence to the
AES principles; and other factors referenced in this Prospectus Supplement and
in the accompanying Prospectus. See "Risk Factors" in the accompanying
Prospectus.
USE OF PROCEEDS
The Company intends to use the estimated $319.8 million ($367.8 million if
the Underwriter's over-allotment option is exercised in full) net proceeds from
this offering to repay pro rata amounts outstanding under a $250 million bridge
loan (the "CEMIG Bridge") to AES CEMIG Funding Corporation, a wholly-owned
subsidiary of AES, and a $200 million bridge loan (the "ESEBA Bridge") to AESEBA
Funding Corporation, a wholly-owned subsidiary of AES.
The ESEBA Bridge and the CEMIG Bridge mature in May 1998 or in the case of
the ESEBA Bridge, earlier if AES sells its interest in Hazelwood, a 1,600
megawatt coal-fired plant in Victoria, Australia. The interest rates on both the
ESEBA Bridge and the CEMIG Bridge are currently LIBOR plus 2.5% and will
increase by 1.0% each month beginning January 1, 1998. The ESEBA Bridge and the
CEMIG Bridge were incurred to finance a portion of the cost of the Company's
acquisition of its interest in Companhia Energetica de Minas Gerais and in
Empresa Social de Energia de Buenos Aires S.A., respectively.
S-2
<PAGE>
COMMON STOCK PRICE RANGES AND DIVIDENDS
The Common Stock began trading on the New York Stock Exchange ("NYSE") on
October 16, 1996 under the symbol "AES." Prior to that date, the Common Stock
had been quoted on the NASDAQ National Market System ("NASDAQ/NMS") under the
symbol "AESC." The following table sets forth for the periods indicated the high
and low sale prices for the Common Stock as reported on the NYSE Composite Tape
and by NASDAQ/NMS.
HIGH LOW
---------- ---------
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 .............................. 50 1/8 39 1/4
1997
First Quarter .............................. 68 1/4 44 1/2
Second Quarter (through July 16, 1997) ...... 83 3/8 55 1/2
No cash dividends have been paid on the Common Stock since December 22,
1993 in order to provide capital for the Company's equity investments in
projects.
The Company's ability to declare and pay dividends is dependent, among
other things, on the ability of its project subsidiaries to declare and pay
dividends (and otherwise distribute cash) to it, the Company's ability to
service its parent company debt and the Company's ability to meet certain
criteria for paying dividends under its $425 million revolving credit facility
(the "Revolver") and under certain outstanding indebtedness.
The ability of the Company's subsidiaries to declare and pay dividends and
otherwise distribute cash to the Company is subject to certain limitations in
the project loans and other documents entered into by such project subsidiaries.
Such limitations permit the payment of dividends out of current cash flow for
quarterly, semi-annual or annual periods only at the end of such periods and
only after payment of principal and interest on project loans due at the end of
such periods.
Cash dividend payments on the Common Stock are limited under the Revolver
to a certain percentage of cash flow. The indentures relating to the Company's
existing senior subordinated notes preclude the payment of cash dividends if at
the time of such payment or after giving effect thereto an event of default (as
defined), or an event that, after the giving of notice or lapse of time or both,
would become an event of default, shall have occurred and be continuing, if
certain fixed charge coverage ratios are not met or if the payment of such
dividends, together with other restricted payments, would exceed certain limits.
Under the Amended and Restated Certificate of Incorporation of the Company,
the authorized capital stock of the Company consists of 500,000,000 shares of
Common Stock, par value $.01 per share, and 1,000,000 shares of Preferred Stock,
no par value.
S-3
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR
NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
beneficial owner thereof that is a "Non-U.S. Holder." A "Non-U.S. Holder" is a
person or entity that, for U.S. federal income tax purposes, is a non-resident
alien individual, a foreign corporation or a foreign estate or trust.
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), and administrative interpretations as of the date hereof, all of
which are subject to change, including changes with retroactive effect. This
discussion does not address all aspects of U.S. federal income and estate
taxation that may be relevant to Non-U.S. Holders (including Non-U.S. Holders
who are pass-through entities) in light of their particular circumstances and
does not address any tax consequences arising under the laws of any state, local
or foreign jurisdiction. Prospective holders should consult their tax advisors
with respect to the particular tax consequences to them of owning and disposing
of Common Stock, including the consequences under the laws of any state, local
or foreign jurisdiction.
DIVIDENDS
Subject to the discussion below, dividends paid to a Non-U.S. Holder of
Common Stock generally will be subject to withholding tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. For purposes
of determining whether tax is to be withheld at a 30% rate or at a reduced rate
as specified by an income tax treaty, the Company ordinarily will presume that
dividends paid to an address in a foreign country are paid to a resident of such
country absent knowledge that such presumption is not warranted.
Under proposed U.S. Treasury Regulations issued on April 15, 1996 (the
"Proposed Regulations"), in order to obtain a reduced rate of withholding under
a treaty, a Non-U.S. Holder would generally be required to provide an Internal
Revenue Service Form W-8 certifying such Non-U.S. Holder's entitlement to
benefits under a treaty. The Proposed Regulations would also provide, among
others, special rules to determine whether, for purposes of determining the
applicability of a tax treaty, dividends paid to a Non-U.S. Holder that is an
entity should be treated as paid to the entity or those holding an interest in
that entity.
There will be no withholding tax on dividends paid to a Non-U.S. Holder
that are effectively connected with the Non-U.S. Holder's conduct of a trade or
business within the U.S. if a Form 4224 stating that the dividends are so
connected is filed with the Company or its paying agent. Instead, the
effectively connected dividends will be subject to regular U.S. income tax in
the same manner as if the Non-U.S. Holder were a U.S. resident unless a specific
treaty exemption applies. A non-U.S. corporation receiving effectively connected
dividends may also be subject to an additional "branch profits tax" which is
imposed, under certain circumstances, at a rate of 30% (or such lower rate as
may be specified by an applicable treaty) of the non-U.S. corporation's
effectively connected earnings and profits, subject to certain adjustments.
Generally, the Company must report to the U.S. Internal Revenue Service the
amount of dividends paid, the name and address of the recipient, and the amount,
if any, of tax withheld. A similar report is sent to the holder. Pursuant to tax
treaties or certain other agreements, the U.S. Internal Revenue Service may make
its reports available to tax authorities in the recipient's country of
residence.
Dividends paid to a Non-U.S. Holder at an address within the U.S. may be
subject to backup withholding imposed at a rate of 31% if the Non-U.S. Holder
fails to establish that it is entitled to an exemption or to provide a correct
taxpayer identification number and certain other information to the Company or
its paying agent. Under the Proposed Regulations, regardless of its address the
Non-U.S. Holder may be subject to backup withholding imposed at a rate of 31%
with respect to the dividends if the Non-U.S. Holder fails to establish that it
is entitled to an exemption or to provide a correct taxpayer identification
number and certain other information to the Company or its paying agent.
S-4
<PAGE>
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder will generally not be subject to U.S. federal income tax
with respect to gain realized on a sale or other disposition of Common Stock
unless (i) the gain is effectively connected with a trade or business of such
holder in the U.S., (ii) in the case of certain Non-U.S. Holders who are
non-resident alien individuals and who hold the Common Stock as a capital asset,
such individuals are present in the U.S. for 183 or more days in the taxable
year of the disposition, (iii) the Non-U.S. Holder is subject to tax pursuant to
the provisions of the Code regarding the taxation of U.S. expatriates, or (iv)
the Company is or has been a "U.S. real property holding corporation" within the
meaning of Section 897(c)(2) of the Code at any time within the shorter of the
five-year period preceding such disposition or such holder's holding period.
The Company believes that it is unlikely that it is, or will be treated as,
a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code. Even if the Company is treated as a United States
real property holding corporation, gain realized by a Non-U.S. Holder on a
disposition of the Common Stock will not be subject to a U.S. federal income tax
so long as (i) such Non-U.S. Holder is deemed to have beneficially owned less
than or equal to 5% of the Common Stock and (ii) the Common Stock is currently,
and will be at the time of disposition, "regularly traded" on an established
securities market (within the meaning of Section 897(c)(3) of the Code and the
temporary Treasury Regulations thereunder). There can be no assurance that the
Common Stock qualifies or will continue to qualify as "regularly traded" on an
established securities market.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING ON DISPOSITION OF
COMMON STOCK
Under current U.S. federal income tax law, information reporting and
backup withholding imposed at a rate of 31% will apply to the proceeds of a
disposition of Common Stock effected by or through a U.S. office of a broker
unless the disposing holder certifies as to its non-U.S. status or otherwise
establishes an exemption. Generally, U.S. information reporting and backup
withholding will not apply to a payment of disposition proceeds where the
transaction is effected outside the U.S. through a non-U.S. office of a
non-U.S. broker. However, U.S. information reporting requirements (but not
backup withholding) will apply to a payment of disposition proceeds where the
transaction is effected outside the U.S. by or through an office outside the
U.S. of a broker that is either (i) a U.S. person, (ii) a foreign person which
derives 50% or more of its gross income for certain periods from the conduct of
a trade or business in the U.S. or (iii) a "controlled foreign corporation" for
U.S. federal income tax purposes, unless the broker has documentary evidence
that the holder is a Non-U.S. Holder and that certain conditions are met or
that the holder otherwise establishes an exemption.
The Proposed Regulations would, if adopted, alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations would provide
certain presumptions under which a Non-U.S. Holder would be subject to backup
withholding and information reporting unless the Company receives certification
from the holder of non-U.S. status.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.
FEDERAL ESTATE TAX
An individual Non-U.S. Holder who is treated as the owner of, or has made
certain lifetime transfers of, an interest in the Common Stock will be required
to include the value thereof in his gross estate for U.S. federal estate tax
purposes, and may be subject to U.S. federal estate tax unless an applicable
estate tax treaty provides otherwise.
S-5
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to Salomon
Brothers Inc (the "Underwriter"), and the Underwriter has agreed to purchase
from the Company, 4,113,164 shares of Common Stock. In the Underwriting
Agreement, the Underwriter has agreed, subject to the terms and conditions set
forth therein, to purchase all of the shares of the Common Stock offered hereby
if any are purchased.
The Underwriter has advised the Company that it proposes initially to offer
such shares of Common Stock to the public at the price to public set forth on
the cover page of this Prospectus Supplement. After the initial public offering,
the public offering price may be changed.
Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriter an option, exercisable for 30 days from the date hereof, to purchase
up to an additional 616,974 shares of Common Stock at the price to public less
the underwriting discount set forth on the cover page hereof. The Underwriter
may exercise such option to purchase solely for the purpose of covering
over-allotments, if any, made in connection with the offering.
The Company and certain of the Company's directors and executive officers
are agreeing that, with certain exceptions (including issuances by the Company
as consideration for acquisitions), without the prior written consent of Salomon
Brothers Inc, they will not, directly or indirectly, offer to sell, contract to
sell, sell or otherwise dispose of, or announce the offering of any shares of
Common Stock or securities convertible into or exchangeable or exercisable for
shares of Common Stock, for a period of 90 days after the date of the
Underwriting Agreement.
The Company has agreed to indemnify the Underwriter against, or contribute
to payments that the Underwriter may be required to make in respect of, certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Underwriter may engage in stabilizing transactions, syndicate covering
transactions and penalty bids in accordance with Rule 104 under the Securities
Exchange Act of 1934, as amended. Stabilizing transactions permit bids to
purchase the Common Stock so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Common Stock in the open market following completion of this offering to cover
all or a portion of a syndicate short position created by the Underwriter
selling more shares of Common Stock in connection with this offering than it is
committed to purchase from the Selling Stockholder. In addition, the Underwriter
may impose "penalty bids" under contractual arrangements between the Underwriter
and dealers participating in this offering whereby they may reclaim from a
dealer participating in the offering the selling concession with respect to
shares of Common Stock that are distributed in this offering but subsequently
purchased for the account of the Underwriter in the open market. Such
stabilizing transactions, syndicate covering transactions and penalty bids may
result in the maintenance of the price of the Common Stock at a level above that
which might otherwise prevail in the open market. None of the transactions
described in this paragraph is required and, if any are undertaken, they may be
discontinued at any time.
From time to time, in the ordinary course of their respective businesses,
the Underwriter and its affiliates have engaged and may engage in commercial and
investment banking transactions with the Company and its affiliates.
S-6
<PAGE>
LEGAL MATTERS
The validity of the Shares offered hereby and certain matters relating
thereto and certain U.S. federal income taxation matters will be passed upon by
Davis Polk & Wardwell, New York, New York. Certain legal matters will be passed
upon for the Underwriter by Cahill Gordon & Reindel (a partnership including a
professional corporation), New York, New York.
EXPERTS
The consolidated financial statements incorporated by reference in this
Prospectus Supplement from the Company's Current Report on Form 8-K, dated July
3, 1997, as of December 31, 1996 and 1995 and for the years ended December 31,
1996, 1995 and 1994, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is included therein, and has been so
included and incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The financial statements of Companhia Energetica de Minas Gerais
incorporated by reference in this Prospectus Supplement from Form 8-K of The AES
Corporation dated July 16, 1997 for the years ended December 31, 1996 and 1995
have been audited by Price Waterhouse, Belo Horizonte, MG, Brazil, independent
auditors.
In addition, see "Experts" in the accompanying Prospectus.
S-7
<PAGE>
(This page intentionally left blank)
<PAGE>
Prospectus
[LOGO]
THE AES CORPORATION
$750,000,000
COMMON STOCK, PREFERRED STOCK, DEBT SECURITIES, STOCK PURCHASE CONTRACTS AND
STOCK PURCHASE UNITS
The AES Corporation (the "Company" or "AES") may from time to time offer,
together or separately, (i) shares of its common stock, par value $.01 per share
(the "Common Stock"), (ii) shares of its preferred stock, no par value (the
"Preferred Stock"), (iii) unsecured senior debt securities (the "Senior Debt
Securities"), (iv) unsecured senior subordinated debt securities (the "Senior
Subordinated Debt Securities"), (v) unsecured junior subordinated securities
(the "Junior Subordinated Debt Securities"), (vi) Stock Purchase Contracts to
purchase Common Stock ("Stock Purchase Contracts") and (vii) Stock Purchase
Units ("Stock Purchase Units"), each representing ownership of a Stock Purchase
Contract and Debt Securities or debt obligations of third parties, including
U.S. Treasury securities, securing the holder's obligation to purchase Common
Stock under the Stock Purchase Contract, in each case in one or more series and
in amounts, at prices and on terms to be determined at or prior to the time of
sale. The Senior Debt Securities, Senior Subordinated Debt Securities and Junior
Subordinated Securities are collectively referred to herein as the "Debt
Securities." The Debt Securities, Common Stock, Preferred Stock, Stock Purchase
Contracts and Stock Purchase Units are collectively referred to herein as the
"Securities."
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------
The Common Stock and Preferred Stock offered pursuant to this Prospectus may be
issued in one or more series or issuances in U.S. dollars or in one or more
foreign currencies, currency units or composite securities to be determined at
or prior to the time of any offering. The Stock Purchase Contracts and the Stock
Purchase Units offered pursuant to this Prospectus may be issued in one or more
series and amounts, at prices and on terms to be determined at or prior to the
time of any such offering. The Debt Securities offered pursuant to this
Prospectus may consist of debentures, notes or other evidences of indebtedness
in one or more series and in amounts, at prices and on terms to be determined at
or prior to the time of any such offering. The Company's obligations under the
Senior Debt Securities will rank pari passu with all unsecured and
unsubordinated debt (as defined herein) of the Company. The Company's
obligations under the Senior Subordinated Debt Securities will be subordinated
in right of payment to the prior payment in full of all Senior Debt (as defined
herein). The Company's obligations under the Junior Subordinated Debt Securities
will be subordinated in right of payment to the prior payment in full of all
Senior and Senior Subordinated Debt (as defined herein) of the Company. See
"Description of Debt Securities."
By separate prospectus, the form of which is included in the Registration
Statement of which this Prospectus forms a part, two Delaware statutory business
trusts (the "AES Trusts"), which are wholly owned subsidiaries of the Company,
may from time to time severally offer preferred securities guaranteed by the
Company to the extent set forth therein and the Company may offer from time to
time junior subordinated debt securities either directly or to an AES Trust. The
aggregate public offering price of the securities to be offered by the
Prospectus and such other prospectus shall not exceed $750,000,000 (or its
equivalent in one or more foreign currencies, currency units or composite
currencies).
Specific terms of the Securities in respect of which this Prospectus is being
delivered (the "Offered Securities") will be set forth in a Prospectus
Supplement with respect to such Offered Securities, which Prospectus Supplement
will describe, without limitation and where applicable, the following: (i) in
the case of Common Stock, the specific designation, number of shares, purchase
price and the rights and privileges thereof, together with any qualifications or
restrictions thereon and any listing on a securities exchange; (ii) in the case
of Preferred Stock, the specific designation, number of shares, purchase price
and the rights, preferences and privileges thereof and any qualifications or
restrictions thereon (including dividends, liquidation value, voting rights,
terms for the redemption, conversion or exchange thereof and any other specific
terms of the Preferred Stock) and any listing on a securities exchange; (iii) in
the case of Debt Securities, the specific designation, aggregate principal
amount, authorized denomination, maturity, premium, if any, exchangeability,
redemption, conversion, prepayment or sinking fund provisions, if any, interest
rate (which may be fixed or variable), if any, method, if any, of calculating
interest payments and dates for payment thereof, dates on which premium, if any,
will be payable, the right of the Company, if any, to defer payment of interest
on the Debt Securities and the maximum length of such deferral period, the
initial public offering price, any listing on a securities exchange and other
specific terms of the offering; (iv) in the case of Stock Purchase Contracts,
the designation and number of shares of Common Stock issuable thereunder, the
purchase price of the Common Stock, the date or dates on which the Common Stock
is required to be purchased by the holders of the Stock Purchase Contracts, any
periodic payments required to be made by the Company to the holders of the Stock
Purchase Contract or vice versa, and the terms of the offering and sale thereof,
and (v) in the case of Stock Purchase Units, the specific terms of the Stock
Purchase Contracts and any Debt Securities or debt obligations of third parties
securing the holder's obligation to purchase the Common Stock under the Stock
Purchase Contracts, and the terms of the offering and sale thereof. Unless
otherwise indicated in the Prospectus Supplement, the Company does not intend to
list any of the Securities other than the Common Stock and the Preferred Stock
on a national securities exchange. Any Prospectus Supplement relating to any
series of Offered Securities will contain information concerning certain United
States federal income tax considerations, if applicable, to the Offered
Securities.
The Offered Securities may be offered directly, through agents designated from
time to time, through dealers or through underwriters. Such agents or
underwriters may act alone or with other agents or underwriters. See "Plan of
Distribution." Any such agents, dealers or underwriters will be set forth in a
Prospectus Supplement. If an agent of the Company, or a dealer or underwriter is
involved in the offering of the Offered Securities, the agent's commission,
dealer's purchase price, underwriter's discount and net proceeds to the Company,
as the case may be, will be set forth in, or may be calculated from, the
Prospectus Supplement. Any underwriters, dealers or agents participating in the
offering may be deemed "underwriters" within the meaning of the Securities Act
of 1933.
This Prospectus may not be used to consummate sales of Offered Securities unless
accompanied by a Prospectus Supplement.
The date of this Prospectus is December 4, 1996.
<PAGE>
AVAILABLE INFORMATION
AES is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy and information statements and other information with the
Securities and Exchange Commission (the "Commission"). These reports, proxy and
information statements and other information may be inspected without charge and
copied at the public reference facilities maintained by the Commission at its
principal offices at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's regional offices located at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such materials also can
be obtained at prescribed rates from the Public Reference Section of the
Commission at the principal offices of the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. Such material may also be inspected
at the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Securities offered hereby (including all amendments and
supplements thereto, the "Registration Statement"). This Prospectus, which forms
a part of the Registration Statement, does not contain all the information set
forth in the Registration Statement and the exhibits filed thereto, certain
parts of which have been omitted in accordance with the rules and regulations of
the Commission. Statements contained herein concerning the provisions of any
documents are not necessarily complete and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference. The Registration Statement and the exhibits thereto
can be inspected and copied at the public reference facilities and regional and
other offices referred to above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates in this Prospectus by reference thereto and
makes a part hereof the following documents, heretofore filed with the
Commission pursuant to the Exchange Act: (i) the Company's Annual Report on Form
10-K for the year ended December 31, 1995; (ii) the Company's Quarterly Report
on Form 10-Q for the quarters ended September 30, 1996, June 30, 1996 and March
31, 1996; (iii) the Company's Current Reports on Form 8-K filed on November 13,
1996, July 1, 1996, June 12, 1996, May 30, 1996, February 26, 1996 and February
6, 1996; (iv) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A (File No. 0-19281) filed on October 10, 1996
and (v) the Company's Registration Statement on Form S-3 filed on June 12, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
termination of the offering being made hereby shall be deemed to be incorporated
in this Prospectus by reference and to be a part hereof from the respective
dates of the filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus and the
Registration Statement of which it is a part to the extent that a statement
contained herein or in any subsequently filed document which also is, or is
deemed to be, incorporated by reference herein, modifies or supersedes such
earlier statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus or
such Registration Statement.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon written or oral request
of any such person, a copy of any and all of the documents referred to above
which have been or may be incorporated in this Prospectus by reference, other
than exhibits to such documents which are not specifically incorporated by
reference into such documents. Requests for such copies should be directed to
William R. Luraschi, General Counsel and Secretary, The AES Corporation, 1001
North 19th Street, Arlington, Virginia 22209, telephone (703) 522-1315.
2
<PAGE>
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement,
proceeds from the sale of the Offered Securities will be used by the Company for
general corporate purposes and initially may be temporarily invested in
short-term securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ --------------
1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges ...... 1.31 1.37 1.63 2.08 2.18 2.04
</TABLE>
For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before income taxes and
minority interest, plus fixed charges, less capitalized interest, less excess of
earnings over dividends of less-than-fifty-percent-owned companies. Fixed
charges consist of interest (including capitalized interest) on all
indebtedness, amortization of debt discount and expense and that portion of
rental expense which the Company believes to be representative of an interest
factor. A statement setting forth the computation of the above ratios is on file
as an exhibit to the Registration Statement of which this Prospectus is a part.
During the period from January 1, 1991 until September 30, 1996, no shares
of Preferred Stock were issued or outstanding, and during that period the
Company did not pay any Preferred Stock dividends.
3
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THE COMPANY
With a presence in over 35 countries, The AES Corporation is a global power
company committed to supplying electricity to customers world-wide in a socially
responsible way. The Company, 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 independent power companies, based on
net equity ownership of generating capacity (in megawatts) in operation or under
construction.
Over the last six years, the Company has experienced significant growth.
This growth has resulted primarily from the development and construction of new
plants ("greenfield development") and also from the acquisition of existing
plants, primarily through competitively bid privatization initiatives outside
the United States.
In part, the Company'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 the Company's strategy include:
o Supplying energy to customers at the lowest cost possible, taking into
account factors such as reliability and environmental performance.
o Constructing or acquiring projects of a relatively large size
(generally larger than 100 megawatts).
o Entering into power sales contracts with electric utilities or other
customers with credit strength.
The Company also strives for operating excellence as a key element of its
strategy, which it believes it accomplishes by minimizing organizational layers
and maximizing company-wide participation in decision-making. AES has attempted
to create an operating environment that results in safe, clean and reliable
electricity generation. Because of this emphasis, the Company prefers to operate
all facilities which it develops or acquires; however, there can be no assurance
that the Company will have operating control of all of its facilities in the
future.
The Company, a corporation organized under the laws of Delaware, was formed
in 1981. The principal office of the Company is located at 1001 North 19th
Street, Arlington, Virginia 22209, and its telephone number is (703) 522-1315.
4
<PAGE>
RISK FACTORS
Purchasers of the Securities should read this entire Prospectus carefully.
Ownership of the Securities involves certain risks. The following factors should
be considered carefully in evaluating AES and its business before purchasing the
Securities offered by this Prospectus.
Leverage and Subordination.
The Company and its subsidiaries had approximately $2.1 billion of
outstanding indebtedness at September 30, 1996. As a result of the Company's
level of debt, the Company might be significantly limited in its ability to meet
its debt service obligations, to finance the acquisition and development of
additional projects, to compete effectively or to operate successfully under
adverse economic conditions. As of September 30, 1996, the Company had a
consolidated ratio of total debt to total book capitalization (including current
debt) of approximately 75%.
The Senior Subordinated Debt Securities will be subordinated to all Senior
Debt, including, but not limited to, the amounts outstanding under the Company's
current $425 million credit facility. The Junior Subordinated Debt Securities
will be subordinated to all Senior and Senior Subordinated Debt of the Company,
including, but not limited to, the amounts outstanding under the Company's
current $425 million credit facility. As of September 30, 1996, the Company had
approximately $331 million in aggregate principal amount of Senior Debt and $656
million in aggregate principal amount of Senior and Senior Subordinated Debt.
Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, receivership, reorganization, assignment
for the benefit of creditors, marshaling of assets and liabilities or any
bankruptcy, insolvency or similar proceedings of the Company, the holders of
Senior Debt will first be entitled to receive payment in full of all amounts due
or to become due under all Senior Debt before the holders of the Senior
Subordinated Debt Securities will be entitled to receive any payment in respect
of the principal of, premium, if any, or interest on such Senior Subordinated
Debt Securities and holders of Senior and Senior Subordinated Debt will first be
entitled to receive payment in full of all amounts due or to become due under
all Senior and Senior Subordinated Debt before the holders of the Junior
Subordinated Debt Securities will be entitled to receive any payment in respect
of the principal of, premium, if any, or interest on such Junior Subordinated
Debt Securities. No payments on account of principal, premium, if any, or
interest in respect of the Senior Subordinated Debt Securities or Junior
Subordinated Debt Securities may be made if there shall have occurred and be
continuing a default in any payment under any Senior Debt or Senior and Senior
Subordinated Debt, respectively, or during certain periods when an event of
default under certain Senior Debt or Senior and Senior Subordinated Debt,
respectively, permits the respective lenders thereunder to accelerate the
maturity thereof. See "Description of Debt Securities - Subordination of Senior
Subordinated Debt Securities" and "Description of Debt Securities Subordination
of Junior Subordinated Debt Securities."
The Debt Securities will be effectively subordinated to the indebtedness
and other obligations (including trade payables) of the Company's subsidiaries.
At September 30, 1996, the indebtedness and obligations of the Company's
subsidiaries, aggregated approximately $1.5 billion. The ability of the Company
to pay principal of, premium, if any, and interest on the Debt Securities will
be dependent upon the receipt of funds from its subsidiaries by way of
dividends, fees, interest, loans or otherwise. Most of the Company's
subsidiaries with interests in power generation facilities currently have in
place, and the Indentures for the Debt Securities will, under certain
circumstances, permit the Company's subsidiaries to enter into, arrangements
that restrict their ability to make distributions to the Company by way of
dividends, fees, interest, loans or otherwise. The Company's subsidiaries are
separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Debt Securities or to make any
funds available therefor, whether by dividends, loans or other payments, and do
not guarantee the payment of interest on or principal of the Debt Securities.
Any right of the Company to receive any assets of any of its subsidiaries upon
any liquidation, dissolution, winding up, receivership, reorganization,
assignment for the benefit of creditors, marshaling of assets and liabilities or
any bankruptcy, insolvency or similar proceedings of the Company (and the
consequent right of the holders of the Debt Securities to participate in the
distribution of, or to realize proceeds from, those
5
<PAGE>
assets) will be effectively subordinated to the claims of any such subsidiary's
creditors (including trade creditors and holders of debt issued by such
subsidiary). The Company currently conducts substantially all of its operations
through its subsidiaries.
Doing Business Outside the United States.
The Company's involvement in the development of new projects and the
acquisition of existing plants in locations outside the United States is
increasing and most of the Company's current development and acquisition
activities are for projects and plants outside the United States. The Company,
through subsidiaries, affiliates and joint ventures, has ownership interests in
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 People's
Republic of China; 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 the Company than historically have been the case.
In addition, financing in countries with less than investment grade sovereign
credit ratings may also require substantial participation by multilateral
financing agencies. There can be no assurance that such financing can be
obtained when needed.
The uncertainty of the legal environment in certain countries in which the
Company, its subsidiaries and its affiliates are or in the future may be
developing, constructing or operating could make it more difficult for the
Company to enforce its respective rights under agreements relating to such
projects. In addition, the laws and regulations of certain countries may limit
the Company's ability to hold a majority interest in some of the projects that
it may develop or acquire. International projects owned by the Company may, in
certain cases, be expropriated by applicable governments. Although AES may have
legal recourse in enforcing its rights under agreements and recovering damages
for breaches thereof, there can be no assurance that any such legal proceedings
will be successful.
Competition.
The global power production market is characterized by numerous strong and
capable competitors, many of whom may have extensive and diversified
developmental or operating experience (including both domestic and international
experience) and financial resources similar to or greater than the Company.
Further, in recent years, the power production industry has been characterized
by strong and increasing competition with respect to both obtaining power sales
agreements and acquiring existing power generation assets. In certain markets,
these factors have caused reductions in prices contained in new power sales
agreements and, in many cases, have caused higher acquisition prices for
existing assets through competitive bidding practices. The evolution of
competitive electricity markets and the development of highly efficient
gas-fired power plants have also caused, or are anticipated to cause, price
pressure in certain power markets where the Company sells or intends to sell
power. There can be no assurance that the foregoing competitive factors will not
have a material adverse effect on the Company.
Development Uncertainties.
The majority of the projects that AES develops are large and complex and
the completion of any such project is subject to substantial risks. Development
can require the Company to expend significant sums for preliminary engineering,
permitting, legal and other expenses in preparation for competitive bids which
the Company may not win or before it can be determined whether a project is
feasible, economically attractive or capable of being financed. Successful
development and construction is contin-
6
<PAGE>
gent upon, among other things, negotiation on terms satisfactory to the Company
of engineering, construction, fuel supply and power sales contracts with other
project participants, receipt of required governmental permits and consents and
timely implementation and satisfactory completion of construction. There can be
no assurance that AES will be able to obtain new power sales contracts, overcome
local opposition, if any, obtain the necessary site agreements, fuel supply and
ash disposal agreements, construction contracts, steam sales contracts, licenses
and certifications, environmental and other permits and financing commitments
necessary for the successful development of its projects. There can be no
assurance that development efforts on any particular project, or the Company's
efforts generally, will be successful. If these development efforts are not
successful, the Company may abandon a project under development. At the time of
abandonment, the Company would expense all capitalized development costs
incurred in connection therewith and could incur additional losses associated
with any related contingent liabilities. The future growth of the Company is
dependent, in part, upon the demand for significant amounts of additional
electrical generating capacity and its ability to obtain contracts to supply
portions of this capacity. Any material unremedied delay in, or unsatisfactory
completion of, construction of the Company's projects could, under certain
circumstances, have an adverse effect on the Company's ability to meet its
obligations, including the payment of principal of, premium, if any and interest
on Debt Securities. The Company also is faced with certain development
uncertainties arising out of doing business outside of the United States. See "-
Doing Business Outside the United States."
Uncertainty of Access to Capital for Future Projects.
Each of AES's projects under development and those independent power
facilities it may seek to acquire may require substantial capital investment.
Continued access to capital with acceptable terms is necessary to assure the
success of future projects and acquisitions. AES has substantially utilized
project financing loans to fund the capital expenditures associated with
constructing and acquiring its electric power plants and related assets. Project
financing borrowings have been substantially non- recourse to other subsidiaries
and affiliates and to AES as the parent company and are generally secured by the
capital stock, physical assets, contracts and cash flow of the related project
subsidiary or affiliate. The Company intends to continue to seek, where
possible, such non-recourse project financing in connection with the assets
which the Company or its affiliates may develop, construct or acquire. However,
depending on market conditions and the unique characteristics of individual
projects, such financing may not be available or the Company's traditional
providers of project financing, particularly multinational commercial banks, may
seek higher borrowing spreads and increased equity contributions.
Furthermore, because of the reluctance of commercial lending institutions
to provide non-recourse project financing (including financial guarantees) in
certain less developed economies, the Company, in such locations, has and will
continue to seek direct or indirect (through credit support or guarantees)
project financing from a limited number of multilateral or bilateral
international financial institutions or agencies. As a precondition to making
such project financing available, these institutions may also require
governmental guarantees of certain project and sovereign related risks.
Depending on the policies of specific governments, such guarantees may not be
offered and as a result, AES may determine that sufficient financing will
ultimately not be available to fund the related project.
In addition to the project financing loans, if available, AES provides a
portion, or in certain instances all, of the remaining long-term financing
required to fund development, construction, or acquisition. These investments
have generally taken the form of equity investments or loans, which are
subordinated to the project financing loans. The funds for these investments
have been provided by cash flows from operations and by the proceeds from
borrowings under the short-term credit facilities and issuances of senior
subordinated notes, convertible debentures and common stock of the Company.
The Company's ability to arrange for financing on either a fully recourse
or a substantially non- recourse basis and the costs of such capital are
dependent on numerous factors, including general economic and capital market
conditions, the availability of bank credit, investor confidence in the Company,
the continued success of current projects and provisions of tax and securities
laws which are conducive to raising capital in this manner. Should future access
to capital not be available, AES may decide not to
7
<PAGE>
build new plants or acquire existing facilities. While a decision not to build
new plants or acquire existing facilities would not affect the results of
operations of AES on its currently operating facilities or facilities under
construction, such a decision would affect the future growth of AES.
Dependence on Utility Customers and Certain Projects.
The nature of most of AES's power projects is such that each facility
generally relies on one power sales contract with a single customer for the
majority, if not all, of its revenues over the life of the power sales contract.
During 1995, four customers, including Connecticut Light & Power Company, a
subsidiary of Northeast Utilities, accounted for 73% of the Company's revenues.
The prolonged failure of any one utility customer to fulfill its contractual
obligations could have a substantial negative impact on AES's primary source of
revenues. AES has sought to reduce this risk in part by entering into power
sales contracts with utilities or other customers of strong credit quality and
by locating its plants in different geographic areas in order to mitigate the
effects of regional economic downturns.
Four of the Company's plants collectively represented approximately 61% of
AES's consolidated total assets at December 31, 1995 and generated approximately
80% of AES's consolidated total revenues for the year ended December 31, 1995.
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+.
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. The Company believes that, upon the occurrence of an event that would
threaten the QF status of one of its domestic plants, it would be able to react
in a manner that would avoid the loss of QF status (such as by replacing the
steam customer). In the event the Company were unable to avoid the loss of such
status for one of its plants, to avoid public utility holding company status,
AES could apply to the Federal Energy Regulatory Commission ("FERC") to obtain
status as an Exempt Wholesale Generator ("EWG"), or could restructure the
ownership of the project subsidiary. EWGs, however, are subject to broader
regulation by FERC and may be subject to state public utility commissions
regulation regarding non-rate matters. In addition, any restructuring of a
project subsidiary could result in, among other things, a reduced financial
interest in such subsidiary, which could result in a gain or loss on the sale of
the interest in such subsidiary, the removal of such subsidiary from the
consolidated income tax group or the consolidated financial statements of the
Company, or an increase or decrease in the results of operations of the Company.
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 compre-
8
<PAGE>
hensive legislation to restructure the electric utility industry, allow retail
competition, and deregulate most electric rates. The effect of any such repeal
cannot be predicted, although any such repeal could have a material adverse
effect on the Company.
Electric Utility Industry Restructuring Proposals.
The FERC and many state utility commissions are currently studying a number
of proposals to restructure the electric utility industry in the United States.
Such restructuring would permit utility customers to choose their utility
supplier in a competitive electric energy market. The FERC issued a final rule
in April 1996 which requires utilities to offer wholesale customers and
suppliers open access on utility transmission lines, on a comparable basis to
the utilities' own use of the lines. The final rule is subject to rehearing and
may become the subject of court litigation. Many utilities have already filed
"open access" tariffs. The utilities contend that they should recover from
departing customers their fixed costs that will be "stranded" by the ability of
their wholesale customers (and perhaps eventually, their retail customers) to
choose new electric power suppliers. The FERC final rule endorses the recovery
of legitimate and verifiable "stranded costs." These may include the costs
utilities are required to pay under many QF contracts which the utilities view
as excessive when compared with current market prices. Many utilities are
therefore seeking ways to lower these contract prices or rescind the contracts
altogether, out of concern that their shareholders will be required to bear all
or part of such "stranded" costs. Some utilities have engaged in litigation
against QFs to achieve these ends.
In addition, future United States electric rates may be deregulated in a
restructured United States electric utility industry and increased competition
may result in lower rates and less profit for United States electricity sellers.
Falling electricity prices and uncertainty as to the future structure of the
industry is inhibiting United States utilities from entering into long-term
power purchase contracts. The effect of any such restructuring on the Company
cannot be predicted, although any such restructuring could have a material
adverse effect on the Company.
Litigation and Regulatory Proceedings.
From time to time, the Company and its affiliates are parties to litigation
and regulatory proceedings. Investors should review the descriptions of such
matters contained in the Company's Annual, Quarterly and Current Reports filed
with the Commission and incorporated by reference herein. There can be no
assurances that the outcome of such matters will not have a material adverse
effect on the Company's consolidated financial position.
Business Subject to Stringent Environmental Regulations.
AES's activities are subject to stringent environmental regulation by
federal, state, local and foreign governmental authorities. For example, the
Clean Air Act Amendments of 1990 impose more stringent standards than those
previously in effect, and require states to impose permit fees on certain
emissions. Congress and other foreign governmental authorities also may consider
proposals to restrict or tax certain emissions. These proposals, if adopted,
could impose additional costs on the operation of AES's power plants. There can
be no assurance that AES would be able to recover all or any increased costs
from its customers or that its business, financial condition or results of
operations would not be materially and adversely affected by future changes in
domestic or foreign environmental laws and regulations. The Company has made and
will continue to make capital and other expenditures to comply with
environmental laws and regulations. There can be no assurance that such
expenditures will not have a material adverse effect on the Company's financial
condition or results of operations.
Control by Existing Stockholders.
As of September 30, 1996, AES's two founders, Roger W. Sant and Dennis W.
Bakke, and their immediate families together owned beneficially approximately
26% of AES's outstanding Common Stock. As a result of their ownership
interests, Messrs. Sant and Bakke may be able to significantly influence or
exert control over the affairs of AES, including the election of the Company's
directors. As
9
<PAGE>
of September 30, 1996, all of AES's officers and directors and their immediate
families together owned beneficially approximately 35% of AES's outstanding
Common Stock. To the extent that they decide to vote together, these
stockholders would be able to significantly influence or control the election of
AES's directors, the management and policies of AES and any action requiring
stockholder approval, including significant corporate transactions.
Adherence to AES's Principles - Possible Impact on Results of Operations.
A core part of AES's corporate culture is a commitment to "shared
principles": to act with integrity, to be fair, to have fun and to be socially
responsible. The Company seeks to adhere to these principles not as a means to
achieve economic success, but because adherence is a worthwhile goal in and of
itself. However, if the Company perceives a conflict between these principles
and profits, the Company will try to adhere to its principles - even though
doing so might result in diminished or foregone opportunities or financial
benefits.
No Prior Public Market - Possible Price Volatility of Debt Securities and
Preferred Stock.
Prior to the offering, there has been no public market for the Senior Debt
Securities, the Junior Subordinated Debt Securities or the Preferred Stock.
There can be no assurance that an active trading market for the Senior Debt
Securities, the Junior Subordinated Debt Securities or the Preferred Stock will
develop or be sustained. If such a market were to develop, the Senior Debt
Securities, the Junior Subordinated Debt Securities or the Preferred Stock could
trade at prices that may be higher or lower than their initial offering price
depending upon many factors, including prevailing interest rates, the Company's
operating results and the markets for similar securities. Historically, the
market for non- investment grade debt has demonstrated substantial volatility in
the prices of securities similar to the Debt Securities. There can be no
assurance that the future market for the Debt Securities will not be subject to
similar volatility.
10
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Under the Amended and Restated Certificate of Incorporation of the Company
(the "Certificate of Incorporation"), the authorized capital stock of the
Company consists of 100,000,000 shares of Common Stock, par value $.01 per
share, and 1,000,000 shares of Preferred Stock, no par value.
The following summary contains a description of certain general terms of
the Common Stock and the Preferred Stock to which any Prospectus Supplement may
relate. Certain terms of any series of Preferred Stock offered by a Prospectus
Supplement will be described in the Prospectus Supplement relating thereto. If
so indicated in the Prospectus Supplement, the terms of any series may differ
from the terms set forth below. The description of certain material provisions
of the Common Stock and the Preferred Stock is subject to and qualified in its
entirety by reference to the provisions of the Company's Certificate of
Incorporation, and, in the case of the Preferred Stock, to the Certificate of
Designation (the "Certificate of Designation") relating to each particular
series of Preferred Stock which will be filed or incorporated by reference, as
the case may be, as an exhibit to the Registration Statement of which this
Prospectus is a part at or prior to the time of the issuance of such Preferred
Stock.
COMMON STOCK
As of September 30, 1996, there were 77,099,303 shares of Common Stock
outstanding.
The holders of 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 Preferred Stock, the holders of 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 the Company (the "Board of Directors") out
of funds legally available therefor. In the event of the liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities,
subject to prior distribution rights of the Preferred Stock, if any, then
outstanding. The Common Stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are fully
paid and non-assessable, and any shares of Common Stock in respect of which this
Prospectus is being delivered will be fully paid and non-assessable.
The transfer agent for the Company's Common Stock is First Chicago Trust
Company.
PRICE RANGE OF AES COMMON STOCK AND COMMON STOCK DIVIDENDS
AES Common Stock began trading on the New York Stock Exchange on October
16, 1996 under the symbol "AES." Prior to that date, Common Stock had been
quoted on the NASDAQ National Market System ("NASDAQ/NMS") under the symbol
"AESC." The following table sets forth for the periods indicated the high and
low sale prices for the Common Stock as reported by NASDAQ/NMS.
HIGH LOW
--------- --------
1994
First Quarter .......................... 24 1/2 19 1/2
Second Quarter .......................... 21 1/2 16
Third Quarter .......................... 20 1/8 15 3/4
Fourth Quarter .......................... 21 3/4 17 1/2
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
11
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On December 7, 1993, the Board of Directors authorized a three-for-two
stock split, effected in the form of a stock dividend, payable to stockholders
of record on January 15, 1994. Additionally, on February 17, 1994, the Company
declared a 3% stock dividend, payable to stockholders of record on March 10,
1994. No cash dividends have been paid on Common Stock since December 22, 1993
in order to provide capital for the Company's equity investments in projects.
The Company's ability to declare and pay dividends is dependent, among
other things, on the ability of its project subsidiaries to declare and pay
dividends (and otherwise distribute cash) to it, the Company's ability to
service its parent company debt and the Company's ability to meet certain
criteria for paying dividends under its corporate credit facility and under
existing indentures of Debt Securities.
The ability of the Company's subsidiaries to declare and pay dividends and
otherwise distribute cash to the Company is subject to certain limitations in
the project loans and other documents entered into by such project subsidiaries.
Such limitations permit the payment of dividends out of current cash flow for
quarterly, semi-annual or annual periods only at the end of such periods and
only after payment of principal and interest on project loans due at the end of
such periods.
Cash dividend payments on Common Stock are limited to a certain percentage
of cash flow under the Company's corporate credit agreement. The indentures
relating to the Company's existing senior subordinated notes preclude the
payment of cash dividends if at the time of such payment or after giving effect
thereto an event of default (as defined) or an event that, after the giving of
notice or lapse of time or both, would become an event of default, shall have
occurred and be continuing, if certain fixed charge coverage ratios are not met
or if the payment of such dividends, together with other restricted payments,
would exceed certain limits.
PREFERRED STOCK
As of September 30, 1996, there were no shares of Preferred Stock
outstanding.
The Board of Directors has the authority to issue Preferred Stock in one or
more classes or series and to fix, by resolution, the rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend rates,
conversion rights, exchange 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 or series, without any
further action or vote by the stockholders. Preferred Stock, if issued, will not
be entitled to any preemptive or similar rights. The applicable Prospectus
Supplement will describe the following terms of any Preferred Stock in respect
of which the Prospectus is being delivered (to the extent applicable to such
Preferred Stock): (i) the specific designation, number of shares, seniority and
purchase price; (ii) any liquidation preference per share; (iii) any date of
maturity; (iv) any redemption, repayment or sinking fund provisions; (v) any
dividend rate or rates and the dates on which any such dividends will be payable
(or the method by which such rates or dates will be determined); (vi) any voting
rights; (vii) if other than the currency of the United States, the currency or
currencies including composite currencies in which such Preferred Stock is
denominated and/or in which payments will or may be payable; (viii) the method
by which amounts in respect of such Preferred Stock may be calculated and any
commodities, currencies or indices, or value, rate or price, relevant to such
calculation; (ix) whether such Preferred Stock is convertible or exchangeable
and, if so, the securities or rights into which such Preferred Stock is
convertible or exchangeable, and the terms and conditions upon which such
conversions or exchanges will be effected including conversion or exchange
prices or rates, the conversion or exchange period and any other related
provisions; (x) the place or places where dividends and other payments on the
Preferred Stock will be payable; and (xi) any additional voting, dividend,
liquidation, redemption and other rights, preferences, privileges, limitations
and restrictions.
All shares of Preferred Stock offered hereby, or issuable upon conversion,
exchange or exercise of Securities, will, when issued, be fully paid and
non-assessable. Any shares of Preferred Stock that are issued would have
priority over the Common Stock with respect to dividend or liquidation rights or
both.
The transfer agent for each series of Preferred Stock will be described in
the applicable Prospectus Supplement.
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DESCRIPTION OF CERTAIN PROVISIONS OF CERTIFICATE OF INCORPORATION AND BY-LAWS
The Certificate of Incorporation and By-Laws of AES 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 the 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, by the Chairman of the Board or by the President
and shall be called by the Chairman of the Board or by 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.
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, the 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 the Company 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. The 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 the Company 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 the Company for another entity, to the full extent
authorized by Delaware law, against expenses (including, but not limited to,
attorneys' fees),
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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 the Company in the
performance of his or her duty. Agents of the Company may be similarly
indemnified at the discretion of the Board of Directors.
Under Section 145 of the GCL, a similar duty 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, the Company 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. The Company maintains directors' and officers' insurance.
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DESCRIPTION OF DEBT SECURITIES
The Debt Securities may consist of Senior Debt Securities, Subordinated
Debt Securities or Junior Subordinated Debt Securities. The Senior Debt
Securities will be issued under an indenture (the "Senior Debt Indenture")
between The AES Corporation, as issuer, and The First National Bank of Chicago,
as trustee. The Senior Subordinated Debt Securities will be issued under an
indenture (the "Senior Subordinated Debt Indenture") dated as of July 1, 1996
between The AES Corporation, as issuer, and The First National Bank of Chicago,
as trustee. The Junior Subordinated Debt Securities will be issued under an
indenture (the "Junior Subordinated Debt Indenture") between The AES
Corporation, as issuer, and The First National Bank of Chicago, as trustee. The
First National Bank of Chicago, in its capacity as trustee under each of the
Indentures, is referred to herein as the "Trustee."
Copies of the Indentures (or the forms thereof) have been incorporated by
reference or included herein as exhibits to the Registration Statement of which
this Prospectus is a part and are also available for inspection at the office of
the Trustee. The Indentures are subject to and governed by the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). Section references
contained herein are applicable to each of the Indentures. The following
summaries of certain provisions of the Indentures do not purport to be complete,
and where reference is made to particular provisions of the Indentures, such
provisions, including definitions of certain terms, are incorporated by
reference as a part of such summaries or terms, which are qualified in their
entirety by such reference. The Indentures are substantially identical except
for provisions relating to subordination.
GENERAL
None of the Indentures limits the amount of Debt Securities which may be
issued thereunder. Each Indenture provides that Debt Securities issuable
thereunder may be issued up to the aggregate principal amount which may be
authorized from time to time by the Company. Reference is made to the Prospectus
Supplement for the following terms of the Debt Securities (to the extent such
terms are applicable to such Debt Securities) in respect of which this
Prospectus is being delivered (the "Offered Debt Securities"): (i) the
designation, aggregate principal amount and authorized denominations of the
Offered Debt Securities; (ii) the date or dates on which the Offered Debt
Securities will mature; (iii) the rate or rates per annum at which the Offered
Debt Securities will bear interest and the method of calculating such rates, if
any; (iv) the dates on which any such interest will be payable and the record
dates for any such interest payments; (v) any mandatory or optional redemption
terms or prepayment, conversion, sinking fund or exchangeability provisions;
(vi) the place where the principal of and interest on the Offered Debt
Securities will be payable; (vii) if other than denominations of $1,000 or
multiples thereof, the denominations in which the Offered Debt Securities will
be issuable; (viii) whether the Offered Debt Securities shall be issued in the
form of Global Securities (as defined below) or certificates; (ix) additional
provisions, if any, relating to the defeasance of the Offered Debt Securities;
(x) the currency or currencies, if other than the currency of the United States,
in which payment of the principal of and interest on the Offered Debt Securities
will be payable; (xi) whether the Offered Debt Securities will be issuable in
registered form or bearer form ("Bearer Securities") or both and, if Bearer
Securities are issuable, any restrictions applicable to the exchange of one form
for another and the offer, sale and delivery of Bearer Securities; (xii) any
applicable United States federal income tax consequences, including whether and
under what circumstances the Company will pay additional amounts on Offered Debt
Securities held by a person who is not a U.S. Person (as defined in each
Prospectus Supplement relating to any particular series of Debt Securities
offered thereby) in respect of any tax, assessment or governmental charge
withheld or deducted and, if so, whether the Company will have the option to
redeem such Offered Debt Securities rather than pay such additional amounts;
(xiii) the dates on which premium, if any, will be payable; (xiv) the right of
the Company, if any, to defer payment of interest and the maximum length of such
deferral period; (xv) any listing on a securities exchange; (xvi) the initial
public offering price; and (xvii) other specific terms, including any additional
events of default or covenants provided for with respect to the Offered Debt
Securities.
As described in each Prospectus Supplement relating to any particular
series of Debt Securities offered thereby, the Indenture under which such Debt
Securities are issued may contain covenants limiting: (i) the incurrence of debt
by the Company; (ii) the incurrence of debt by subsidiaries of the
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Company; (iii) the making of certain payments by the Company and its
subsidiaries; (iv) subsidiary mergers; (v) business activities of the Company
and its subsidiaries; (vi) the issuance of preferred stock of subsidiaries;
(vii) asset dispositions; (viii) transactions with affiliates; (ix) liens; and
(x) mergers and consolidations involving the Company.
BOOK-ENTRY SYSTEM
If so specified in any accompanying Prospectus Supplement relating to Debt
Securities, Debt Securities of any series may be issued under a book-entry
system in the form of one or more global securities (each, a "Global Security").
Each Global Security will be deposited with, or on behalf of, a depositary,
which, unless otherwise specified in the accompanying Prospectus Supplement,
will be The Depository Trust Company, New York, New York (the "Depositary"). The
Global Securities will be registered in the name of the Depositary or its
nominee.
The Depositary has advised the Company that the Depositary is a limited
purpose trust company organized under the laws of the State of New York, a
"banking organization" within the meaning of the New York banking law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. The Depositary
was created to hold securities of its participants and to facilitate the
clearance and settlement of securities transactions among its participants
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations, some of which
(and/or their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to others, such as banks, brokers, dealers,
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
Upon the issuance of a Global Security in registered form, the Depositary
will credit, on its book-entry registration and transfer system, the respective
principal amounts of the Debt Securities represented by such Global Security to
the accounts of participants. The accounts to be credited will be designated by
the underwriters, dealers, or agents, if any, or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of beneficial
interests in the Global Security will be limited to participants or persons that
may hold interests through participants. Ownership of beneficial interests by
participants in the Global Security will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by such
participants. The laws of some jurisdictions may require that certain purchasers
of securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in a Global
Security.
So long as the Depositary or its nominee is the owner of record of a Global
Security, the Depositary or such nominee, as the case may be, will be considered
the sole owner or holder of the Debt Securities represented by such Global
Security for all purposes under the Indenture under which such Debt Securities
are issued. Except as set forth below, owners of beneficial interests in a
Global Security will not be entitled to have the Debt Security represented by
such Global Security registered in their names, and will not receive or be
entitled to receive physical delivery of such Debt Securities in definitive form
and will not be considered the owners or holders thereof under the Indenture
under which such Debt Securities are issued. Accordingly, each person owning a
beneficial interest in a Global Security must rely on the procedures of the
Depositary and, if such person is not a participant, on the procedures of the
participant through which such person owns its interest, to exercise any rights
of a holder of record under the applicable Indenture pursuant to which the Debt
Securities relating to such Global Security are issued. The Company understands
that under existing industry practices, if the Company requests any action of
holders or if any owner of a beneficial interest in a Global Security desires to
give or take any action which a holder is entitled to give or take under the
applicable Indenture, the Depositary would authorize the participants holding
the relevant beneficial interests to give or take such action, and such
participants would authorize beneficial owners owning through such participants
to give or take such action or would otherwise act upon the instruction of
beneficial owners holding through them.
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Payments of principal of, premium, if any, and interest on Debt Securities
represented by a Global Security registered in the name of the Depositary or its
nominee will be made to such Depositary or such nominee, as the case may be, as
the registered owner of such Global Security. None of the Company, the Trustee
or any other agent of the Company or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in such Global
Security or for maintaining, supervising, or reviewing any records relating to
such beneficial ownership interests.
The Company has been advised by the Depositary that the Depositary will
credit participants, accounts with payments of principal, premium, if any, or
interest on the payment date thereof in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Security
as shown on the records of the Depositary. The Company expects that payments by
participants to owners of beneficial interests in the Global Security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers registered in "street name," and will be the responsibility of such
participants.
A Global Security may not be transferred except as a whole by the
Depositary to a nominee or successor of the Depositary or by a nominee of the
Depositary to another nominee of the Depositary. A Global Security representing
all but not part of an offering of Offered Debt Securities hereby is
exchangeable for Debt Securities in definitive form of like tenor and terms if
(i) the Depositary notifies the Company that it is unwilling or unable to
continue as depositary for such Global Security or if at any time the Depositary
is no longer eligible to be or in good standing as a clearing agency registered
under the Exchange Act, and in either case, a successor depositary is not
appointed by the Company within 90 days of receipt by the Company of such notice
or of the Company becoming aware of such ineligibility, or (ii) the Company in
its sole discretion at any time determines not to have all of the Debt
Securities represented in an offering of Offered Debt Securities by a Global
Security and notifies the Trustee thereof. A Global Security exchangeable
pursuant to the preceding sentence shall be exchangeable for Debt Securities
registered in such names and in such authorized denominations as the Depositary
for such Global Security shall direct. The Debt Securities of a series may also
be issued in the form of one or more bearer global Debt Securities (a "Bearer
Global Security") that will be deposited with a common depositary for Euro-clear
and CEDEL, or with a nominee for such depositary identified in the Prospectus
Supplement relating to such series. The specific terms and procedures, including
the specific terms of the depositary arrangement, with respect to any portion of
a series of Debt Securities to be represented by a Bearer Global Security will
be described in the Prospectus Supplement relating to such series.
SENIOR DEBT SECURITIES
The payment of principal of, premium, if any, and interest on the Senior
Debt Securities will, to the extent and in the manner set forth in the Senior
Debt Indenture, rank pari pass with all unsecured and unsubordinated debt of the
Company.
SUBORDINATION OF SENIOR SUBORDINATED DEBT SECURITIES
The payment of principal of, premium, if any, and interest on the Senior
Subordinated Debt Securities will, to the extent and in the manner set forth in
the Senior Subordinated Debt Indenture, be subordinated in right of payment to
the prior payment in full, in cash equivalents, of all Senior Debt.
Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, receivership, reorganization, assignment
for the benefit of creditors, marshaling of assets and liabilities or any
bankruptcy, insolvency or similar proceedings of the Company, the holders of all
Senior Debt will first be entitled to receive payment in full of all amounts due
or to become due thereon before the holders of the Senior Subordinated Debt
Securities will be entitled to receive any payment in respect of the principal
of, premium, if any, or interest on the Senior Subordinated Debt Securities.
No payments on account of principal, premium, if any, or interest in
respect of the Senior Subordinated Debt Securities may be made by the Company if
there shall have occurred and be continuing a default in any payment with
respect to Senior Debt. In addition, during the continuance of any other
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event of default (other than a payment default) with respect to Designated
Senior Debt pursuant to which the maturity thereof may be accelerated, from and
after the date of receipt by the Trustee of written notice from the holders of
such Designated Senior Debt or from an agent of such holders, no payments on
account of principal, premium, if any, or interest in respect of the Senior
Subordinated Debt Securities may be made by the Company for a period (the
"Payment Blockage Period") commencing on the date of delivery of such notice and
ending 179 days thereafter (unless such Payment Blockage Period shall be
terminated by written notice to the Trustee from the holders of such Designated
Senior Debt or from an agent of such holders, or such event of default has been
cured or waived or has ceased to exist). Only one Payment Blockage Period may be
commenced with respect to the Senior Subordinated Debt Securities during any
period of 360 consecutive days. No event of default which existed or was
continuing on the date of the commencement of any Payment Blockage Period with
respect to the Designated Senior Debt initiating such Payment Blockage Period
shall be or be made the basis for the commencement of any subsequent Payment
Blockage Period by the holders of such Designated Senior Debt, unless such event
of default shall have been cured or waived for a period of not less than 90
consecutive days.
By reason of such subordination, in the event of insolvency, funds that
would otherwise be payable to holders will be paid to the holders of Senior Debt
to the extent necessary to pay the Senior Debt in full, and the Company may be
unable to meet fully its obligations with respect to the Senior Subordinated
Debt Securities.
"Debt" is defined to mean, with respect to any person at any date of
determination (without duplication), (i) all indebtedness of such person for
borrowed money, (ii) all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
person in respect of letters of credit or bankers' acceptance or other similar
instruments (or reimbursement obligations with respect thereto), (iv) all
obligations of such person to pay the deferred purchase price of property or
services, except trade payables, (v) all obligations of such person as lessee
under capitalized leases, (vi) all Debt of others secured by a lien on any asset
of such person, whether or not such Debt is assumed by such person; provided
that, for purposes of determining the amount of any Debt of the type described
in this clause, if recourse with respect to such Debt is limited to such asset,
the amount of such Debt shall be limited to the lesser of the fair market value
of such asset or the amount of such Debt, (vii) all Debt of others guaranteed by
such person to the extent such Debt is guaranteed by such person, (viii) all
redeemable stock valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends and (ix) to the extent
not otherwise included in this definition, all obligations of such person under
currency agreements and interest rate agreements.
"Designated Senior Debt" is defined to mean (i) Debt under the Credit
Agreement dated as of August 2, 1996 (the "Credit Agreement") among the Company,
the Banks named on the signature pages thereof and the Morgan Guaranty Trust
Company of New York, as agent for the banks, as such Credit Agreement has been
and may be amended, restated, supplemented or otherwise modified from time to
time and (ii) Debt constituting Senior Debt which, at the time of its
determination, (A) has an aggregate principal amount of at least $30 million and
(B) is specifically designated as "Designated Senior Debt" by the Company.
"Senior Debt" is defined to mean the principal of (and premium, if any) and
interest on all Debt of the Company whether created, incurred or assumed before,
on or after the date of the Senior Subordinated Debt Indenture; provided that
Senior Debt shall not include (i) the Company's 9 3/4% Senior Subordinated Notes
Due 2000 and the Company's 10 1/4% Senior Subordinated Notes due 2006 which rank
pari passu with the Senior Subordinated Debt Securities, (ii) Debt of the
Company to any affiliate, (iii) Debt of the Company that, when incurred, and
without respect to any election under Section 1111(b) of Title 11, U.S. Code,
was without recourse, (iv) any other Debt of the Company which by the terms of
the instrument creating or evidencing the same are specifically designated as
not being senior in right of payment to the Senior Subordinated Debt Securities
and (v) redeemable stock of the Company.
SUBORDINATION OF JUNIOR SUBORDINATED DEBT SECURITIES
The payment of principal of, premium, if any, and interest on the Junior
Subordinated Debt Securities will, to the extent and in the manner set forth in
the Junior Subordinated Debt Indenture, be
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subordinated in right of payment to the prior payment in full, in cash or cash
equivalents, of all Senior and Subordinated Debt of the Company.
Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, receivership, reorganization, assignment
for the benefit of creditors, marshaling of assets and liabilities or any
bankruptcy, insolvency or similar proceedings of the Company, the holders of all
Senior and Subordinated Debt will first be entitled to receive payment in full
of all amounts due or to become due thereon before the holders of the Junior
Subordinated Debt Securities will be entitled to receive any payment in respect
of the principal of, premium, if any, or interest on the Junior Subordinated
Debt Securities.
No payments on account of principal, premium, if any, or interest in
respect of the Junior Subordinated Debt Securities may be made by the Company if
there shall have occurred and be continuing a default in any payment with
respect to Senior and Subordinated Debt. In addition, during the continuance of
any other event of default (other than a payment default) with respect to
Designated Senior and Subordinated Debt pursuant to which the maturity thereof
may be accelerated, from and after the date of receipt by the Trustee of written
notice from holders of such Designated Senior and Subordinated Debt or from an
agent of such holders, no payments on account of principal, premium, if any, or
interest may be made by the Company during a Payment Blockage Period in respect
of such Junior Subordinated Debt Securities (unless such Payment Blockage Period
shall be terminated by written notice to the Trustee from the holders of such
Designated Senior and Subordinated Debt or from an agent of such holders, or
such event of default has been cured or waived or has ceased to exist). Only one
Payment Blockage Period may be commenced with respect to the Junior Subordinated
Debt Securities during any period of 360 consecutive days. No event of default
which existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior and Subordinated Debt
initiating such Payment Blockage Period shall be or be made the basis for the
commencement of any subsequent Payment Blockage Period by the holders of such
Designated Senior and Subordinated Debt, unless such event of default shall have
been cured or waived for a period of not less than 90 consecutive days.
By reason of such subordination, in the event of insolvency, funds that
would otherwise be payable to holders of Junior Subordinated Debt Securities
will be paid to the holders of Senior and Subordinated Debt of the Company to
the extent necessary to pay such Debt in full, and the Company may be unable to
meet fully its obligations with respect to the Junior Subordinated Debt
Securities.
"Designated Senior and Subordinated Debt" is defined to mean (i) Debt under
the Credit Agreement and (ii) Debt constituting Senior and Subordinated Debt
which, at the time of its determination, (A) has an aggregate principal amount
of at least $30 million and (B) is specifically designated in the instrument as
"Designated Senior and Subordinated Debt" by the Company.
"Senior and Subordinated Debt" is defined to mean the principal of (and
premium, if any) and interest on all Debt of the Company whether created,
incurred or assumed before, on or after the date of the Junior Subordinated Debt
Indenture; provided that such Senior and Subordinated Debt shall not include (i)
Debt of the Company to any affiliate, (ii) Debt of the Company that, when
incurred and without respect to any election under Section 1111(b) of Title 11,
U.S. Code, was without recourse, (iii) any other Debt of the Company which by
the terms of the instrument creating or evidencing the same are specifically
designated as not being senior in right of payment to the Junior Subordinated
Debt Securities, and in particular the Junior Subordinated Debt Securities shall
rank pari passu with all other debt securities and guarantees issued to an AES
Trust or any other trust, partnership or other entity affiliated with the
Company which is a financing vehicle of the Company in connection with an
issuance of preferred securities by such financing entity, and (iv) redeemable
stock of the Company.
EVENTS OF DEFAULT
An Event of Default, as defined in each of the Indentures and applicable to
Debt Securities issued under such Indenture, will occur with respect to the Debt
Securities of any series issued under such Indenture if: (i) the Company
defaults in the payment of principal of (or premium, if any, on) any Debt
Security of such series issued under such Indenture when the same becomes due
and payable at maturity, upon acceleration, redemption, mandatory repurchase, or
otherwise; (ii) the Company defaults in
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the payment of interest on any Debt Security of such series issued under such
Indenture when the same becomes due and payable, and such default continues for
a period of 30 days; (iii) the Company defaults in the performance of or
breaches any other covenant or agreement of the Company in such Indenture with
respect to the Debt Securities of any series issued under such Indenture and
such default or breach continues for a period of 30 consecutive days after
written notice by the Trustee or by the holders (as defined in the Indenture) of
25% or more in aggregate principal amount of the Debt Securities of all series
issued under such Indenture; (iv) a court having jurisdiction in the premises
enters a decree or order for (A) relief in respect of the Company or any of its
subsidiaries in an involuntary case under any applicable bankruptcy, insolvency,
or other similar law now or hereafter in effect, (B) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator, or similar official of
the Company or any of its subsidiaries or for all or substantially all of the
property and assets of the Company or any of its subsidiaries or (C) the winding
up or liquidation of the affairs of the Company or any of its subsidiaries and,
in each case, such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; (v) the Company or any of its subsidiaries (A)
commences a voluntary case under any applicable bankruptcy, insolvency, or other
similar law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or similar official of the Company or any of
its subsidiaries or for all or substantially all of the property and assets of
the Company or any of its subsidiaries or (C) effects any general assignment for
the benefit of creditors; and (vi) any other Events of Default set forth in the
applicable Prospectus Supplement occur.
If an Event of Default (other than an Event of Default specified in clause
(iv) or (v) above that occurs with respect to the Company) occurs with respect
to the Debt Securities of any series issued under an Indenture, and if such
Event of Default is continuing under such Indenture, then, and in each and every
such case, except for any series of Debt Securities issued under such Indenture
the principal of which shall have already become due and payable, either the
Trustee or the holders of not less than 25% in aggregate principal amount of the
Debt Securities of any such series issued under such Indenture (each such series
voting as a separate class) by written notice to the Company (and to the Trustee
if such notice is given by the holders (the "Acceleration Notice")), may, and
the Trustee at the request of such holders shall, declare the principal of,
premium, if any, and accrued interest on the Debt Securities of such series to
be immediately due and payable. Upon a declaration of acceleration, such
principal of, premium, if any, and accrued interest shall be immediately due and
payable. If an Event of Default specified in clause (iv) or (v) above occurs
with respect to the Company, the principal of, premium, if any, and accrued
interest on the Debt Securities then outstanding under each of the Indentures
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holder. The holders
of at least a majority in principal amount of the outstanding Debt Securities of
any series under an Indenture may, by written notice to the Company and to the
Trustee, waive all past defaults with respect to Debt Securities of such series
and rescind and annul a declaration of acceleration with respect to Debt
Securities of such series and its consequences if (i) all existing Events of
Default applicable to Debt Securities of such series, other than the nonpayment
of the principal of, premium, if any, and interest on the Debt Securities that
have become due solely by such declaration of acceleration, have been cured or
waived and (ii) the rescission would not conflict with any judgment or decree of
a court of competent jurisdiction. For information as to the waiver of defaults,
see "- Modification and Waiver."
The holders of at least a majority in aggregate principal amount of the
outstanding Debt Securities of any series under an Indenture may direct the
time, method, and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee. However,
the Trustee may refuse to follow any direction that conflicts with law or the
applicable Indenture, that may involve the Trustee in personal liability, or
that the Trustee determines in good faith may be unduly prejudicial to the
rights of holders of such series of Debt Securities not joining in the giving of
such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from holders of Debt Securities of
such series. A holder may not pursue any remedy with respect to the applicable
Indenture or the Debt Securities of any series issued under such Indenture
unless: (i) the holder gives the Trustee written notice of a continuing Event of
Default; (ii) the holders of
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at least 25% in aggregate principal amount of outstanding Debt Securities of
such series make a written request to the Trustee to pursue the remedy; (iii)
such holder or holders offer the Trustee indemnity satisfactory to the Trustee
against any costs, liability or expense; (iv) the Trustee does not comply with
the request within 60 days after receipt of the request and the offer of
indemnity; and (v) during such 60-day period, the holders of a majority in
aggregate principal amount of the outstanding Debt Securities of such series do
not give the Trustee a direction that is inconsistent with the request. However,
such limitations do not apply to the right of any holder of a Debt Security to
receive payment of the principal of, premium, if any, or interest on, such Debt
Security or to bring suit for the enforcement of any such payment, on or after
the due date expressed in the Debt Securities, which right shall not be impaired
or affected without the consent of the holder.
Each of the Indentures requires that certain officers of the Company
certify, on or before a date not more than four months after the end of each
fiscal year, that to the best of such officers, knowledge, the Company has
fulfilled all its obligations under such Indenture. The Company is also
obligated to notify the Trustee of any default or defaults in the performance of
any covenants or agreements under any of the Indentures.
MODIFICATION AND WAIVER
Each of the Indentures provides that the Company and the Trustee may amend
or supplement such Indenture or the Debt Securities of any series issued under
such Indenture without notice to or the consent of any holder: (i) to cure any
ambiguity, defect, or inconsistency in such Indenture; provided that such
amendments or supplements shall not adversely affect the interests of the
holders in any material respect; (ii) to comply with Article 5 of such
Indenture; (iii) to comply with any requirements of the Commission in connection
with the qualification of such Indenture under the Trust Indenture Act of 1939,
as amended; (iv) to evidence and provide for the acceptance of appointment with
respect to the Debt Securities of any or all series issued under such Indenture
by a successor Trustee; (v) to establish the form or forms of Debt Securities of
any series issued under such Indenture or of the coupons pertaining to such Debt
Securities as permitted by such Indenture; (vi) to provide for uncertificated
Debt Securities and to make all appropriate changes for such purpose; and (vii)
to make any change that does not materially and adversely affect the rights of
any holder.
Each of the Indentures also provides that modifications and amendments of
such Indenture may be made by the Company and the Trustee with the consent of
the holders of not less than a majority in aggregate principal amount of the
outstanding Debt Securities of each series issued under such Indenture affected
thereby (each series voting as a separate class); provided, however, that no
such modification or amendment may, without the consent of each holder affected
thereby, (i) change the stated maturity of the principal of, or any sinking fund
obligation or any installment of interest on, any Debt Security issued under
such Indenture, (ii) reduce the principal amount of, or premium, if any, or
interest on, any Debt Security issued under such Indenture, (iii) reduce the
above-stated percentage of outstanding Debt Securities issued under such
Indenture the consent of whose holders is necessary to modify or amend such
Indenture with respect to the Debt Securities of any series issued under such
Indenture, (iv) reduce the percentage or aggregate principal amount of
outstanding Debt Securities of any series issued under the Indenture the consent
of whose holders is necessary for waiver of compliance with certain provisions
of such Indenture or for waiver of certain defaults. A supplemental indenture
which changes or eliminates any covenant or other provision of an Indenture
which has expressly been included solely for the benefit of one or more
particular series of Debt Securities issued under such Indenture, or which
modifies the rights of holders of Debt Securities of such series with respect to
such covenant or provision, shall be deemed not to affect the rights under the
applicable Indenture of the holders of Debt Securities of any other series
issued under such Indenture or of the coupons appertaining to such Debt
Securities. It shall not be necessary for the consent of the holders under this
section of an Indenture to approve the particular form of any proposed
amendment, supplement, or waiver, but it shall be sufficient if such consent
approves the substance thereof. After an amendment, supplement, or waiver under
this section of an Indenture becomes effective, the Company shall give to the
holders affected thereby a notice briefly describing the amendment, supplement,
or waiver. The Company will mail supplemental indentures to holders upon
request. Any failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture or waiver.
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RESTRICTION ON MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
Pursuant to the Indentures, the Company may not consolidate with, merge
with or into, or transfer all or substantially all of its assets (as an entirety
or substantially an entirety in one transaction or a series of related
transactions), to any Person (as defined in the Indentures) unless: (i) the
Company shall be the continuing Person, or the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or to
which properties and assets of the Company are transferred shall be a solvent
corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia and shall expressly assume in writing
all the obligations of the Company under the Notes, (ii) immediately after
giving effect to such transaction no Event of Default or event or condition
which through the giving of notice or lapse of time or both would become an
Event of Default shall have occurred and be continuing and (iii) such other
conditions as may be established in connection with the issuance of the
applicable Debt Securities.
DEFEASANCE AND DISCHARGE
Each of the Indentures provides that the Company shall be deemed to have
paid and shall be discharged from any and all obligations in respect of the Debt
Securities of any series issued under such Indenture on the 123rd day after the
deposit referred to below has been made, and the provisions of such Indenture
will no longer be in effect with respect to the Debt Securities of such series
issued thereunder (except for, among other matters, certain obligations to
register the transfer or exchange of the Debt Securities of such series, to
replace stolen, lost or mutilated Debt Securities of such series, to maintain
paying agencies and to hold monies for payment in trust) if, among other things,
(A) the Company has deposited with the Trustee, in trust, money and/or U.S.
Government Obligations that through the payment of interest and principal in
respect thereof, in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest on the
applicable Debt Securities, on the due date thereof or earlier redemption
(irrevocably provided for under arrangements satisfactory to the Trustee), as
the case may be, in accordance with the terms of such Indenture and the
applicable Debt Securities, (B) the Company has delivered to the Trustee (i)
either (x) an opinion of counsel to the effect that holders will not recognize
income, gain or loss for federal income tax purposes as a result of the
Company's exercise of its option under this "Defeasance" provision and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit, defeasance and
discharge had not occurred, which opinion of counsel must be based upon a ruling
of the Internal Revenue Service to the same effect unless there has been a
change in applicable federal income tax law or related treasury regulations
after the date of such Indenture that a ruling is no longer required or (y) a
ruling directed to the Trustee received from the Internal Revenue Service to the
same effect as the aforementioned opinion of counsel and (ii) an opinion of
counsel to the effect that the creation of the defeasance trust does not violate
the Investment Company Act of 1940 and after the passage of 123 days following
the deposit, the trust fund will not be subject to the effect of Section 547 of
the U.S. Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law,
(C) immediately after giving effect to such deposit on a pro forma basis, no
Event of Default, or event that after the giving of notice or lapse of time or
both would become an Event of Default, shall have occurred and be continuing on
the date of such deposit or during the period ending on the 123rd day after the
date of such deposit, and such deposit shall not result in a breach or violation
of, or constitute a default under, any other agreement or instrument to which
the Company is a party or by which the Company is bound, (D) the Company is not
prohibited from making payments in respect of the applicable Debt Securities by
the subordination provisions contained in such Indenture and (E) if at such time
the applicable Debt Securities are listed on a national securities exchange, the
Company has delivered to the Trustee an opinion of counsel to the effect that
such Debt Securities will not be delisted as a result of such deposit,
defeasance and discharge.
As more fully described in the Prospectus Supplement, each of the
Indentures also provides for defeasance of certain covenants.
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DESCRIPTON OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
AES may issue Stock Purchase Contracts, representing contracts obligating
holders to purchase from the Company, and the Company to sell to the holders, a
specified number of shares of Common Stock at a future date or dates. The price
per share of Common Stock may be fixed at the time the Stock Purchase Contracts
are issued or may be determined by reference to a specific formula set forth in
the Stock Purchase Contracts. The Stock Purchase Contracts may be issued
separately or as a part of units ("Stock Purchase Units") consisting of a Stock
Purchase Contract and Debt Securities or debt obligations of third parties,
including U.S. Treasury securities, securing the holders' obligations to
purchase the Common Stock under the Stock Purchase Contracts. The Stock Purchase
Contracts may require AES to make periodic payments to the holders of the Stock
Purchase Units or vice versa, and such payments may be unsecured or prefunded on
some basis. The Stock Purchase Contracts may require holders to secure their
obligations thereunder in a specified manner.
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units. The description in the Prospectus
Supplement will not purport to be complete and will be qualified in its entirety
by reference to the Stock Purchase Contracts, and, if applicable, collateral
arrangements and depositary arrangements, relating to such Stock Purchase
Contracts or Stock Purchase Units.
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PLAN OF DISTRIBUTION
The Company may sell the Offered Securities in any of three ways (or in any
combination thereof): (i) through underwriters or dealers; (ii) directly to a
limited number of purchasers or to a single purchaser; or (iii) through agents.
The Prospectus Supplement with respect to any Offered Securities will set forth
the terms of the offering of such Offered Securities, including the name or
names of any underwriters, dealers or agents and the respective amounts of such
Offered Securities underwritten or purchased by each of them, the initial public
offering price of such Offered Securities and the proceeds to the Company from
such sale, any discounts, commissions or other items constituting compensation
from the Company and any discounts, commissions or concessions allowed or
reallowed or paid to dealers and any securities exchanges on which such Offered
Securities may be listed. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If underwriters are used in the sale of any Offered Securities, such
Offered Securities will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. Such Offered Securities may be either offered to
the public through underwriting syndicates represented by managing underwriters,
or directly by underwriters. Unless otherwise set forth in the Prospectus
Supplement, the obligations of the underwriters to purchase such Offered
Securities will be subject to certain conditions precedent and the underwriters
will be obligated to purchase all of such Offered Securities if any are
purchased.
Offered Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of Offered Securities in respect of which this Prospectus is delivered will
be named, and any commissions payable by the Company to such agent will be set
forth, in the Prospectus Supplement. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis for
the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters, dealers or agents to solicit offers by certain purchasers to
purchase Offered Securities from the Company at the public offering price set
forth in the Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. Such
contracts will be subject only to those conditions set forth in the Prospectus
Supplement, and the Prospectus Supplement will set forth the commission payable
for solicitation of such contracts.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be customers of, engage in transactions
with, or perform services for the Company in the ordinary course of business.
LEGAL MATTERS
The legality of the Securities offered hereby will be passed upon for the
Company by Davis Polk & Wardwell.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference from the Company's Registration Statement on Form S-3 filed on June
12, 1996, and the consolidated financial statement schedules incorporated in
this Prospectus by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated by
reference herein, and such consolidated financial statements and consolidated
financial statement schedules have been so incorporated in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
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The financial statements of Light Servicos de Electricidade S.A.
incorporated in this Prospectus by reference, from Form 8-K of The AES
Corporation dated May 30, 1996, for the years ended December 31, 1995 and 1994
have been audited by Deloitte Touche Tohmatsu, Rio de Janeiro, Brazil,
independent auditors, as stated in their reports, which are incorporated herein
by reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
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<TABLE>
<S> <C>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS 4,113,164 Shares
SUPPLEMENT AND THE PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY THE UNDERWRITER. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR THE AES
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON CORPORATION
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED
TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION.
-----------------------
COMMON STOCK
TABLE OF CONTENTS ($.01 PAR VALUE)
PAGE
----
PROSPECTUS SUPPLEMENT
Special Note Regarding Forward Looking [LOGO]
Statements .............................. S-2
Use of Proceeds ........................... S-2
Common Stock Price Ranges and Dividends S-3
Certain U.S. Federal Income Tax Consider-
ations for Non-U.S. Holders of Common
Stock ................................. S-4
Underwriting .............................. S-6
Legal Matters .............................. S-7
Experts .................................... S-7
PROSPECTUS
Available Information ..................... 2 -----------------------------------
Incorporation of Certain Documents by SALOMON BROTHERS INC
Reference .............................. 2 -----------------------------------
Use of Proceeds ........................... 3
Ratio of Earnings to Fixed Charges ......... 3
The Company .............................. 4
Risk Factors .............................. 5
Description of Capital Stock ............... 11 PROSPECTUS SUPPLEMENT
Description of Debt Securities ............ 15 DATED JULY 17, 1997
Description of Stock Purchase Contracts and
Stock Purchase Units .................. 23
Plan of Distribution ..................... 24
Legal Matters .............................. 24
Experts .................................... 24
</TABLE>
