As filed with the Securities and Exchange Commission on November 7, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE AES CORPORATION DELAWARE 54-1163725
AES TRUST III DELAWARE 54-1840550
AES TRUST IV DELAWARE [APPLICATION PENDING]
AES TRUST V DELAWARE [APPLICATION PENDING]
(Exact name of Registrant as (State or other jurisdiction of (I.R.S. employer
specified in its charter) incorporation or organization) identification number)
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1001 NORTH 19TH STREET
ARLINGTON, VIRGINIA 22209
(703) 522-1315
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
BARRY J. SHARP
1001 NORTH 19TH STREET
ARLINGTON, VIRGINIA 22209
(703) 522-1315
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
RICHARD D. TRUESDELL, JR.
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
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Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
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If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities being offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE
SECURITIES TO BE REGISTERED OFFERING PRICE (1)(2)(3) AMOUNT OF REGISTRATION FEE
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Senior Debt Securities, Senior Subordinated Debt Securities and
Junior Subordinated Debt Securities (collectively, "Debt
Securities") of The AES Corporation............................. $ 1,500,000,000 $ 454,545.45
Preferred Stock of The AES Corporation ("Preferred Stock")...........
Common Stock of The AES Corporation ("Common Stock").................
Junior Subordinated Debt Securities of The AES Corporation for
issuance directly or to AES Trust III, AES Trust IV
and AES Trust V ("Junior Subordinated Debt Trust Securities")..
Preferred Securities of AES Trust III, AES Trust IV, and AES
Trust V, severally ("Preferred Securities").....................
Guarantees of Preferred Securities of AES Trust III, AES Trust
IV and AES Trust V by the AES Corporation(4)....................
Stock Purchase Contracts to purchase Common Stock ("Stock
Purchase Contracts")............................................
Stock Purchase Units, each representing ownership of a Stock
Purchase Contract and Debt Securities or debt obligations of
third parties ("Stock Purchase Units")..........................
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(1) Such indeterminate number or amount of Debt Securities, Junior Subordinated
Debt Trust Securities, Preferred Stock, Common Stock, Stock Purchase
Contracts and Stock Purchase Units of The AES Corporation and Preferred
Securities of AES Trust III, AES Trust IV and AES Trust
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V as may from time to time be issued at indeterminate prices. Junior
Subordinated Debt Trust Securities may be issued and sold to AES Trust III,
AES Trust IV and AES Trust V, in which event such Junior Subordinated Debt
Trust Securities may later be distributed to the holders of Preferred
Securities upon a dissolution of AES Trust III, AES Trust IV and AES Trust
V and the distribution of the assets thereof.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) and exclusive of accrued interest and dividends, if
any. Calculated using the maximum aggregate offering price of such
indeterminate amount of Debt Securities that may be offered from time to
time at an offering price below their face value.
(3) The AES Corporation is also registering under this Registration Statement
all other obligations that it may have with respect to Preferred Securities
issued by AES Trust III, AES Trust IV or AES Trust V. No separate
consideration will be received for any Guarantee or any other such
obligations.
(4) Includes the rights of holders of the Preferred Securities of an AES Trust
under the Trust Preferred Securities Guarantee and back-up undertakings,
consisting of obligations by The AES Corporation to provide certain
indemnities in respect of, and pay and be responsible for certain expenses,
costs, liabilities, and debts of, as applicable, AES Trust III, AES Trust
IV, AES Trust V and such other obligations of The AES Corporation set forth
in the Amended and Restated Declaration of Trust, the Junior Subordinated
Debt Trust Securities Indenture and Supplemental Indentures thereto, in
each case as further described in the Registration Statement. No separate
consideration will be received for any Guarantees or any back-up
undertakings.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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EXPLANATORY NOTE
This Registration Statement contains two forms of prospectuses to be used
in connection with offerings of the following securities:
(1) Debt Securities (consisting of Senior Debt Securities, Senior
Subordinated Debt Securities and Junior Subordinated Debt Securities),
Preferred Stock, Common Stock, Stock Purchase Contracts and Stock
Purchase Units of The AES Corporation.
(2) Preferred Securities of AES Trust III, AES Trust IV or AES Trust V,
severally, Junior Subordinated Debt Trust Securities of The AES
Corporation and Guarantees by The AES Corporation of Preferred
Securities issued by AES Trust III, AES Trust IV or AES Trust V.
Each offering of securities made under this Registration Statement will be
made pursuant to one of these Prospectuses, with the specific terms of the
securities offered thereby set forth in an accompanying Prospectus Supplement.
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SUBJECT TO COMPLETION, DATED NOVEMBER 7, 1997
PROSPECTUS
[LOGO]
THE AES CORPORATION
$1,500,000,000
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 4 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The 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
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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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, three 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 $1,500,000,000.
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 , 1997.
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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, 1996; (ii) the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997; (iii) the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997; (iv) the Company's
Current Reports on Form 8-K filed on November 6, 1997, October 24, 1997, August
18, 1997, July 16, 1997, July 15, 1997, July 14, 1997, July 3, 1997, March 24,
1997, March 13, 1997, February 19, 1997 and January 30, 1997 and the Company's
Current Report on Form 8-K/A filed on August 5, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
termination of the offering being made hereby shall be deemed to be incorporated
in this Prospectus by reference and to be a part hereof from the respective
dates of the filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus 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.
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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.
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SIX-MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
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1992 1993 1994 1995 1996 1997
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Ratio of earnings to fixed charges..... 1.37 1.62 2.08 2.18 1.83 1.71
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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, 1992 until June 30, 1997, no shares of
Preferred Stock were issued or outstanding, and during that period the Company
did not pay any Preferred Stock dividends.
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THE COMPANY
AES is a global power company committed to supplying electricity to
customers world-wide in a socially responsible way. The Company was one of the
original entrants in the independent power market and today is one of the
world's largest independent power companies, based on net equity ownership of
generating capacity (in megawatts) in operation or under construction. AES
markets power principally from electricity generating facilities that it
develops, acquires, owns and operates.
Over the last five years, the Company has experienced significant growth.
This growth has resulted primarily from the development and construction of new
plants ("greenfield development") and also from the acquisition of existing
generating plants and distribution companies, through competitively bid
privatization initiatives outside of the United States or negotiated
acquisitions. Since 1992, the Company's total generating capacity in megawatts
has grown from 1,829 MW to 18,538 MW (an increase of 914%), with the total
number of plants in operation increasing from eight to 74. Additionally, the
Company's total revenues have increased at a compound annual growth rate of 20%
from $401 million in 1992 to $835 million in 1996, while net income has
increased at a compound annual growth rate of 22% from $56 million to $125
million over the same period.
AES operates and owns (entirely or in part), through subsidiaries and
affiliates, power plants in ten countries with a capacity of approximately
18,538 MW (including 4,000 MW attributable to Ekibastuz which currently has a
capacity factor of approximately 20%). AES is also constructing nine additional
power plants in seven countries with a capacity of approximately 4,921 MW. The
Company's total ownership in plants in operation and under construction
aggregates approximately 23,459 MW and its net equity ownership in such plants
is approximately 11,882 MW. In addition, AES has numerous projects in advanced
stages of development, including seven projects with design capacity of
approximately 3,398 MW that have executed or been awarded power sales
agreements.
The Company is also engaged (entirely or in part) in electric power
distribution businesses in Latin America through its subsidiaries and
affiliates. These subsidiaries and affiliates serve approximately eight million
commercial, industrial and residential customers using approximately 63,000
gigawatt hours per year.
As a result of the Company's significant growth in recent years, the
Company's operations have become more diverse with regard to both geography and
fuel source and it has reduced its dependence upon any single project or
customer. During 1996, four of the Company's projects individually contributed
more than 10% of the Company's total revenues, Shady Point which represented
approximately 20%, San Nicolas which represented approximately 16%, Thames which
represented approximately 16% and Barbers Point which represented approximately
15%.
OUTLOOK
The global trend of electricity market restructuring has created
significant new business opportunities for companies like AES. Both domestic and
international electricity markets are being restructured and there is a trend
away from government-owned electricity systems toward deregulated, competitive
market structures. Many countries have rewritten their laws and regulations to
allow foreign investment and private ownership of electricity generation,
transmission or distribution systems. Some countries have or are in the process
of "privatizing" their electricity systems by selling all or part of such
systems to private investors. With 69 of its operating plants and distribution
companies having been acquired or commenced commercial operations since 1992,
AES has been an active participant in both the international privatization
process and the development process. The Company is currently pursuing over 90
projects including acquisitions, the expansion of existing plants and new
projects.
AES believes that there is significant demand for both new and more
efficiently operated electric generating capacity in many regions around the
world. In an effort to further grow and diversify the Company's portfolio of
electric generating plants, AES is pursuing, through its integrated divisions,
additional greenfield developments and
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acquisitions in many countries. Several of these acquisitions, if consummated,
would require the Company to obtain substantial additional financing, in the
form of both debt and equity financing, in the short term.
STRATEGY
The Company's strategy in helping meet the world's need for electricity is
to participate in competitive power markets as they develop either by greenfield
development or by acquiring and operating existing facilities or distribution
systems in these markets. The Company generally operates electric generating
facilities that utilize natural gas, coal, oil, hydro power, or combinations
thereof. In addition, the Company participates in the electric power
distribution and retail supply businesses in certain limited instances, and will
continue to review opportunities in such markets in the future.
Other elements of the Company's strategy include:
o Supplying energy to customers at the lowest cost possible, taking
into account factors such as reliability and environmental
performance;
o Constructing or acquiring projects of a relatively large size
(generally larger than 100 MW);
o When available, entering into power sales contracts with electric
utilities or other customers with significant credit strength; and
o Participating in electric power distribution and retail supply
markets that grant concessions with long-term pricing
arrangements.
The Company also strives for operating excellence as a key element of its
strategy, which it believes it accomplishes by minimizing organizational layers
and maximizing company-wide participation in decision-making. AES has attempted
to create an operating environment that results in safe, clean and reliable
electricity generation. Because of this emphasis, the Company prefers to operate
all facilities which it develops or acquires; however, there can be no assurance
that the Company will have operating control of all of its facilities.
Where possible, AES attempts to sell electricity under long-term power
sales contracts. The Company attempts, whenever possible, to structure the
revenue provisions of such power sales contracts such that changes in the cost
components of a facility (primarily fuel costs) correspond, as effectively as
possible, to changes in the revenue components of the contract. The Company also
attempts to provide fuel for its operating plants generally under long-term
supply agreements, either through contractual arrangements with third parties
or, in some instances, through acquisition of a dependable source of fuel.
As electricity markets become more competitive, it may be more difficult
for AES (and other power generation companies) to obtain long-term power sales
contracts. In markets where long-term contracts are not available, AES will
pursue methods to hedge costs and revenues to provide as much assurance as
possible of a project's profitability. In these situations, AES might choose to
purchase a project with a partial hedge or with no hedge, with the strategy that
its diverse portfolio of projects provides some hedge to the increased
volatility of the project's earnings and cash flow. Additionally, AES may choose
not to participate in these markets.
The Company attempts to finance each domestic and foreign plant primarily
under loan agreements and related documents which, except as noted below,
require the loans to be repaid solely from the project's revenues and provide
that the repayment of the loans (and interest thereon) is secured solely by the
capital stock, physical assets, contracts and cash flow of that plant subsidiary
or affiliate. This type of financing is generally referred to as "project
financing." The lenders under these project financing structures cannot look to
AES or its other projects for repayment, unless such entity explicitly agrees to
undertake liability. AES has explicitly agreed to undertake certain limited
obligations and
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contingent liabilities, most of which by their terms will only be effective or
will be terminated upon the occurrence of future events. In certain
circumstances, the Company may incur indebtedness which is recourse to the
Company or to more than one project.
5
<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 $4.1 billion of outstanding indebtedness at June 30, 1997. As a
result of the Company's level of debt, the Company might be significantly
limited in its ability to meet its debt service obligations, to finance the
acquisition and development of additional projects, to compete effectively or to
operate successfully under adverse economic conditions. As of June 30, 1997, 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 June 30, 1997, the Company had
approximately $386 million in aggregate principal amount of Senior Debt and $911
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 June 30, 1997, the indebtedness and obligations of the Company's subsidiaries
aggregated approximately $3.3 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 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.
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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 76 power plants outside the United States in
operation or under construction. Thirty-nine of such power plants are located in
Brazil; nine in the People's Republic of China; seven in Kazakhstan; six in
Argentina; five in the United Kingdom; three in Hungary; two in each of
Australia and Pakistan; and one in each of the Netherlands, Canada and the
Dominican Republic.
The financing, development and operation of projects outside the United
States entail significant political and financial uncertainties (including,
without limitation, uncertainties associated with first-time privatization
efforts in the countries involved, currency exchange rate fluctuations, currency
repatriation restrictions, currency inconvertibility, political instability,
civil unrest, and expropriation) and other credit quality, liquidity or
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 contingent upon,
among other things, negotiation on terms satisfactory to the Company of
engineering, construction, fuel supply and power sales contracts with other
project participants, receipt of required governmental permits and consents and
timely implementation and satisfactory completion of construction. There can be
no assurance that AES will be able to obtain new power sales contracts, overcome
local opposition, if any, obtain the necessary site agreements, fuel supply and
ash disposal agreements, construction contracts, steam sales contracts, licenses
and certifications, environmental and other permits and financing commitments
necessary for the successful development of its projects. There can be no
assurance that development efforts on any particular project, or the Company's
efforts generally, will be successful. If these development efforts are not
successful, the Company may abandon a project under development. At the time of
abandonment, the Company would expense all capitalized development costs
incurred in connection therewith and
7
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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."
Risks Associated with Acquisitions. The Company has achieved a significant
portion of its growth through acquisitions and expects that it will continue to
grow, in part, through acquisitions. During 1997 alone the Company consummated
several major acquisitions in which the Company invested an aggregate of $1.9
billion (excluding non-recourse debt). Although each of the acquired businesses
had a significant operating history at the time of its acquisition by the
Company, the Company has a limited history of owning and operating these
businesses. In addition, most of these businesses were government owned and some
were operated as part of a larger integrated utility prior to their acquisition
by the Company. There can be no assurances that the Company will be successful
in transitioning these to private ownership, that such businesses will perform
as expected or that the returns from such businesses will support the
indebtedness incurred to acquire them or the capital expenditures needed to
develop them.
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 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.
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Dependence on Utility Customers and Certain Projects. The nature of most of
AES's power projects is such that each facility generally relies on one power
sales contract with a single customer for the majority, if not all, of its
revenues over the life of the power sales contract. During 1996, five customers,
including Connecticut Light & Power Company, a subsidiary of Northeast
Utilities, accounted for 73% of the Company's consolidated total revenues. The
prolonged failure of any one utility customer to fulfill its contractual
obligations could have a substantial negative impact on AES's primary source of
revenues. AES has sought to reduce this risk in part by entering into power
sales contracts with utilities or other customers of strong credit quality and
by locating its plants in different geographic areas in order to mitigate the
effects of regional economic downturns.
Four of the Company's plants collectively represented approximately 39% of
AES's consolidated total assets at December 31, 1996 and generated approximately
67% of AES's consolidated total revenues for the year ended December 31, 1996.
Sales to Connecticut Light & Power Company ("CL&P") represented 16% of the
Company's total revenues in 1996. Moody's Investor Service Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P") have recently downgraded CL&P's senior
secured long-term debt from Baa3/BBB- to Ba1/BB+, Both Moody's and S&P have
placed CL&P under review for possible downgrade or on credit watch. In March
1997, as a result of regulatory action by the Public Service Commission of New
Hampshire, Moody's and S&P downgraded the senior unsecured debt of Northeast
Utilities, the parent of CL&P, from Ba2/BB to Ba3/BB- and placed Northeast
Utilities on watch for possible downgrade.
Regulatory Uncertainty. AES's cogeneration operations in the United States
are subject to the provisions of various laws and regulations, including the
Public Utility Regulatory Policies Act of 1978, as amended ("PURPA") and the
Public Utility Holding Company Act, 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 comprehensive legislation to restructure the
electric utility industry, allow retail competition, and deregulate most
electric rates. The effect of any such repeal cannot be predicted, although any
such repeal could have a material adverse effect on the Company.
9
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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 June 30, 1997, AES's two founders,
Roger W. Sant and Dennis W. Bakke, and their immediate families together owned
beneficially approximately 24.1% of AES's outstanding Common Stock. As a result
of their ownership interests, Messrs. Sant and Bakke may be able to
significantly influence or exert control over the affairs of AES, including the
election of the Company's directors. As of June 30, 1997, all of AES's officers
and directors and their immediate families together owned beneficially
approximately 32.5% 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.
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Shares Eligible for Future Sale. Certain credit facilities of AES
subsidiaries are secured by the pledge of 34.6 million shares of the AES Common
Stock held by a subsidiary of AES. The sale of a substantial number of such
shares in the public market upon any foreclosure or otherwise could have an
adverse effect on the market price of the AES Common Stock.
Risk of Fraudulent Transfer. Various fraudulent conveyance laws have been
enacted for the protection of creditors and may be applied by a court on behalf
of any unpaid creditor or a representative of AES's creditors in a lawsuit to
subordinate or avoid Debt Securities in favor of other existing or future
creditors of AES. Under applicable provisions of the U.S. Bankruptcy code or
comparable provisions of state fraudulent transfer or conveyance laws, if AES at
the time of issuance of Debt Securities , (i) incurred such indebtedness with
intent to hinder, delay or defraud any present or future creditor of AES or
contemplated insolvency with a design to prefer one or more creditors to the
exclusion in whole or in part of others or (ii) received less than reasonably
equivalent value or fair consideration for issuing Debt Securities and AES (a)
was insolvent, (b) was rendered insolvent by reason of the issuance of the Debt
Securities, (c) was engaged or about to engage in business or a transaction for
which the remaining assets of AES constitute unreasonably small capital to carry
on its business or (d) intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they mature, then, in each case, a court
of competent jurisdiction could void, in whole or in part, the Debt Securities.
Among other things, a legal challenge of the Debt Securities on fraudulent
conveyance grounds may focus on the benefits, if any, realized by AES as a
result of the issuance by AES of the Debt Securities.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law applied in such case. Generally, however, AES would be considered
insolvent if the sum of its debts, including contingent liabilities, were
greater than all of its assets at fair valuation or if the present fair market
value of its assets were less than the amount that would be required to pay the
probable liability on its existing debts, including contingent liabilities, as
they become absolute and mature. There can be no assurance that, after providing
for all prior claims, there will be sufficient assets to satisfy the claims of
the holders of the Debt Securities.
Management believes that, for purposes of all such insolvency, bankruptcy
and fraudulent transfer or conveyance laws, the Debt Securities are being
incurred without the intent to hinder, delay or defraud creditors and for proper
purposes and in good faith, and that AES after the issuance of the Debt
Securities will be solvent, will have sufficient capital for carrying on its
business and will be able to pay its debts as they mature. There can be no
assurance, however, that a court passing on such questions would agree with
management's view.
No Prior Public Market--Possible Price Volatility of Debt Securities, Stock
Purchase Contracts, Stock Purchase Units and Preferred Stock. Prior to the
offering, there has been no public market for the Senior Debt Securities, the
Junior Subordinated Debt Securities, the Preferred Stock, the Stock Purchase
Contracts and the Stock Purchase Units. There can be no assurance that an active
trading market for the Senior Debt Securities, the Junior Subordinated Debt
Securities, the Preferred Stock, the Stock Purchase Contracts or the Stock
Purchase Units will develop or be sustained. If such a market were to develop,
the Senior Debt Securities, the Junior Subordinated Debt Securities, the
Preferred Stock, the Stock Purchase Contracts or the Stock Purchase Units could
trade at prices that may be higher or lower than their initial offering price
depending upon many factors, including prevailing interest rates, the Company's
operating results and the markets for similar securities. Historically, the
market for non-investment grade debt has demonstrated substantial volatility in
the prices of securities similar to the Debt Securities. There can be no
assurance that the future market for the Debt Securities will not be subject to
similar volatility.
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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 500,000,000 shares of Common Stock, par value $.01 per
share, and 50,000,000 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 June 30, 1997, there were, after giving effect to the stock split
discussed below, 165,309,292 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 on the NYSE Composite Tape and
by NASDAQ/NMS. In July 1997, the Company announced a two for one stock split, in
the form of a stock dividend, for holders of record on July 28, 1997 of its
Common Stock, par value $.01 per share, which was paid on August 28, 1997. The
prices set forth below are adjusted for such stock split.
HIGH LOW
------------ ------------
1995
- ----
First Quarter...................................... $ 9.88 $ 8.00
Second Quarter..................................... 9.63 8.00
Third Quarter...................................... 10.81 9.25
Fourth Quarter..................................... 12.00 9.38
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HIGH LOW
------------ ------------
1996
- ----
First Quarter...................................... $ 12.63 $ 10.50
Second Quarter..................................... 14.81 11.13
Third Quarter...................................... 20.25 13.94
Fourth Quarter..................................... 25.06 19.63
HIGH LOW
------------ ------------
1997
- ----
First Quarter...................................... $ 34.13 $ 22.38
Second Quarter..................................... 37.75 27.50
Third Quarter ..................................... 45.25 34.63
Fourth Quarter (through November 6, 1997).......... 49.63 38.94
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 June 30, 1997, 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,
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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.
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.
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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), 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 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;
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(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.
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
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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 passu 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 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
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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 8.875% Senior Subordinated
Debentures due 2027, 8.50% Senior Subordinated Notes due 2007, 8.375% Senior
Subordinated Notes Due 2007 and the Company's 10.25% 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 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.
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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 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
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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; (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
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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 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 the terms in "Restriction
on Mergers, Consolidations and Sales of Assets" described below; (iii) to comply
with any requirements of the Commission in connection with the qualification of
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
22
<PAGE>
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.
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
23
<PAGE>
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.
24
<PAGE>
DESCRIPTION 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.
25
<PAGE>
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, New York, New York.
EXPERTS
The financial statements as of December 31, 1996 and 1995 and for each of
the three years in the period ended December 31, 1996 incorporated by reference
in this Prospectus from the Company's Current Report on Form 8-K filed November
6, 1997 and the related financial statement schedules incorporated by reference
in the Registration Statement from the Company's Annual Report on Form 10-K have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports which are incorporated by reference herein, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
26
<PAGE>
The financial statements of Companhia Energetica de Minas Gerais -- CEMIG
for the years ended December 31, 1996 and 1995, prepared in accordance with
accounting principles generally accepted in Brazil, incorporated by reference in
this Prospectus from Item 7 of the Current Report on Form 8-K of The AES
Corporation filed July 16, 1997, have been audited by Price Waterhouse Auditores
Independentes, Belo Horizonte, Brazil, independent accountants, as stated in
their report, which is incorporated herein by reference, and has been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
27
<PAGE>
====================================== ======================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE
CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT, IN CONNECTION WITH ANY $1,500,000,000
OFFERING CONTEMPLATED HEREBY, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY UNDERWRITER, AGENT OR
DEALER. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR ANY PROSPECTUS THE AES CORPORATION
SUPPLEMENT NOR ANY SALE MADE HEREUNDER
OR THEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THEREOF. NEITHER THIS DEBT SECURITIES
PROSPECTUS NOR ANY PROSPECTUS COMMON STOCK
SUPPLEMENT SHALL CONSTITUTE AN OFFER PREFERRED STOCK
TO SELL OR A SOLICITATION OF AN OFFER STOCK PURCHASE CONTRACTS
TO BUY ANY SECURITIES BY ANYONE IN ANY STOCK PURCHASE UNITS
JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
-----------------------
-----------------------
PROSPECTUS
TABLE OF CONTENTS
PAGE -----------------------
Available Information............. 1
Incorporation of Certain
Information by Reference....... 1
Use of Proceeds................... 2
Ratios of Earnings to Fixed
Charges........................ 2
The Company....................... 3
Risk Factors...................... 5
Description of Capital Stock...... 11
Description of Debt Securities.... 15
Description of Stock Purchase
Contracts and Stock Purchase
Units.......................... 24
Plan of Distribution.............. 25
Legal Matters..................... 25
Experts........................... 25 , 1997
====================================== ======================================
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 7, 1997
PROSPECTUS
[LOGO]
THE AES CORPORATION
$1,500,000,000
JUNIOR SUBORDINATED DEBT SECURITIES
AES TRUST III
AES TRUST IV
AES TRUST V
PREFERRED TRUST SECURITIES FULLY AND UNCONDITIONALLY GUARANTEED AS SET FORTH
HEREIN BY THE AES CORPORATION
The AES Corporation (the "Company" or "AES") may from time to time offer,
together or separately unsecured junior subordinated securities (the "Junior
Subordinated Debt Trust Securities") consisting 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 Junior
Subordinated Debt Trust Securities when issued will be unsecured obligations of
the Company. The Company's obligations under the Junior Subordinated Debt Trust
Securities will be subordinate and junior in right of payment to all Senior and
Subordinated Debt (as defined herein) of the Company.
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.
-----------------------
AES Trust III, AES Trust IV and AES Trust V (collectively, the "AES
Trusts"), each a statutory business trust formed under the laws of the State of
Delaware, may offer and sell, from time to time, preferred trust securities
representing undivided beneficial interests in the assets of the respective AES
Trust (the "Preferred Securities" and, together with the Junior Subordinated
Debt Trust Securities, the
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
"Securities"). The Preferred Securities may be offered in amounts, at prices and
on terms to be determined at or prior to the time of any such offering. The
payment of periodic cash distributions ("distributions") with respect to
Preferred Securities of each of the AES Trusts out of moneys held by the
Property Trustee (as defined herein) of each of the AES Trusts, and payments on
liquidation of each AES Trust and on redemption of Preferred Securities of such
AES Trust, will be guaranteed by the Company fully and unconditionally as
described herein (each such guarantee, a "Preferred Securities Guarantee"). See
"Description of the Preferred Securities Guarantees." The Company's obligation
under each Preferred Securities Guarantee is an unsecured obligation of the
Company and will rank (i) subordinate and junior in right of payment to all
other liabilities of the Company, including the Junior Subordinated Debt Trust
Securities, except those made pari passu or subordinate by their terms, and (ii)
senior to all capital stock now or hereafter issued by the Company and to any
guarantee now or hereafter entered into by the Company in respect of any of its
capital stock. Junior Subordinated Debt Trust Securities may be issued and sold
from time to time in one or more series by the Company to an AES Trust, or a
trustee of such trust, in connection with the investment of the proceeds from
the offering of Preferred Securities and Common Securities (as defined herein)
of such AES Trust. The Junior Subordinated Debt Trust Securities purchased by an
AES Trust may be subsequently distributed pro rata to holders of Preferred
Securities and Common Securities in connection with the dissolution of such AES
Trust, upon the occurrence of certain events as may be described in an
accompanying Prospectus Supplement.
Specific terms of the Junior Subordinated Debt Trust Securities and
Preferred 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 will describe, without limitation and where
applicable, the following: (i) in the case of Junior Subordinated Debt Trust
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
Junior Subordinated Debt Trust Securities and the maximum length of such
deferral period, the public offering price, any listing on a securities exchange
and other specific terms of the offering; and (ii) in the case of Preferred
Securities, the specific designation, number of securities, liquidation amount
per security, initial public offering price, and any listing on a securities
exchange, distribution rate (or method of calculation thereof), dates on which
distributions shall be payable and dates from which distributions shall accrue,
voting rights (if any), terms for any conversion or exchange into other
securities, any redemption or sinking fund provisions, any other rights,
preferences, privileges, limitations or restrictions relating to the Preferred
Securities and the terms upon which the proceeds of the sale of the Preferred
Securities shall be used to purchase a specific series of Junior Subordinated
Debt Trust Securities of the Company. Unless otherwise indicated in the
Prospectus Supplement, the Company does not intend to list any of the Offered
Securities 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. By separate
prospectus, the form of which is included in the Registration Statement of which
this Prospectus is a part, the Company may offer from time to time debt
securities or preferred stock. The aggregate initial public offering price of
the securities to be offered by this Prospectus and such other prospectus shall
not exceed $1,500,000,000.
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 and/or any AES Trust, 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 , 1997.
<PAGE>
AVAILABLE INFORMATION
The AES Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission").
These reports, proxy and information statements and other information may be
inspected without charge and copied at the public reference facilities
maintained by the Commission at its principal offices at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such materials also can be obtained at prescribed rates
from the Public Reference Section of the Commission at the principal offices of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Such material may also be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006. Such material may also be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the 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, 1996; (ii) the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997; (iii) the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997; (iv) the Company's
Current Reports on Form 8-K filed on filed on November 6, 1997, October 24,
1997, August 18, 1997, July 16, 1997, July 15, 1997, July 14, 1997, July 3,
1997, March 24, 1997, March 13, 1997, February 19, 1997 and January 30, 1997 and
the Company's Current Report on Form 8-K/A filed on August 5, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
termination of the offering being made hereby shall be deemed to be incorporated
in this Prospectus by reference and to be a part hereof from the respective
dates of the filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus 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.
<PAGE>
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement,
proceeds from the sale of the Junior Subordinated Debt Trust Securities will be
used by the Company for general corporate purposes and initially may be
temporarily invested in short-term securities.
Each AES Trust will use all proceeds received from the sale of its Trust
Securities to purchase Junior Subordinated Debt Trust Securities from the
Company.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------- SIX MONTHS
ENDED
1992 1993 1994 1995 1996 JUNE 30, 1997
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges ..................... 1.37 1.62 2.08 2.18 1.83 1.71
</TABLE>
For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before income taxes and
minority interest, plus fixed charges, less capitalized interest, less excess of
earnings over dividends of less-than-fifty-percent-owned companies. Fixed
charges consist of interest (including capitalized interest) on all
indebtedness, amortization of debt discount and expense and that portion of
rental expense which the Company believes to be representative of an interest
factor. A statement setting forth the computation of the above ratios of
earnings to fixed charges is on file as an exhibit to the Registration Statement
of which this Prospectus is a part.
During the period from January 1, 1992 until June 30, 1997, no shares of
Preferred Stock were issued or outstanding, and during that period the Company
did not pay any Preferred Stock dividends.
2
<PAGE>
THE COMPANY
AES is a global power company committed to supplying electricity to
customers world-wide in a socially responsible way. The Company was one of the
original entrants in the independent power market and today is one of the
world's largest independent power companies, based on net equity ownership of
generating capacity (in megawatts) in operation or under construction. AES
markets power principally from electricity generating facilities that it
develops, acquires, owns and operates.
Over the last five years, the Company has experienced significant growth.
This growth has resulted primarily from the development and construction of new
plants ("greenfield development") and also from the acquisition of existing
generating plants and distribution companies, through competitively bid
privatization initiatives outside of the United States or negotiated
acquisitions. Since 1992, the Company's total generating capacity in megawatts
has grown from 1,829 MW to 18,538 MW (an increase of 914%), with the total
number of plants in operation increasing from eight to 74. Additionally, the
Company's total revenues have increased at a compound annual growth rate of 20%
from $401 million in 1992 to $835 million in 1996, while net income has
increased at a compound annual growth rate of 22% from $56 million to $125
million over the same period.
AES operates and owns (entirely or in part), through subsidiaries and
affiliates, power plants in ten countries with a capacity of approximately
18,538 MW (including 4,000 MW attributable to Ekibastuz which currently has a
capacity factor of approximately 20%). AES is also constructing nine additional
power plants in seven countries with a capacity of approximately 4,921 MW. The
Company's total ownership in plants in operation and under construction
aggregates approximately 23,459 MW and its net equity ownership in such plants
is approximately 11,882 MW. In addition, AES has numerous projects in advanced
stages of development, including seven projects with design capacity of
approximately 3,398 MW that have executed or been awarded power sales
agreements.
The Company is also engaged (entirely or in part) in electric power
distribution businesses in Latin America through its subsidiaries and
affiliates. These subsidiaries and affiliates serve approximately eight million
commercial, industrial and residential customers using approximately 63,000
gigawatt hours per year.
As a result of the Company's significant growth in recent years, the
Company's operations have become more diverse with regard to both geography and
fuel source and it has reduced its dependence upon any single project or
customer. During 1996, four of the Company's projects individually contributed
more than 10% of the Company's total revenues, Shady Point which represented
approximately 20%, San Nicolas which represented approximately 16%, Thames which
represented approximately 16% and Barbers Point which represented approximately
15%.
OUTLOOK
The global trend of electricity market restructuring has created
significant new business opportunities for companies like AES. Both domestic and
international electricity markets are being restructured and there is a trend
away from government-owned electricity systems toward deregulated, competitive
market structures. Many countries have rewritten their laws and regulations to
allow foreign investment and private ownership of electricity generation,
transmission or distribution systems. Some countries have or are in the process
of "privatizing" their electricity systems by selling all or part of such
systems to private investors. With 69 of its operating plants and distribution
companies having been acquired or commenced commercial operations since 1992,
AES has been an active participant in both the international privatization
process and the development process. The Company is currently pursuing over 90
projects including acquisitions, the expansion of existing plants and new
projects.
AES believes that there is significant demand for both new and more
efficiently operated electric generating capacity in many regions around the
world. In an effort to further grow and diversify the Company's portfolio of
electric generating plants, AES is pursuing, through its integrated divisions,
additional greenfield developments and
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acquisitions in many countries. Several of these acquisitions, if consummated,
would require the Company to obtain substantial additional financing, in the
form of both debt and equity financing, in the short term.
STRATEGY
The Company's strategy in helping meet the world's need for electricity is
to participate in competitive power markets as they develop either by greenfield
development or by acquiring and operating existing facilities or distribution
systems in these markets. The Company generally operates electric generating
facilities that utilize natural gas, coal, oil, hydro power, or combinations
thereof. In addition, the Company participates in the electric power
distribution and retail supply businesses in certain limited instances, and will
continue to review opportunities in such markets in the future.
Other elements of the Company's strategy include:
o Supplying energy to customers at the lowest cost possible, taking
into account factors such as reliability and environmental
performance;
o Constructing or acquiring projects of a relatively large size
(generally larger than 100 MW);
o When available, entering into power sales contracts with electric
utilities or other customers with significant credit strength; and
o Participating in electric power distribution and retail supply
markets that grant concessions with long-term pricing
arrangements.
The Company also strives for operating excellence as a key element of its
strategy, which it believes it accomplishes by minimizing organizational layers
and maximizing company-wide participation in decision-making. AES has attempted
to create an operating environment that results in safe, clean and reliable
electricity generation. Because of this emphasis, the Company prefers to operate
all facilities which it develops or acquires; however, there can be no assurance
that the Company will have operating control of all of its facilities.
Where possible, AES attempts to sell electricity under long-term power
sales contracts. The Company attempts, whenever possible, to structure the
revenue provisions of such power sales contracts such that changes in the cost
components of a facility (primarily fuel costs) correspond, as effectively as
possible, to changes in the revenue components of the contract. The Company also
attempts to provide fuel for its operating plants generally under long-term
supply agreements, either through contractual arrangements with third parties
or, in some instances, through acquisition of a dependable source of fuel.
As electricity markets become more competitive, it may be more difficult
for AES (and other power generation companies) to obtain long-term power sales
contracts. In markets where long-term contracts are not available, AES will
pursue methods to hedge costs and revenues to provide as much assurance as
possible of a project's profitability. In these situations, AES might choose to
purchase a project with a partial hedge or with no hedge, with the strategy that
its diverse portfolio of projects provides some hedge to the increased
volatility of the project's earnings and cash flow. Additionally, AES may choose
not to participate in these markets.
The Company attempts to finance each domestic and foreign plant primarily
under loan agreements and related documents which, except as noted below,
require the loans to be repaid solely from the project's revenues and provide
that the repayment of the loans (and interest thereon) is secured solely by the
capital stock, physical assets, contracts and cash flow of that plant subsidiary
or affiliate. This type of financing is generally referred to as "project
financing." The lenders under these project financing structures cannot look to
AES or its other projects for repayment, unless such entity explicitly agrees to
undertake liability. AES has explicitly agreed to undertake certain limited
obligations and
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contingent liabilities, most of which by their terms will only be effective or
will be terminated upon the occurrence of future events. In certain
circumstances, the Company may incur indebtedness which is recourse to the
Company or to more than one project.
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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 $4.1 billion of outstanding indebtedness at June 30, 1997. As a
result of the Company's level of debt, the Company might be significantly
limited in its ability to meet its debt service obligations, to finance the
acquisition and development of additional projects, to compete effectively or to
operate successfully under adverse economic conditions. As of June 30, 1997, the
Company had a consolidated ratio of total debt to total book capitalization
(including current debt) of approximately 75%.
The Junior Subordinated Debt Trust Securities will be subordinated to all
Senior and Senior Subordinated Debt including, but not limited to, the Company's
current $425 million credit facility debt. The obligations of AES under the
Preferred Securities Guarantee are subordinate and junior in right of payment to
all liabilities of AES and pari passu in right of payment with the most senior
preferred stock issued, from time to time, if any, by AES. As of June 30, 1997,
the Company had approximately $911 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 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 Subordinated Debt
before the holders of the Junior Subordinated Debt Trust Securities will be
entitled to receive any payment in respect of the principal of, premium, if any,
or interest on such Junior Subordinated Debt Trust Securities. No payments on
account of principal, premium, if any, or interest in respect of the Junior
Subordinated Debt Trust Securities may be made if there shall have occurred and
be continuing a default in any payment under any Senior and Senior Subordinated
Debt or during certain periods when an event of default under certain Senior and
Subordinated Debt permits the lenders thereunder to accelerate the maturing of
such Senior and Senior Subordinated Debt. See "Description of Junior
Subordinated Debt Trust Securities--Subordination." The Preferred Securities
will rank subordinate and junior in right of payment to all other liabilities of
the Company, including the Junior Subordinated Debt Trust Securities, except
those made pari passu by their terms and (ii) senior to all capital stock now or
hereafter issued by the Company and to any guarantee now or hereafter entered
into by the Company in respect of any of its capital stock. See "Description of
the Preferred Securities Guarantees--Status of the Preferred Securities
Guarantees."
The Junior Subordinated Debt Trust Securities will be effectively
subordinated to the indebtedness and other obligations (including trade
payables) of the Company's subsidiaries. At June 30, 1997, the indebtedness and
obligations of the Company's subsidiaries aggregated approximately $3.3 billion.
The ability of the Company to pay principal of, premium, if any, and interest on
the Junior Subordinated Debt Trust Securities will be dependent upon the receipt
of funds from its subsidiaries by way of dividends, fees, interest, loans or
otherwise. There are no terms in the Junior Subordinated Debt Trust Securities,
the Preferred Securities or the Preferred Securities Guarantee that limit the
Company's or its subsidiaries' ability to incur additional indebtedness. Most of
the Company's subsidiaries with interests in power generation facilities
currently have in place 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 Junior Subordinated Debt Trust Securities or the Preferred 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
Junior Subordinated Debt Trust Securities or the Preferred 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 Junior Subordinated Debt Trust Securities and the
Preferred Securities to participate in the distribution of, or to realize
proceeds from, those assets) will be effectively subordinated to the claims of
any such subsidiary's creditors (including trade creditors and holders of debt
issued by such subsidiary).
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The Company currently conducts substantially all of its operations through its
subsidiaries. See "Description of the Preferred Securities Guarantees--Status of
the Preferred Securities Guarantees" and "Description of the Junior Subordinated
Debt Securities--Subordination."
Doing Business Outside the United States. The Company's involvement in the
development of new projects and the acquisition of existing plants in locations
outside the United States is increasing and most of the Company's current
development and acquisition activities are for projects and plants outside the
United States. The Company, through subsidiaries and joint ventures, has
ownership interests in 76 power plants outside the United States in operation or
under construction. Thirty-nine of such power plants are located in Brazil; nine
in the People's Republic of China; seven in Kazakhstan; six in Argentina; five
in the United Kingdom; three in Hungary; two in each of Australia and Pakistan;
and one in each of the Netherlands, Canada and the Dominican Republic.
The financing, development and operation of projects outside the United
States entail significant political and financial uncertainties (including,
without limitation, uncertainties associated with first-time privatization
efforts in the countries involved, currency exchange rate fluctuations, currency
repatriation restrictions, currency convertibility, political instability, civil
unrest, and expropriation) and other credit quality, liquidity or 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 contingent upon,
among other things, negotiation on terms satisfactory to the Company of
engineering, construction, fuel supply and power sales contracts with other
project participants, receipt of required governmental permits and consents and
timely implementation and satisfactory completion of construction. There can be
no assurance that AES will be able to obtain new power sales contracts, overcome
local opposition, if any, obtain the necessary site agreements, fuel supply and
ash disposal agreements, construction contracts, steam sales contracts, licenses
and certifications, environmental and other permits
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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."
Risks Associated with Acquisitions. The Company has achieved a significant
portion of its growth through acquisitions and expects that it will continue to
grow, in part, through acquisitions. During 1997 alone the Company consummated
several major acquisitions in which the Company invested an aggregate of $1.9
billion (excluding non-recourse debt). Although each of the acquired businesses
had a significant operating history at the time of its acquisition by the
Company, the Company has a limited history of owning and operating these
businesses. In addition, most of these businesses were government owned and some
were operated as part of a larger integrated utility prior to their acquisition
by the Company. There can be no assurances that the Company will be successful
in transitioning these to private ownership, that such businesses will perform
as expected or that the returns from such businesses will support the
indebtedness incurred to acquire them or the capital expenditures needed to
develop them.
Uncertainty of Access to Capital for Future Projects. Each of AES's
projects under development and those independent power facilities it may seek to
acquire may require substantial capital investment. Continued access to capital
with acceptable terms is necessary to assure the success of future projects and
acquisitions. AES has primarily utilized project financing loans to fund the
capital expenditures associated with constructing and acquiring its electric
power plants and related assets. Project financing borrowings have been
substantially non-recourse to other subsidiaries and affiliates and to AES as
the parent company and are generally secured by the capital stock, physical
assets, contracts and cash flow of the related project subsidiary or affiliate.
The Company intends to continue to seek, where possible, such non-recourse
project financing in connection with the assets which the Company or its
affiliates may develop, construct or acquire. However, depending on market
conditions and the unique characteristics of individual projects, the Company's
traditional providers of project financing, particularly multinational
commercial banks, may seek higher borrowing spreads and increased equity
contributions.
Furthermore, because of the reluctance of commercial lending institutions
to provide non-recourse project financing (including financial guarantees) in
certain less developed economies, the Company, in such locations, has and will
continue to seek direct or indirect (through credit support or guarantees)
project financing from a limited number of multilateral or bilateral
international financial institutions or agencies. As a precondition to making
such project financing available, these institutions may also require
governmental guarantees of certain project and sovereign related risks.
Depending on the policies of specific governments, such guarantees may not be
offered and as a result, AES may determine that sufficient financing will
ultimately not be available to fund the related project.
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 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
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provisions of tax and securities laws which are conducive to raising capital in
this manner. Should future access to capital not be available, AES may decide
not to build new plants or acquire existing facilities. While a decision not to
build new plants or acquire existing facilities would not affect the results of
operations of AES on its currently operating facilities or facilities under
construction, such a decision would affect the future growth of AES.
Dependence on Utility Customers and Certain Projects. The nature of most of
AES's power projects is such that each facility generally relies on one power
sales contract with a single customer for the majority, if not all, of its
revenues over the life of the power sales contract. During 1996, five customers,
including Connecticut Light & Power Company, a subsidiary of Northeast
Utilities, accounted for 73% of the Company's consolidated total revenues. The
prolonged failure of any one utility customer to fulfill its contractual
obligations could have a substantial negative impact on AES's primary source of
revenues. AES has sought to reduce this risk in part by entering into power
sales contracts with utilities or other customers of strong credit quality and
by locating its plants in different geographic areas in order to mitigate the
effects of regional economic downturns.
Four of the Company's plants collectively represented approximately 39% of
AES's consolidated total assets at December 31, 1996 and generated approximately
67% of AES's consolidated total revenues for the year ended December 31, 1996.
Sales to Connecticut Light & Power Company ("CL&P") represented 16% of the
Company's total revenues in 1996. Moody's Investor Service Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P") have recently downgraded CL&P's senior
secured long-term debt from Baa3/BBB- to Ba1/BB+. Both Moody's and S&P have
placed CL&P under review for possible downgrade or credit watch. In March 1997,
as a result of regulatory action by the Public Service Commission of New
Hampshire, Moody's and S&P downgraded the senior unsecured debt of Northeast
Utilities, the parent of CL&P, from Ba2/BB to Ba3/BB- and placed Northeast
Utilities on watch for possible downgrade.
Regulatory Uncertainty. AES's cogeneration operations are subject to the
provisions of various laws and regulations, including the Public Utility
Regulatory Policies Act of 1978, as amended ("PURPA") and the Public Utility
Holding Company Act, as amended ("PUHCA"). PURPA provides to qualifying
facilities ("QFs") certain exemptions from substantial federal and state
legislation, including regulation as public utilities. PUHCA regulates public
utility holding companies and their subsidiaries. AES is not and will not be
subject to regulation as a holding company under PUHCA as long as the domestic
power plants it owns are QFs under PURPA. QF status is conditioned on meeting
certain criteria, and would be jeopardized, for example, by the loss of a steam
customer. The Company believes that, upon the occurrence of an event that would
threaten the QF status of one of its domestic plants, it would be able to react
in a manner that would avoid the loss of QF status (such as by replacing the
steam customer). In the event the Company were unable to avoid the loss of such
status for one of its plants, to avoid public utility holding company status,
AES could apply to the Federal Energy Regulatory Commission ("FERC") to obtain
status as an Exempt Wholesale Generator ("EWG"), or could restructure the
ownership of the project subsidiary. EWGs, however, are subject to 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
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PURPA and/or PUHCA may or may not be part of comprehensive legislation to
restructure the electric utility industry, allow retail competition, and
deregulate most electric rates. The effect of any such repeal cannot be
predicted, although any such repeal could have a material adverse effect on the
Company.
Electric Utility Industry Restructuring Proposals. The FERC and many state
utility commissions are currently studying a number of proposals to restructure
the electric utility industry in the United States. Such restructuring would
permit utility customers to choose their utility supplier in a competitive
electric energy market. The FERC issued a final rule in April 1996 which
requires utilities to offer wholesale customers and suppliers open access on
utility transmission lines, on a comparable basis to the utilities' own use of
the lines. The final rule is subject to rehearing and may become the subject of
court litigation. Many utilities have already filed "open access" tariffs. The
utilities contend that they should recover from departing customers their fixed
costs that will be "stranded" by the ability of their wholesale customers (and
perhaps eventually, their retail customers) to choose new electric power
suppliers. The FERC final rule endorses the recovery of legitimate and
verifiable "stranded costs." These may include the costs utilities are required
to pay under many QF contracts which the utilities view as excessive when
compared with current market prices. Many utilities are therefore seeking ways
to lower these contract prices or rescind the contracts altogether, out of
concern that their shareholders will be required to bear all or part of such
"stranded" costs. Some utilities have engaged in litigation against QFs to
achieve these ends.
In addition, future United States electric rates may be deregulated in a
restructured United States electric utility industry and increased competition
may result in lower rates and less profit for United States electricity sellers.
Falling electricity prices and uncertainty as to the future structure of the
industry is inhibiting United States utilities from entering into long-term
power purchase contracts. The effect of any such restructuring on the Company
cannot be predicted, although any such restructuring could have a material
adverse effect on the Company.
Litigation and Regulatory Proceedings. From time to time, the Company and
its affiliates are parties to litigation and regulatory proceedings. Investors
should review the descriptions of such matters contained in the Company's
Annual, Quarterly and Current Reports filed with the Commission and incorporated
by reference herein. There can be no assurances that the outcome of such matters
will not have a material adverse effect on the Company's consolidated financial
position.
Business Subject to Stringent Environmental Regulations. AES's activities
are subject to stringent environmental regulation by federal, state, local and
foreign governmental authorities. For example, the Clean Air Act Amendments of
1990 impose more stringent standards than those previously in effect, and
require states to impose permit fees on certain emissions. Congress and other
foreign governmental authorities also may consider proposals to restrict or tax
certain emissions. These proposals, if adopted, could impose additional costs on
the operation of AES's power plants. There can be no assurance that AES would be
able to recover all or any increased costs from its customers or that its
business, financial condition or results of operations would not be materially
and adversely affected by future changes in domestic or foreign environmental
laws and regulations. The Company has made and will continue to make capital and
other expenditures to comply with environmental laws and regulations. There can
be no assurance that such expenditures will not have a material adverse effect
on the Company's financial condition or results of operations.
Control by Existing Stockholders. As of June 30, 1997, AES's two founders,
Roger W. Sant and Dennis W. Bakke, and their immediate families together owned
beneficially approximately 24.1% of AES's outstanding Common Stock. As a result
of their ownership interests, Messrs. Sant and Bakke may be able to
significantly influence or exert control over the affairs of AES, including the
election of the Company's directors. As of June 30, 1997, all of AES's officers
and directors and their immediate families together owned beneficially
approximately 32.5% 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
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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.
Shares Eligible for Future Sale. Certain credit facilities of AES
subsidiaries are secured by the pledge of 34.6 million shares of the AES Common
Stock held by a subsidiary of AES. The sale of a substantial number of such
shares in the public market upon any foreclosure or otherwise could have an
adverse effect on the market price of the AES Common Stock and thereby an
adverse effect on the market price of any Preferred Securities that are
convertible to AES Common Stock.
Risk of Fraudulent Transfer. Various fraudulent conveyance laws have been
enacted for the protection of creditors and may be applied by a court on behalf
of any unpaid creditor or a representative of AES's creditors in a lawsuit to
subordinate or avoid the Junior Subordinated Debentures in favor of other
existing or future creditors of AES. Under applicable provisions of the U.S.
Bankruptcy code or comparable provisions of state fraudulent transfer or
conveyance laws, if AES at the time of issuance of the Junior Subordinated
Debentures, (i) incurred such indebtedness with intent to hinder, delay or
defraud any present or future creditor of AES or contemplated insolvency with a
design to prefer one or more creditors to the exclusion in whole or in part of
others or (ii) received less than reasonably equivalent value or fair
consideration for issuing the Junior Subordinated Debentures and AES (a) was
insolvent, (b) was rendered insolvent by reason of the issuance of the Junior
Subordinated Debentures, (c) was engaged or about to engage in business or a
transaction for which the remaining assets of AES constitute unreasonably small
capital to carry on its business or (d) intended to incur, or believed that it
would incur, debts beyond its ability to pay such debts as they mature, then, in
each case, a court of competent jurisdiction could void, in whole or in part,
the Junior Subordinated Debentures. Among other things, a legal challenge of the
Junior Subordinated Debentures on fraudulent conveyance grounds may focus on the
benefits, if any, realized by AES as a result of the issuance by AES of the
Junior Subordinated Debentures.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law applied in such case. Generally, however, AES would be considered
insolvent if the sum of its debts, including contingent liabilities, were
greater than all of its assets at fair valuation or if the present fair market
value of its assets were less than the amount that would be required to pay the
probable liability on its existing debts, including contingent liabilities, as
they become absolute and mature. There can be no assurance that, after providing
for all prior claims, there will be sufficient assets to satisfy the claims of
the holders of the Junior Subordinated Debentures.
[JAY]
Management believes that, for purposes of all such insolvency, bankruptcy
and fraudulent transfer or conveyance laws, the Junior Subordinated Debentures
are being incurred without the intent to hinder, delay or defraud creditors and
for proper purposes and in good faith, and that AES after the issuance of the
Junior Subordinated Debentures will be solvent, will have sufficient capital for
carrying on its business and will be able to pay its debts as they mature. There
can be no assurance, however, that a court passing on such questions would agree
with management's view.
Ability of AES to Make Distributions. The ability of the AES Trusts to make
distributions and other payments on the Preferred Securities is solely dependent
upon the Company making interest and other payments on the Junior Subordinated
Debt Trust Securities deposited as trust assets as and when required. If the
Company were not to make distributions or other payments on the Junior
Subordinated Debt Trust Securities for any reason, including as a result of the
Company's election to defer the payment of interest on the Junior Subordinated
Debt Trust Securities by extending the interest period on the Junior
Subordinated Debt Trust Securities, the AES Trusts will not make payments on the
Trust Securities (as defined herein). In such an event, holders of the Preferred
Securities would not be able to rely on the Preferred Securities Guarantee since
distributions and other payments on the Preferred Securities are subject to such
Guarantee only if and to the extent that the Company has made a payment to the
Property Trustee (as defined herein) of interest or principal on the Junior
Subordinated Debt Trust Securities deposited in the Trust as trust assets.
Instead, holders of Preferred Securities would rely on the enforcement by the
Property Trustee of its rights as registered holder of the Junior Subordinated
Debt Trust Securities against the Company pursuant to the terms of the Indenture
(as defined herein). However, if the Trust's failure to make distributions on
the Preferred Securities is a consequence of the Company's exercise of its right
to extend the interest payment period for the Junior Subordinated Debt Trust
Securities, the Property Trustee will have no right to enforce the payment of
distributions on the Preferred Securities until an Event of Default (as defined
herein) under the Declaration (as defined herein) shall have occurred.
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The Declaration provides that the Company shall pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs and
expenses of the AES Trusts, including any taxes and all costs and expenses with
respect thereto, to which the AES Trusts may become subject, except for United
States withholding taxes. No assurance can be given that the Company will have
sufficient resources to enable it to pay such debts, obligations, costs and
expenses on behalf of the AES Trusts.
Option to Extend Interest Payment Period; Tax Impact of Extension. So long
as the Company shall not be in default in the payment of interest on the Junior
Subordinated Debt Trust Securities, the Company has the right under the
Indenture to defer payments of interest on the Junior Subordinated Debt Trust
Securities by extending the interest payment period from time to time on the
Junior Subordinated Debt Trust Securities for an extension period not exceeding
20 consecutive quarterly interest periods (an "Extension Period"), during which
no interest shall be due and payable. In such an event, quarterly distributions
on the Preferred Securities would not be made by the applicable AES Trust during
any such Extension Period. If the Company exercises the right to extend an
interest payment period, the Company may not during such Extension Period
declare or pay dividends on, or redeem, purchase, acquire or make a distribution
or liquidation payment with respect to, any of its common stock or preferred
stock; provided that (i) the Company will be permitted to pay accrued dividends
upon the exchange or redemption of any series of preferred stock of the Company
as may be outstanding from time to time, in accordance with the terms of such
stock and (ii) the foregoing will not apply to stock dividends paid by the
Company. Under the Amended and Restated Certificate of Incorporation the Company
is authorized to issue up to 50,000,000 shares of preferred stock. As of June
30, 1997, no shares of the Company's preferred stock were outstanding. The
Company may from time to time offer shares of its preferred stock to the public.
Prior to the termination of any Extension Period, the Company may further
extend such Extension Period; provided that such Extension Period together with
all such previous and further extensions thereof may not exceed 20 consecutive
quarterly interest periods. Upon the termination of any Extension Period and the
payment of all amounts then due, the Company may commence a new Extension
Period, subject to the above requirements. The Company may also prepay at any
time all or any portion of the interest accrued during an Extension Period.
Consequently, there could be multiple Extension Periods of varying lengths
throughout the term of the Junior Subordinated Debt Trust Securities, not to
exceed 20 consecutive quarters or to cause any extension beyond the maturity of
the Junior Subordinated Debt Trust Securities. See any accompanying Prospectus
Supplement relating to Junior Subordinated Debt Trust Securities.
Because the Company has the right to extend the interest payment period for
an Extension Period of up to 20 consecutive quarterly interest periods on
various occasions, the Junior Subordinated Debt Trust Securities will be treated
as issued with "original issue discount" for United States federal income tax
purposes. As a result, holders of Preferred Securities will be required to
include their pro rata share of original issue discount in gross income as it
accrues for United States federal income tax purposes in advance of the receipt
of cash. Generally, all of a securityholder's taxable interest income with
respect to the Junior Subordinated Debt Trust Securities will be accounted for
as "original issue discount" and actual distributions of stated interest will
not be separately reported as taxable income. See any accompanying Prospectus
Supplement relating to Junior Subordinated Debt Trust Securities.
Special Event Redemption or Distribution. Upon the occurrence and during
the continuation of a Tax Event or Investment Company Event (each as defined
herein), which may occur at any time, the applicable AES Trust shall, unless the
Junior Subordinated Debt Trust Securities are redeemed in the limited
circumstances described below, be dissolved with the result that Junior
Subordinated Debt Trust Securities having an aggregate principal amount equal to
the aggregate stated liquidation amount of, and bearing accrued and unpaid
distributions on, the Preferred Securities and Common Securities would be
distributed on a Pro Rata Basis (as defined herein under "The AES Trusts --
Distributions") to the holders of the Preferred Securities and Common Securities
in liquidation of such Trust. In the case of a Tax Event, in certain
circumstances, the Company shall have the right to redeem at any time the Junior
Subordinated Debt Trust Securities in whole or in part, in which event the
applicable AES Trust will redeem Preferred Securities and Common Securities on a
Pro Rata Basis to the same extent as the Junior Subordinated Debt Trust
Securities are redeemed. There can be no assurance as to the market prices for
Preferred Securities or the Junior Subordinated Debt Trust Securities which may
be distributed in exchange for Preferred Securities if a dissolution and
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liquidation of the applicable AES Trust were to occur. Accordingly, the
Preferred Securities that an investor may purchase, or the Junior Subordinated
Debt Trust Securities that the investor may receive on dissolution and
liquidation of the applicable AES Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
Because holders of Preferred Securities may receive Junior Subordinated Debt
Trust Securities upon the occurrence of a Special Event (as defined herein),
prospective purchasers of Preferred Securities are also making an investment
decision with regard to the Junior Subordinated Debt Trust Securities and should
carefully review all the information regarding the Junior Subordinated Debt
Trust Securities contained in any accompanying Prospectus Supplement relating to
Junior Subordinated Debt Trust Securities.
There can be no assurance that future federal legislative proposals will
not prevent the Company from deducting interest on the Junior Subordinated Debt
Trust Securities. This would constitute a Tax Event and could result in the
distribution of any Junior Subordinated Debt Trust Securities to holders of the
Preferred Securities or, in certain circumstances, the redemption of such
securities by the Company and the distribution of the resulting cash in
redemption of the Preferred Securities. See any accompanying Prospectus
Supplement relating to Junior Subordinated Debt Trust Securities.
"Tax Event" means that the Regular Trustees (as defined herein) shall have
obtained an opinion of a nationally recognized independent tax counsel
experienced in such matters (a "Dissolution Tax Opinion") to the effect that on
or after the date of any accompanying Prospectus Supplement relating to Junior
Subordinated Debt Trust Securities as a result of (a) any amendment to, or
change in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, (b) any amendment
to, or change in, an interpretation or application of any such laws or
regulations by any legislative body, court, governmental agency or regulatory
authority (including the enactment of any legislation and the publication of any
judicial decision or regulatory determination), (c) any interpretation or
pronouncement that provides for a position with respect to such laws or
regulations that differs from the theretofore generally accepted position or (d)
any action taken by any governmental agency or regulatory authority, which
amendment or change is enacted, promulgated, issued or effective or which
interpretation or pronouncement is issued or announced or which action is taken,
in each case on or after the date of such Prospectus Supplement, there is more
than an insubstantial risk that (i) the applicable AES Trust is, or will be
within 90 days of the date thereof, subject to United States federal income tax
with respect to income accrued or received on the Junior Subordinated Debt Trust
Securities, (ii) the applicable AES Trust is, or will be within 90 days of the
date thereof, subject to more than a de minimis amount of other taxes, duties or
other governmental charges or (iii) interest payable by the Company to the
applicable AES Trust on the Junior Subordinated Debt Trust Securities is not, or
within 90 days of the date thereof will not be, deductible by the Company for
United States federal income tax purposes.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced in
practice under the Investment Company Act of 1940, as amended (the "1940 Act"),
that as a result of the occurrence of a change in law or regulation or a change
in interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
there is more than an insubstantial risk that an AES Trust is or will be
considered an "investment company" which is required to be registered under the
1940 Act, which Change in 1940 Act Law becomes effective on or after the date of
any accompanying Prospectus Supplement relating to Junior Subordinated Debt
Trust Securities.
"Special Event" means a Tax Event or an Investment Company Event.
Limiting Voting Rights. Holders of Preferred Securities will have limited
voting rights, but will not be able to appoint, remove or replace, or to
increase or decrease the number of, Trustees, which rights are vested
exclusively in the Common Securities (as defined herein under "The AES Trusts").
Trading Prices of Preferred Securities. The Preferred Securities constitute
a new issue of securities with no established trading market. The Preferred
Securities may trade at a price that does not fully reflect the value of accrued
but unpaid interest with respect to the underlying Junior Subordinated Debt
Trust Securities. A holder who disposes of his Preferred Securities between
record dates for payments of distributions thereon will be required to include
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accrued but unpaid interest on the Junior Subordinated Debt Trust Securities
through the date of disposition in income as ordinary income, and to add such
amount to his adjusted tax basis in his pro rata share of the underlying Junior
Subordinated Debt Trust Securities deemed disposed of. Accordingly, such a
holder will recognize a capital loss to the extent the selling price (which may
not fully reflect the value of accrued but unpaid interest) is less than the
holders adjusted tax basis (which will include accrued but unpaid interest).
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes. See any
accompanying Prospectus Supplement relating to Junior Subordinated Debt Trust
Securities.
Potential Market Volatility During Extension Period. As described above,
the Company has the right to extend an interest payment period on the Junior
Subordinated Debt Trust Securities from time to time for a period not exceeding
20 consecutive quarterly interest periods. If the Company determines to extend
an interest payment period, or if the Company thereafter extends an Extension
Period or prepays interest accrued during an Extension Period as described
above, the market price of the Preferred Securities is likely to be affected. In
addition, as a result of such rights, the market price of the Preferred
Securities (which represent an undivided interest in Junior Subordinated Debt
Trust Securities) may be more volatile than other securities on which original
issue discount accrues that do not have such rights. A holder that disposes of
its Preferred Securities during an Extension Period, therefore, may not receive
the same return on its investment as a holder that continues to hold its
Preferred Securities. See any accompanying Prospectus Supplement relating to
Junior Subordinated Debt Trust Securities.
No Prior Public Market--Possible Price Volatility of the Securities. Prior
to the offering, there has been no public market for the Securities. There can
be no assurance that an active trading market for the Securities will develop or
be sustained. If such a market were to develop, the Securities, could trade at
prices that may be higher or lower than their 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 Securities. There can be no assurance that the
future market for the Securities will not be subject to similar volatility.
Accordingly, no assurance can be given as to the liquidity of the Securities.
Shares Eligible for Future Sale. Certain credit facilities of AES
subsidiaries are secured by the pledge of 34.6 million shares of the AES Common
Stock held by a subsidiary of AES. The sale of a substantial number of such
shares in the public market upon any foreclosure or otherwise could have an
adverse effect on the market price of the AES Common Stock and thereby an
adverse effect on the market price of any Preferred Securities that are
convertible to AES Common Stock.
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THE AES TRUSTS
Each of the AES Trust III, AES Trust IV and AES Trust V is a statutory
business trust formed, in the case of AES Trust III, on November 13, 1996, and
in the case of AES Trust IV and AES Trust V, on November 5, 1997, in each case
under the Delaware Business Trust Act (the "Business Trust Act") pursuant to a
separate declaration of trust among the Trustees (as defined herein) of such AES
Trust and the Company and the filing of a certificate of trust with the
Secretary of State of the State of Delaware. Such declaration will be amended
and restated in its entirety (as so amended and restated, the "Declaration")
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part, as of the date the Preferred Securities of
such AES Trust are initially issued. Each Declaration will be qualified under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
This description summarizes the material terms of the Declarations and is
qualified in its entirety by reference to the form of Declaration, which has
been filed as an exhibit to the Registration Statement of which this Prospectus
is a part, and the Trust Indenture Act.
TRUST SECURITIES
Upon issuance of any Preferred Securities by an AES Trust, the holders
thereof will own all of the issued and outstanding Preferred Securities of such
AES Trust. The Company will acquire securities representing common undivided
beneficial interests in the assets of each AES Trust (the "Common Securities"
and, together with the Preferred Securities, the "Trust Securities") in an
amount equal to at least 3% of the total capital of such AES Trust and will own,
directly or indirectly, all of the issued and outstanding Common Securities of
each AES Trust. The Preferred Securities and the Common Securities will rank
pari passu with each other and will have equivalent terms; provided that (i) if
a Declaration Event of Default (as defined herein under "--Events of Default")
under the Declaration of an AES Trust occurs and is continuing, the holders of
Preferred Securities of such AES Trust will have a priority over holders of the
Common Securities of such AES Trust with respect to payments in respect of
distributions and payments upon liquidation, redemption and maturity and (ii)
holders of Common Securities have the exclusive right (subject to the terms of
the Declaration) to appoint, remove or replace the Trustees and to increase or
decrease the number of Trustees. Each AES Trust exists for the purpose of (a)
issuing its Preferred Securities, (b) issuing its Common Securities to the
Company, (c) investing the gross proceeds from the sale of the Trust Securities
in Junior Subordinated Debt Trust Securities of the Company and (d) engaging in
only such other activities as are necessary, convenient or incidental thereto.
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the applicable
Declaration, the Business Trust Act and the Trust Indenture Act.
POWERS AND DUTIES OF TRUSTEES
The number of trustees (the "Trustees") of each AES Trust shall initially
be five. Three of such Trustees (the "Regulator Trustees") are individuals who
are employees or officers of the Company. The fourth such trustee will be The
First National Bank of Chicago, which is unaffiliated with the Company and which
will serve as the property trustee (the "Property Trustee") and act as the
indenture trustee for purposes of the Trust Indenture Act. The fifth such
trustee is First Chicago Delaware Inc. that has its principal place of business
in the State of Delaware (the "Delaware Trustee"). Pursuant to each Declaration,
legal title to the Junior Subordinated Debt Trust Securities purchased by an AES
Trust will be held by the Property Trustee for the benefit of the holders of the
Trust Securities of such AES Trust, and the Property Trustee will have the power
to exercise all rights, powers and privileges under the Indenture (as defined
under "Description of the Junior Subordinated Debt Trust Securities") with
respect to the Junior Subordinated Debt Trust Securities. In addition, the
Property Trustee will maintain exclusive control of a segregated non-interest
bearing bank account (the "Property Account") to hold all payments in respect of
the Junior Subordinated Debt Trust Securities purchased by an AES Trust for the
benefit of the holders of Trust Securities. The Property Trustee will promptly
make distributions to the holders of the Trust Securities out of funds from the
Property Account. The Preferred Securities Guarantees are separately qualified
under the Trust Indenture Act and will be held by The First National Bank of
Chicago, acting in its capacity as indenture trustee with respect thereto, for
the benefit of the holders of the applicable Preferred Securities. As used in
this Prospectus and any accompanying Prospectus Supplement, the
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term "Property Trustee" with respect to an AES Trust refers to The First
National Bank of Chicago acting either in its capacity as a Trustee under the
relevant Declaration and the holder of legal title to the Junior Subordinated
Debt Trust Securities purchased by that Trust or in its capacity as indenture
trustee under, and the holder of, the applicable Preferred Securities Guarantee,
as the context may require. The Company, as the direct or indirect owner of all
of the Common Securities of each AES Trust, will have the exclusive right
(subject to the terms of the related Declaration) to appoint, remove or replace
Trustees and to increase or decrease the number of Trustees, provided that the
number of Trustees shall be, except under certain circumstances, at least five
and the majority of Trustees shall be Regular Trustees. The term of an AES Trust
will be set forth in the Prospectus Supplement, but may terminate earlier as
provided in such Declaration.
The duties and obligations of the Trustees of an AES Trust shall be
governed by the Declaration of such AES Trust, the Business Trust Act and the
Trust Indenture Act. Under its Declaration, each AES Trust shall not, and the
Trustees shall cause such AES Trust not to, engage in any activity other than in
connection with the purposes of such AES Trust or other than as required or
authorized by the related Declaration. In particular, each AES Trust shall not
and the Trustees shall cause each AES Trust not to (a) invest any proceeds
received by such AES Trust from holding the Junior Subordinated Debt Trust
Securities purchased by such AES Trust but shall promptly distribute from the
Property Account all such proceeds to holders of Trust Securities pursuant to
the terms of the related Declaration and of the Trust Securities; (b) acquire
any assets other than as expressly provided in the related Declaration; (c)
possess Trust property for other than a Trust purpose; (d) make any loans, other
than loans represented by the Junior Subordinated Debt Trust Securities; (e)
possess any power or otherwise act in such a way as to vary the assets of such
AES Trust or the terms of its Trust Securities in any way whatsoever; (f) issue
any securities or other evidences of beneficial ownership of, or beneficial
interests in, such AES Trust other than its Trust Securities; (g) incur any
indebtedness for borrowed money or (h)(i) direct the time, method and place of
exercising any trust or power conferred upon the Indenture Trustee (as defined
under "Description of the Junior Subordinated Debt Trust Securities") with
respect to the Junior Subordinated Debt Trust Securities deposited in that AES
Trust as trust assets or upon the Property Trustee of that AES Trust with
respect to its Preferred Securities, (ii) waive any past default that is
waivable under the Indenture or the Declaration, (iii) exercise any right to
rescind or annul any declaration that the principal of all of the Junior
Subordinated Debt Trust Securities deposited in that AES Trust as trust assets
shall be due and payable or (iv) consent to any amendment, modification or
termination of the Indenture or such Junior Subordinated Debt Trust Securities,
in each case where such consent shall be required, unless in the case of this
clause (h) the Property Trustee shall have received an unqualified opinion of
nationally recognized independent tax counsel recognized as expert in such
matters to the effect that such action will not cause such AES Trust to be
classified for United States federal income tax purposes as an association
taxable as a corporation or a partnership and that such AES Trust will continue
to be classified as a grantor trust for United States federal income tax
purposes.
BOOKS AND RECORDS
The books and records of each AES Trust will be maintained at the principal
office of such AES Trust and will be open for inspection by a holder of
Preferred Securities of such AES Trust or his representative for any purpose
reasonably related to his interest in such AES Trust during normal business
hours. Each holder of Preferred Securities will be furnished annually with
unaudited financial statements of the applicable AES Trust as soon as available
after the end of such AES Trust's fiscal year.
VOTING
Holders of Preferred Securities will have limited voting rights, but will
not be able to appoint, remove or replace, or to increase or decrease the number
of, Trustees, which rights are vested exclusively in the Common Securities.
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THE PROPERTY TRUSTEE
The Property Trustee, for the benefit of the holders of the Trust
Securities of an AES Trust, is authorized under each Declaration to exercise all
rights under the Indenture with respect to the Junior Subordinated Debt Trust
Securities deposited in such AES Trust as trust assets, including its rights as
the holder of such Junior Subordinated Debt Trust Securities to enforce the
Company's obligations under such Junior Subordinated Debt Trust Securities upon
the occurrence of an Indenture Event of Default (as defined herein under
"Description of the Junior Subordinated Debt Trust Securities--Indenture Events
of Default"). The Property Trustee shall also be authorized to enforce the
rights of holders of Preferred Securities of an AES Trust under the related
Preferred Securities Guarantee. If any AES Trust's failure to make distributions
on the Preferred Securities of an AES Trust is a consequence of the Company's
exercise of any right under the terms of the Junior Subordinated Debt Trust
Securities deposited in such AES Trust as trust assets to extend the interest
payment period for such Junior Subordinated Debt Trust Securities, the Property
Trustee will have no right to enforce the payment of distributions on such
Preferred Securities until a Declaration Event of Default shall have occurred.
Holders of at least a majority in liquidation amount of the Preferred Securities
held by an AES Trust will have the right to direct the Property Trustee for that
AES Trust with respect to certain matters under the Declaration for that AES
Trust and the related Preferred Securities Guarantee. If the Property Trustee
fails to enforce its rights under the Indenture or fails to enforce the
Preferred Securities Guarantee, to the extent permitted by applicable law, any
holder of Preferred Securities may, after a period of 30 days has elapsed from
such Holder's written request to the Property Trustee to enforce such rights,
institute a legal proceeding against the Company to enforce such rights or the
Preferred Securities Guarantee, as the case may be. In addition, the holders of
at least 25% in aggregate liquidation preference of the outstanding Preferred
Securities would have the right to directly institute proceedings for
enforcement of payments to such holders of principal of, or premium, if any, or
interest on the Junior Subordinated Debt Trust Securities having a principal
amount equal to the aggregate liquidation preference of the Preferred Securities
of such holders (a "Direct Action"). In connection with such Direct Action, the
Company will be subrogated to the rights of such holder of Preferred Securities
under the Declaration to the extent of any payment made by the Company to such
holders of Preferred Securities in such Direct Action. Notwithstanding the
foregoing, if an Event of Default under the applicable Declaration has occurred
and is continuing and such event is attributable to the failure of the Company
to pay interest or principal on the applicable series of Junior Subordinated
Debt Trust Securities on the date such interest or principal is otherwise
payable (or in the case of redemption, on the redemption date), then a holder of
Preferred Securities of such AES Trust may directly institute a proceeding for
enforcement of payment to such holder of the principal of or interest on the
applicable series of Junior Subordinated Debt Trust Securities having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder (a "Holder Direct Action") on or after the respective
due date specified in the applicable series of Junior Subordinated Debt Trust
Securities. In connection with such Holder Direct Action, the Company will be
subrogated to the rights of such holder of Preferred Securities under the
applicable Declaration to the extent of any payment made by the Company to such
holder of Preferred Securities in such Holder Direct Action.
DISTRIBUTIONS
Pursuant to each Declaration, distributions on the Preferred Securities of
an AES Trust must be paid on the dates payable to the extent that the Property
Trustee for that AES Trust has cash on hand in the applicable Property Account
to permit such payment. The funds available for distribution to the holders of
the Preferred Securities of an AES Trust will be limited to payments received by
the Property Trustee in respect of the Junior Subordinated Debt Trust Securities
that are deposited in the AES Trust as trust assets. If the Company does not
make interest payments on the Junior Subordinated Debt Trust Securities
deposited in an AES Trust as trust assets, the Property Trustee will not make
distributions on the Preferred Securities of such AES Trust. Under the
Declaration, if and to the extent the Company does make interest payments on the
Junior Subordinated Debt Trust Securities deposited in an AES Trust as trust
assets, the Property Trustee is obligated to make distributions on the Trust
Securities of such AES Trust on a Pro Rata Basis (as defined below). The payment
of distributions on the Preferred Securities of an AES Trust is guaranteed by
AES on a subordinated basis as and to the extent set forth under "Description of
the Preferred Securities Guarantee." A Preferred Securities Guarantee is a
guarantee from the time of issuance of the applicable Preferred Securities, but
the Preferred Securities Guarantee covers distributions and other payments on
the applicable Preferred Securities only if
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and to the extent that the Company has made a payment to the Property Trustee of
interest or principal on the Junior Subordinated Debt Trust Securities deposited
in the AES Trust as trust assets. As used in this Prospectus, the term "Pro Rata
Basis" shall mean pro rata to each holder of Trust Securities of an AES Trust
according to the aggregate liquidation amount of the Trust Securities of such
AES Trust held by the relevant holder in relation to the aggregate liquidation
amount of all Trust Securities of such AES Trust outstanding unless, in relation
to a payment, a Declaration Event of Default under the Declaration has occurred
and is continuing, in which case any funds available to make such payment shall
be paid first to each holder of the Preferred Securities of such AES Trust pro
rata according to the aggregate liquidation amount of the Preferred Securities
held by the relevant holder in relation to the aggregate liquidation amount of
all the Preferred Securities of such AES Trust outstanding, and only after
satisfaction of all amounts owed to the holders of such Preferred Securities, to
each holder of Common Securities of such AES Trust pro rata according to the
aggregate liquidation amount of such Common Securities held by the relevant
holder in relation to the aggregate liquidation amount of all Common Securities
of such AES Trust outstanding.
EVENTS OF DEFAULT
If an Indenture Event of Default occurs and is continuing with respect to
Junior Subordinated Debt Trust Securities deposited in an AES Trust as trust
assets, an Event of Default under the Declaration (a "Declaration Event of
Default") of such AES Trust will occur and be continuing with respect to any
outstanding Trust Securities of such AES Trust. In such event, each Declaration
provides that the holders of Common Securities of such AES Trust will be deemed
to have waived any such Declaration Event of Default with respect to the Common
Securities until all Declaration Events of Default with respect to the Preferred
Securities of such AES Trust have been cured or waived. Until all such
Declaration Events of Default with respect to the Preferred Securities of such
AES Trust have been so cured or waived, the Property Trustee will be deemed to
be acting solely on behalf of the holders of the Preferred Securities of such
AES Trust and only the holders of such Preferred Securities will have the right
to direct the Property Trustee with respect to certain matters under such
Declaration and consequently under the Indenture. In the event that any
Declaration Event of Default with respect to the Preferred Securities of such
AES Trust is waived by the holders of the Preferred Securities of such AES Trust
as provided in the Declaration, the holders of Common Securities pursuant to
such Declaration have agreed that such waiver also constitutes a waiver of such
Declaration Event of Default with respect to the Common Securities for all
purposes under the Declaration without any further act, vote or consent of the
holders of the Common Securities
RECORD HOLDERS
Each Declaration provides that the Trustees of such AES Trust may treat the
person in whose name a Certificate representing its Preferred Securities is
registered on the books and records of such AES Trust as the sole holder thereof
and of the Preferred Securities represented thereby for purposes of receiving
distributions and for all other purposes and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such certificate or in
the Preferred Securities represented thereby on the part of any person, whether
or not such AES Trust shall have actual or other notice thereof. Preferred
Securities will be issued in fully registered form. Unless otherwise specified
in a Prospectus Supplement, Preferred Securities will be represented by a global
certificate registered on the books and records of such AES Trust in the name of
a depositary (the "Depositary") named in an accompanying Prospectus Supplement
or its nominee. Under each Declaration:
(i) such AES Trust and the Trustees thereof shall be entitled to deal
with the Depositary (or any successor depositary) for all purposes,
including the payment of distributions and receiving approvals, votes or
consents under the related Declaration, and except as set forth in the
related Declaration with respect to the Property Trustee, shall have no
obligation to persons owning a beneficial interest in Preferred Securities
("Preferred Security Beneficial Owners") registered in the name of and held
by the Depositary or its nominee; and
(ii) the rights of Preferred Security Beneficial Owners shall be
exercised only through the Depositary (or any successor depositary) and
shall be limited to those established by law and agreements between such
Preferred Security Beneficial Owners and the Depositary and/or its
participants. With respect to Preferred Securities
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registered in the name of and held by the Depositary or its nominee, all
notices and other communications required under each Declaration shall be
given to, and all distributions on such Preferred Securities shall be given
or made to, the Depositary (or its successor).
The specific terms of the depositary arrangement with respect to the
Preferred Securities will be disclosed in the applicable Prospectus Supplement.
DEBTS AND OBLIGATIONS
In each Declaration, the Company has agreed to pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs and
expenses of the applicable AES Trust, including the fees and expenses of its
Trustees and any taxes and all costs and expenses with respect thereto, to which
such AES Trust may become subject, except for United States withholding taxes.
The foregoing obligations of the Company under each Declaration are for the
benefit of, and shall be enforceable by, any person to whom any such debts,
obligations, costs, expenses and taxes are owed (a "Creditor") whether or not
such Creditor has received notice thereof. Any such Creditor may enforce such
obligations of the Company directly against the Company and the Company has
irrevocably waived any right or remedy to require that any such Creditor take
any action against any AES Trust or any other person before proceeding against
the Company. The Company has agreed in each Declaration to execute such
additional agreements as may be necessary or desirable in order to give full
effect to the foregoing.
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DESCRIPTION OF THE PREFERRED SECURITIES
Each AES Trust may issue, from time to time, only one series of Preferred
Securities having terms described in the Prospectus Supplement relating thereto.
The Declaration of each AES Trust authorizes the Regular Trustees of such AES
Trust to issue on behalf of such AES Trust one series of Preferred Securities.
Each Declaration will be qualified as an indenture under the Trust Indenture
Act. The Preferred Securities will have such terms, including distributions,
redemption, voting, liquidation rights and such other preferred, deferred or
other special rights or such restrictions as shall be set forth in the related
Declaration or made part of such Declaration by the Trust Indenture Act.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of an AES Trust for specific terms, including (i) the specific
designation of such Preferred Securities, (ii) the number of Preferred
Securities issued by such AES Trust, (iii) the annual distribution rate (or
method of calculation thereof) for Preferred Securities issued by such AES
Trust, the date or dates upon which such distributions shall be payable and the
record date or dates for the payment of such distributions, (iv) whether
distributions on Preferred Securities issued by such AES Trust shall be
cumulative, and, in the case of Preferred Securities having such cumulative
distribution rights, the date or dates or method of determining the date or
dates from which distribution on Preferred Securities issued by such AES Trust
shall be cumulative, (v) the amount or amounts which shall be paid out of the
assets of such AES Trust to the holders of Preferred Securities of such AES
Trust upon voluntary or involuntary dissolution, winding-up or termination of
such AES Trust, (vi) the obligation or right, if any, of such AES Trust to
purchase or redeem Preferred Securities issued by such AES Trust and the price
or prices at which, the period or periods within which and the terms and
conditions upon which Preferred Securities issued by such AES Trust shall or may
be purchased or redeemed, in whole or in part, pursuant to such obligation or
right, (vii) the voting rights, if any, of Preferred Securities issued by such
AES Trust in addition to those required by law, including the number of votes
per Preferred Security and any requirement for the approval by the holders of
Preferred Securities, or of Preferred Securities issued by one or more AES
Trusts, or of both, as a condition to specified actions or amendments to the
Declaration of such AES Trust, (viii) terms for any conversion or exchange into
other securities and (ix) any other relevant rights, preferences, privileges,
limitations or restrictions of Preferred Securities issued by such AES Trust
consistent with the Declaration of such AES Trust or with applicable law. All
Preferred Securities offered hereby will be guaranteed by the Company as and to
the extent set forth below under "Description of the Preferred Securities
Guarantees." Certain United States federal income tax considerations applicable
to any offering of Preferred Securities will be described in the Prospectus
Supplement relating thereto.
In connection with the issuance of Preferred Securities, each AES Trust
will issue one series of Common Securities. The Declaration of each AES Trust
authorizes the Regular Trustees of such trust to issue on behalf of such AES
Trust one series of Common Securities having such terms including distributions,
redemption, voting, liquidation rights or such restrictions as shall be set
forth therein. The terms of the Common Securities issued by an AES Trust will be
substantially identical to the terms of the Preferred Securities issued by such
AES Trust and the Common Securities will rank pari passu, and payments will be
made thereon on a Pro Rata Basis with the Preferred Securities except that if a
Declaration Event of Default occurs and is continuing, the rights of the holders
of such Common Securities to payment in respect of distributions and payments
upon liquidation, redemption and maturity will be subordinated to the rights of
the holders of such Preferred Securities. Except in certain limited
circumstances, the Common Securities issued by an AES Trust will also carry the
right to vote and to appoint, remove or replace any of the Trustees of that AES
Trust. All of the Common Securities of an AES Trust will be directly or
indirectly owned by the Company.
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DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantees that will be executed and delivered by the Company for the
benefit of the holders from time to time of Preferred Securities. Each Preferred
Security Guarantee will be separately qualified under the Trust Indenture Act
and will be held by The First National Bank of Chicago, acting in its capacity
as indenture trustee with respect thereto, for the benefit of holders of the
Preferred Securities of the applicable AES Trust. The terms of each Preferred
Securities Guarantee will be those set forth in such Preferred Securities
Guarantee and those made part of such Guarantee by the Trust Indenture Act. This
description summarizes the material terms of the Preferred Securities Guarantees
and is qualified in its entirety by reference to the form of Preferred
Securities Guarantee, which is filed as an exhibit to the Registration Statement
of which this Prospectus forms a part, and the Trust Indenture Act. Section and
Article references used herein are references to the provisions of the form of
Preferred Securities Guarantee.
GENERAL
Pursuant to each Preferred Securities Guarantee, the Company will
irrevocably and unconditionally agree, to the extent set forth therein, to pay
in full, to the holders of the Preferred Securities issued by an AES Trust, the
Guarantee Payments (as defined herein) (without duplication of amounts
theretofore paid by such AES Trust), to the extent not paid by such AES Trust,
regardless of any defense, right of set-off or counterclaim that such AES Trust
may have or assert. The following payments or distributions with respect to
Preferred Securities issued by an AES Trust to the extent not paid or made by
such AES Trust (the "Guarantee Payments"), will be subject to the Preferred
Securities Guarantee (without duplication): (i) any accrued and unpaid
distributions on such Preferred Securities, and the redemption price, including
all accrued and unpaid distributions to the date of redemption, with respect to
any Preferred Securities called for redemption by such AES Trust but if and only
to the extent that in each case the Company has made a payment to the related
Property Trustee of interest or principal on the Junior Subordinated Debt Trust
Securities deposited in such AES Trust as trust assets and (ii) upon a voluntary
or involuntary dissolution, winding-up or termination of such AES Trust (other
than in connection with the distribution of such Junior Subordinated Debt Trust
Securities to the holders of Preferred Securities or the redemption of all of
the Preferred Securities upon the maturity or redemption of such Junior
Subordinated Debt Trust Securities) the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on such Preferred
Securities to the date of payment, to the extent such AES Trust has funds
available therefor or (b) the amount of assets of such AES Trust remaining
available for distribution to holders of such Preferred Securities in
liquidation of such AES Trust. The Company's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Company to the holders of Preferred Securities or by causing the applicable AES
Trust to pay such amounts to such holders.
The Preferred Securities Guarantee is a guarantee from the time of issuance
of the applicable Preferred Securities, but the Preferred Securities Guarantee
covers distributions and other payments on such Preferred Securities only if and
to the extent that the Company has made a payment to the Property Trustee of
interest or principal on the Junior Subordinated Debt Trust Securities deposited
in the applicable AES Trust as trust assets. If the Company does not make
interest or principal payments on the Junior Subordinated Debt Trust Securities
deposited in the applicable AES Trust as trust assets, the Property Trustee will
not make distributions of the Preferred Securities of such AES Trust and the AES
Trust will not have funds available therefor.
The Company's obligations under the Declaration for each Trust, the
Preferred Securities Guarantee issued with respect to Preferred Securities
issued by that Trust, the Junior Subordinated Debt Trust Securities purchased by
that Trust and the related Indenture (as defined below) in the aggregate will
provide a full and unconditional guarantee on a subordinated basis by the
Company of payments due on the Preferred Securities issued by that Trust.
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CERTAIN COVENANTS OF THE COMPANY
In each Preferred Securities Guarantee, the Company will covenant that, so
long as any Preferred Securities issued by the applicable AES Trust remain
outstanding, the Company will not (A) declare or pay any dividends on, or
redeem, purchase, acquire or make a distribution or liquidation payment with
respect to, any of its common stock or preferred stock or make any guarantee
payment with respect thereto or (B) make any payment of interest, premium (if
any) or principal on any debt securities issued by the Company which rank pari
passu with or junior to the Junior Subordinated Debt Trust Securities, if at
such time (i) the Company shall be in default with respect to its Guarantee
Payments or other payment obligations under the Preferred Securities Guarantee,
(ii) there shall have occurred any Declaration Event of Default under the
related Declaration or (iii) in the event that Junior Subordinated Debt Trust
Securities are issued to an AES Trust in connection with the issuance of Trust
Securities by such AES Trust, the Company shall have given notice of its
election to defer payments of interest on such Junior Subordinated Debt Trust
Securities by extending the interest payment period as provided in the terms of
the Junior Subordinated Debt Trust Securities and such period, or any extension
thereof, is continuing: provided that (a) the Company will be permitted to pay
accrued dividends (and cash in lieu of fractional shares) upon the conversion of
Preferred Stock of the Company as may be outstanding from time to time, in each
case in accordance with the terms of such stock and (ii) the foregoing will not
apply to stock dividends paid by the Company. In addition, so long as any
Preferred Securities remain outstanding, the Company has agreed (i) to remain
the sole direct or indirect owner of all of the outstanding Common Securities
issued by the applicable AES Trust and shall not cause or permit the Common
Securities to be transferred except to the extent permitted by the related
Declaration; provided that any permitted successor of the Company under the
Indenture may succeed to the Company's ownership of the Common Securities issued
by the applicable AES Trust and (ii) to use reasonable efforts to cause such AES
Trust to continue to be treated as a grantor trust for United States federal
income tax purposes except in connection with a distribution of Junior
Subordinated Debt Trust Securities.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no consent will be required),
each Preferred Securities Guarantee may be amended only with the prior approval
of the holders of not less than 662/3% in liquidation amount of the outstanding
Preferred Securities issued by the applicable AES Trust. The manner of obtaining
any such approval of holders of such Preferred Securities will be set forth in
an accompanying Prospectus Supplement. All guarantees and agreements contained
in a Preferred Securities Guarantee shall bind the successors, assignees,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the Preferred Securities of the applicable AES Trust
then outstanding. Except in connection with a consolidation, merger or sale
involving the Company that is permitted under the Indenture, the Company may not
assign its obligations under any Preferred Securities Guarantee.
TERMINATION OF THE PREFERRED SECURITIES GUARANTEES
Each Preferred Securities Guarantee will terminate and be of no further
force and effect as to the Preferred Securities issued by the applicable AES
Trust upon full payment of the redemption price of all Preferred Securities of
such AES Trust, or upon distribution of the Junior Subordinated Debt Trust
Securities to the holders of the Preferred Securities of such AES Trust in
exchange for all of the Preferred Securities issued by such AES Trust, or upon
full payment of the amounts payable upon liquidation of such AES Trust.
Notwithstanding the foregoing, each Preferred Securities Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
holder of Preferred Securities issued by the applicable AES Trust must restore
payment of any sums paid under such Preferred Securities or such Guarantee.
STATUS OF THE PREFERRED SECURITIES GUARANTEES
The Company's obligations under each Preferred Securities Guarantee to make
the Guarantee Payments will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, including the Junior Subordinated Debt Trust
Securities, except those made pari passu
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or subordinate by their terms, and (ii) senior to all capital stock now or
hereafter issued by the Company and to any guarantee nor or hereafter entered
into by the Company in respect of any of its capital stock. The Company's
obligations under each Preferred Securities Guarantee will rank pari passu with
each other Preferred Securities Guarantee. Because the Company is a holding
company, the Company's obligations under each Preferred Securities Guarantee are
also effectively subordinated to all existing and future liabilities, including
trade payables, of the Company's subsidiaries, except to the extent that the
Company is a creditor of the subsidiaries recognized as such. Each Declaration
provides that each holder of Preferred Securities issued by the applicable AES
Trust by acceptance thereof agrees to the subordination provisions and other
terms of the related Preferred Securities Guarantee.
Each Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without first instituting a legal proceeding against any other person
or entity). Each Preferred Securities Guarantee will be deposited with The First
National Bank of Chicago, as indenture trustee, to be held for the benefit of
the holders of the Preferred Securities issued by the applicable AES Trust. The
First National Bank of Chicago shall enforce the Preferred Securities Guarantee
on behalf of the holders of the Preferred Securities issued by the applicable
AES Trust. The holders of not less than a majority in aggregate liquidation
amount of the Preferred Securities issued by the applicable AES Trust have the
right to direct the time, method and place of conducting any proceeding for any
remedy available in respect of the related Preferred Securities Guarantee,
including the giving of directions to The First National Bank of Chicago . If
The First National Bank of Chicago fails to enforce such Preferred Securities
Guarantee as above provided, any holder of Preferred Securities issued by the
applicable AES Trust may institute a legal proceeding directly against the
Company to enforce its rights under such Preferred Securities Guarantee, without
first instituting a legal proceeding against the applicable AES Trust or any
other person or entity. Notwithstanding the foregoing, if the Company has failed
to make a guarantee payment, a holder of Preferred Securities may directly
institute a proceeding against the Company for enforcement of the Preferred
Securities Guarantee for such payment.
MISCELLANEOUS
The Company will be required to provide annually to The First National Bank
of Chicago a statement as to the performance by the Company of certain of its
obligations under the Preferred Securities Guarantees and as to any default in
such performance. The Company is required to file annually with The First
National Bank of Chicago an officer's certificate as to the Company's compliance
with all conditions under Preferred Securities Guarantees.
The First National Bank of Chicago, prior to the occurrence of a default,
undertakes to perform only such duties as are specifically set forth in the
applicable Preferred Securities Guarantee and, after default with respect to a
Preferred Securities Guarantee, shall exercise the same degree of care as a
prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provision, The First National Bank of Chicago is under no
obligation to exercise any of the powers vested in it by a Preferred Securities
Guarantee at the request of any holder of Preferred Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
GOVERNING LAW
The Guarantees will be governed by, and construed in accordance with, the
laws of the State of New York.
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DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT TRUST SECURITIES
Junior Subordinated Debt Trust Securities may be issued from time to time
in one or more series under an Indenture (the "Indenture") between the Company
and The First National Bank of Chicago, as trustee (the "Indenture Trustee").
The form of Junior Subordinated Debt Trust Securities Indenture has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part. The following description summarizes the material terms of the Indenture,
and is qualified in its entirety by reference to the Indenture and the Trust
Indenture Act. Whenever particular provisions or defined terms in the Indenture
are referred to herein, such provisions or defined terms are incorporated by
reference herein. Section and article references used herein are references to
provisions of the Indenture.
GENERAL
The Junior Subordinated Debt Trust Securities will be unsecured, junior
subordinated obligation of the Company. The Indenture does not limit the amount
of additional indebtedness the Company or any of its subsidiaries may incur.
Since the Company is a holding company, the Company's rights and the rights of
its creditors, including the holders of Junior Subordinated Debt Securities, to
participate in the assets of any subsidiary upon the latter's liquidation or
recapitalization will be subject to the prior claims of the subsidiary's
creditors, except to the extent that the Company may itself be a creditor with
recognized claims against the subsidiary.
The Indenture does not limit the aggregate principal amount of indebtedness
which may be issued thereunder and provides that Junior Subordinated Debt Trust
Securities may be issued thereunder from time to time in one or more series. The
Junior Subordinated Debt Trust Securities are issuable in one or more series
pursuant to an indenture supplemental to the Indenture.
In the event Junior Subordinated Debt Trust Securities are issued to an AES
Trust or a Trustee of such trust in connection with the issuance of Trust
Securities by such AES Trust, such Junior Subordinated Debt Trust Securities
subsequently may be distributed pro rata to the holders of such Trust Securities
in connection with the dissolution of such AES Trust upon the occurrence of
certain events described in the Prospectus Supplement relating to such Trust
Securities. Only one series of Junior Subordinated Debt Trust Securities will be
issued to an AES Trust or a trustee of such trust in connection with the
issuance of Trust Securities by such AES Trust.
Reference is made to the Prospectus Supplement which will accompany this
Prospectus for the following terms of the series of Junior Subordinated Debt
Trust Securities being offered thereby (to the extent such terms are applicable
to the Junior Subordinated Debt Trust Securities): (i) the specific designation
of such Junior Subordinated Debt Trust Securities, aggregate principal amount,
purchase price and premium, if any; (ii) any limit on the aggregate principal
amount of such Junior Subordinated Debt Trust Securities; (iii) the date or
dates on which the principal of such Junior Subordinated Debt Trust Securities
is payable and the right, to extend or defer such date or dates; (iv) the rate
or rates at which such Junior Subordinated Debt Trust Securities will bear
interest or the method of calculating such rate or rates, if any; (v) the date
or dates from which such interest shall accrue, the interest payment dates on
which such interest will be payable or the manner of determination of such
interest payment dates and the record dates for the determination of holders to
whom interest is payable on any such interest payment dates; (vi) the right, if
any, to extend the interest payment periods and the duration of such extension;
(vii) the period or periods within which, the price or prices at which, and the
terms and conditions upon which, such Junior Subordinated Debt Trust Securities
may be redeemed, in whole or in part, at the option of the Company; (viii) the
obligation, if any of the Company to redeem or purchase such Junior Subordinated
Debt Trust Securities pursuant to any sinking fund or analogous provisions or at
the option of the holder thereof and the period or periods for which, the price
or prices at which, and the terms and conditions upon which, such Junior
Subordinated Debt Trust Securities shall be redeemed or purchased, in whole or
part, pursuant to such obligation; (ix) any exchangeability, conversion or
prepayment provisions of the Junior Subordinated Debt Trust Securities; (x) any
applicable United States federal income tax consequences, including whether and
under what circumstances the Company will pay additional amounts on the Junior
Subordinated Debt Trust Securities held by a person who is not a U.S. person in
respect of any tax, assessment or governmental charge withheld
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or deducted and, if so, whether the Company will have the option to redeem such
Junior Subordinated Debt Trust Securities rather than pay such additional
amounts; (xi) the form of such Junior Subordinated Debt Trust Securities; (xii)
if other than denominations of $25 or any integral multiple thereof, the
denominations in which such Junior Subordinated Debt Trust Securities shall be
issuable; (xiii) any and all other terms with respect to such series, including
any modification of or additions to the events of default or covenants provided
for with respect to such series, including any modification of or additions to
the events of default or covenants provided for with respect to the Junior
Subordinated Debt Trust Securities, and any terms which may be required by or
advisable under applicable laws or regulations not inconsistent with the
Indenture; and (xiv) whether such Junior Subordinated Debt Trust Securities are
issuable as a global security, and in such case, the identity of the depositary.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Junior Subordinated Debt Trust Securities will be issued in United States
dollars in fully registered form without coupons in denominations of $25 or
integral multiples thereof. Junior Subordinated Debt Trust Securities may be
presented for exchange and Junior Subordinated Debt Trust Securities in
registered form may be presented for transfer in the manner, at the places and
subject to the restrictions set forth in the Junior Subordinated Debt Trust
Securities and the Prospectus Supplement. Such services will be provided without
charge, other than any tax or other governmental charge payable in connection
therewith, but subject to the limitations provided in the Junior Subordinated
Debt Trust Securities. Junior Subordinated Debt Trust Securities in bearer form
and the coupons, if any, appertaining thereto will be transferable by delivery.
Junior Subordinated Debt Trust Securities may bear interest at a fixed rate
or a floating rate. Junior Subordinated Debt Trust Securities bearing no
interest or interest at a rate that at the time of issuance is below the
prevailing market rate will be sold at a discount below their stated principal
amount. Special United States federal income tax considerations applicable to
any such discounted Junior Subordinated Debt Trust Securities or to certain
Junior Subordinated Debt Trust Securities issued at par which are treated as
having been issued at a discount for United States federal income tax purposes
will be described in the relevant Prospectus Supplement.
CERTAIN COVENANTS OF THE COMPANY APPLICABLE TO THE JUNIOR SUBORDINATED DEBT
SECURITIES
If Junior Subordinated Debt Trust Securities are issued to an AES Trust in
connection with the issuance of Trust Securities by such AES Trust, the Company
will covenant in the Indenture that, so long as the Preferred Securities issued
by the applicable AES Trust remain outstanding, the Company will not declare or
pay any dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any of its common stock or preferred stock
or make any guarantee payment with respect to, any of its common stock or
preferred stock or make any guarantee payment with respect thereto if at such
time (i) the Company shall be in default with respect to its Guarantee Payments
or other payment obligations under the related Preferred Securities Guarantee,
(ii) there shall have occurred any Indenture Event of Default with respect to
the Junior Subordinated Debt Trust Securities or (iii) in the event that Junior
Subordinated Debt Trust Securities are issued to an AES Trust in connection with
the issuance of Trust Securities by such AES Trust, the Company shall have given
notice of its election to defer payments of interest on such Junior Subordinated
Debt Trust Securities by extending the interest payment period as provided in
the terms of such Junior Subordinated Debt Trust Securities and such period, or
any extension thereof, is continuing; provided that (x) the Company will be
permitted to pay accrued dividends (and cash in lieu of fractional shares) upon
the conversion of any Preferred Stock of the Company as may be outstanding from
time to time, in each case in accordance with the terms of such stock and (y)
the foregoing will not apply to any stock dividends paid by the Company. In
addition, if Junior Subordinated Debt Trust Securities are issued to an AES
Trust in connection with the issuance of Trust Securities by such AES Trust, for
so long as the Preferred Securities issued by the applicable AES Trust remain
outstanding, the Company has agreed (i) to remain the sole direct or indirect
owner of all of the outstanding Common Securities issued by the applicable AES
Trust and not to cause or permit the Common Securities to be transferred except
to the extent permitted by the related Declaration; provided that any permitted
successor of the Company under the Indenture may succeed to the Company's
ownership of the Common Securities issued by the applicable AES Trust, (ii) to
comply fully with all of its obligations and agreements contained in the related
Declaration and (iii) not to take any action which would cause the applicable
AES Trust to cease to be treated as a grantor trust for United States federal
income tax purposes, except in connection with a distribution of Junior
Subordinated Debt Trust Securities.
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SUBORDINATION
The payment of principal of, premium, if any, and interest on the Junior
Subordinated Trust Securities will, to the extent and in the manner set forth in
the Indenture, be subordinated in right of payment to the prior payment in full,
in cash 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 Trust Securities will be entitled to receive any payment in
respect of the principal of, premium, if any, or interest on the Junior
Subordinated Debt Trust Securities.
No payments on account of principal, premium, if any, or interest in
respect of the Junior Subordinated Debt Trust 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 or during certain periods when an
event of default under certain Senior and Subordinated Debt permits the lenders
thereunder to accelerate the maturity of such 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 in respect of the Junior
Subordinated Debt Trust Securities may be made by the Company during 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 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 Trust 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 Trust
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 Trust 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.
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"Designated Senior and Subordinated Debt" is defined to mean (i) Debt under
the Credit Agreement dated as of May 20, 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 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 evidencing such
Senior and Subordinated Debt 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 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 Trust
Securities, and in particular the Junior Subordinated Debt Trust Securities
shall rank pari passu with all other debt securities and guarantees issued to
any 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.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Indenture Event of
Default" with respect to each series of Junior Subordinated Debt Securities:
(a) failure for 30 days to pay interest on the Junior Subordinated Debt
Trust Securities of such series when due; provided that a valid extension of the
interest payment period by the Company shall not constitute a default in the
payment of interest for this purpose;
(b) failure to pay principal of or premium, if any, on the Junior
Subordinated Debt Trust Securities of such series when due whether at maturity,
upon redemption, by declaration or otherwise;
(c) failure to observe or perform any other covenant contained in the
Indenture with respect to such series for 90 days after written notice to the
Company from the Indenture Trustee or the holders of at least 25% in principal
amount of the outstanding Junior Subordinated Debt Trust Securities of such
series; or
(d) certain events in bankruptcy, insolvency or reorganization of the
Company.
In each and every such case, unless the principal of all the Junior
Subordinated Debt Trust Securities of that series shall have already become due
and payable, either the Indenture Trustee or the holders of not less than 25% in
aggregate principal amount of the Junior Subordinated Debt Trust Securities of
that series then outstanding, by notice in writing to the Company (and to the
Indenture Trustee if given by such holders), may declare the principal of all
the Junior Subordinated Debt Trust Securities of that series to be due and
payable immediately, and upon any such declaration the same shall become and
shall be immediately due and payable.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Trust Securities of that series have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee. (Section 6.06) The Indenture Trustee or the
holders of not less than 25% in aggregate outstanding principal amount of the
Junior Subordinated Debt Trust Securities of that series may declare the
principal due and payable immediately upon an Indenture Event of Default with
respect to such series, but the holders of a majority in aggregate outstanding
principal amount of Junior Subordinated Debt Trust Securities of such series may
annul such declaration and waive the default if the default has been cured and a
sum sufficient to pay all matured
27
<PAGE>
installments of interest and principal otherwise than by acceleration and any
premium has been deposited with the Indenture Trustee.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Trust Securities of that series may, on behalf of the
holders of all the Junior Subordinated Debt Trust Securities of that series,
waive any past default, except a default in the payment of principal, premium,
if any, or interest (unless such default has been cured and a sum sufficient to
pay all matured installments of interest and principal otherwise than by
acceleration and any premium has been deposited with the Indenture Trustee) or a
call for redemption of Junior Subordinated Debt Trust Securities. The Company is
required to file annually with the Indenture Trustee a certificate as to whether
or not the Company is in compliance with all the conditions and covenants under
the Indenture.
If Junior Subordinated Debt Trust Securities are issued to an AES Trust in
connection with the issuance of Trust Securities of such AES Trust, then under
the applicable Declaration an Indenture Event of Default with respect to such
series of Junior Subordinated Debt Trust Securities will constitute a
Declaration Event of Default.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Indenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of the outstanding Junior Subordinated Debt Trust Securities of
each series affected, to modify the Indenture or any supplemental indenture
affecting the rights of the holders of such Junior Subordinated Debt Securities;
provided that no such modification may, without the consent of the holder of
each outstanding Junior Subordinated Debt Trust Security affected thereby, (i)
extend the fixed maturity of any Junior Subordinated Debt Trust Securities of
any series, reduce the principal amount thereof, reduce the rate or extent the
time of payment of interest thereon, reduce any premium payable upon the
redemption thereof, without the consent of the holder of each Junior
Subordinated Debt Trust Security so affected or (ii) reduce the percentage of
Junior Subordinated Debt Trust Securities, the holders of which are required to
consent to any such modification, without the consent of the holders of each
Junior Subordinated Debt Trust Security then outstanding and affected thereby.
BOOK-ENTRY AND SETTLEMENT
If any Junior Subordinated Debt Trust Securities of a series are
represented by one or more global securities (each, a "Global Security"), the
applicable Prospectus Supplement will describe the circumstances, if any, under
which beneficial owners of interests in any such Global Security may exchange
such interests for Junior Subordinated Debt Trust Securities of such series and
of like tenor and principal amount in any authorized form and denomination.
Principal of and any premium and interest on a Global Security will be payable
in the manner described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Junior Subordinated Debt Trust Securities to be
represented by a Global Security will be described in the applicable Prospectus
Supplement.
CONSOLIDATION, MERGER AND SALE
The Indenture will provide that the Company may not consolidate with or
merge into any other person or transfer or lease its properties and assets
substantially as an entirety to any person and may not permit any person to
merge into or consolidate with the Company unless (i) either the Company will be
the resulting or surviving entity or any successor or purchaser is a corporation
organized under the laws of the United States of America, any State or the
District of Columbia, and any such successor or purchaser expressly assumes the
Company's obligations under the Indenture and (ii) immediately after giving
effect to the transaction no Event of Default shall have occurred and be
continuing. (Section 10.01)
28
<PAGE>
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, the Company will be discharged from any
and all obligations in respect of the Junior Subordinated Debt Trust Securities
of a series (except in each case for certain obligations to register the
transfer or exchange of such Junior Subordinated Debt Trust Securities, replace
stolen, lost or mutilated Junior Subordinated Debt Trust Securities of that
series, maintain paying agencies and hold moneys for payment in trust) if (i)
the Company irrevocably deposits with the Indenture Trustee cash or U.S.
Government Obligations, as trust funds in an amount certified to be sufficient
to pay at maturity (or upon redemption) the principal of, premium, if any, and
interest on all outstanding Junior Subordinated Debt Trust Securities of such
series; (ii) such deposit will not result in a breach or violation of, or
constitute a default under, any agreement or instrument to which the Company is
a party or by which it is bound; (iii) the Company delivers to the Indenture
Trustee an opinion of counsel to the effect that the holders of the Junior
Subordinated Debt Trust Securities of such series will not recognize income,
gain or loss for United States federal income tax purposes as a result of such
defeasance and that defeasance will not otherwise alter holders' United States
federal income tax treatment of principal, premium and interest payments on such
Junior Subordinated Debt Trust Securities of such series (such opinion must be
based on a ruling of the Internal Revenue Service or a change in United States
federal income tax law occurring after the date of such Junior Subordinated Debt
Trust Securities Indenture, since such a result would not occur under current
tax law); (iv) the Company has delivered to the Indenture Trustee an Officer's
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the defeasance contemplated by such provision
have been complied with; and (v) no event or condition shall exist that,
pursuant to the subordination provisions applicable to such series, would
prevent the Company from making payments of principal of, premium, if any, and
interest on the Junior Subordinated Debt Trust Securities of such series at the
date of the irrevocable deposit referred to above.
GOVERNING LAW
The Indenture and the Junior Subordinated Debt Trust Securities will be
governed by the laws of the State of New York.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Indenture
Trustee is under no obligation to exercise any of the powers vested in it by the
Junior Subordinated Debt Trust Securities Indenture at the request of any holder
of Junior Subordinated Debt Trust Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities that might
be incurred thereby. The Indenture Trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance of
its duties if the Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
The Company and its subsidiaries maintain ordinary banking and trust
relationships with The First National Bank of Chicago and its affiliates.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned subsidiary
of the Company; provided that, in the event of any such assignment, the Company
will remain jointly and severally liable for all such obligations. Subject to
the foregoing, the Indenture will be binding upon and inure to the benefit of
the parties thereto and their respective successors and assigns. The Indenture
provides that it may not otherwise be assigned by the parties thereto other than
by the Company to a successor or purchaser pursuant to a consolidation, merger
or sale permitted by the Indenture.
29
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell any series of Junior Subordinated Debt Trust
Securities and the AES Trusts may sell the Preferred Securities being offered
hereby 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 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
Unless otherwise indicated in the applicable Prospectus Supplement, certain
matters of Delaware law relating to the validity of the Preferred Securities
will be passed upon by Richards, Layton & Finger, Wilmington. The legality of
the Junior Subordinated Debt Trust Securities and the Preferred Securities
offered hereby will be passed upon for the Company by Davis Polk & Wardwell, New
York, New York.
EXPERTS
The financial statements as of December 31, 1996 and 1995 and for each of
the three years in the period ended December 31, 1996 incorporated by reference
in this Prospectus from the Company's Current Report on Form 8-K filed on
November 6, 1997 and the related financial statement schedules incorporated by
reference in the Registration
30
<PAGE>
Statement from the Company's Annual Report on Form 10-K have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports which
are incorporated by reference herein, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The financial statements of Companhia Energetica de Minas Gerais -- CEMIG
for the years ended December 31, 1996 and 1995, prepared in accordance with
accounting principles generally accepted in Brazil, incorporated by reference in
this Prospectus from Item 7 of the Current Report on Form 8-K of The AES
Corporation filed July 16, 1997, have been audited by Price Waterhouse Auditores
Independentes, Belo Horizonte, Brazil, independent accountants, as stated in
their report, which is incorporated herein by reference, and has been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
31
<PAGE>
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE $1,500,000,000
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE THE AES CORPORATION
CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS OR ANY PROSPECTUS JUNIOR SUBORDINATED
SUPPLEMENT, IN CONNECTION WITH ANY DEBT SECURITIES
OFFERING CONTEMPLATED HEREBY, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR AES TRUST III
REPRESENTATIONS MUST NOT BE RELIED UPON AES TRUST IV
AS HAVING BEEN AUTHORIZED BY THE AES TRUST V
COMPANY, ANY UNDERWRITER, AGENT OR
DEALER. NEITHER THE DELIVERY OF THIS PREFERRED SECURITIES
PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT
NOR ANY SALE MADE HEREUNDER OR -----------------------
THEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS PROSPECTUS
BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR -----------------------
THEREOF. NEITHER THIS PROSPECTUS NOR ANY
PROSPECTUS SUPPLEMENT SHALL CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
-----------------------
TABLE OF CONTENTS
PAGE
----
Available Information................. 1
Incorporation of Certain Information
by Reference........................ 1
Use of Proceeds....................... 2
Ratios of Earnings to Fixed Charges... 2
The Company........................... 3
Risk Factors.......................... 6
The AES Trusts........................14
Description of Preferred Securities...19
Description of Preferred Securities
Guarantees...........................20
Description of Junior Subordinated
Debt Trust Securities................23
Plan of Distribution..................29
Legal Matters.........................29
Experts...............................29 ,1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses in connection with the issuance
and distribution of the securities being registered, other than underwriting
discounts and commissions. All of the amounts shown are estimates, except the
SEC registration fee.
SEC Registration filing fee............................$ 454,545
Printing and engraving expenses........................$ 150,000
Blue sky fees and expenses (including counsel).........$ 10,000
Legal fees and expenses................................$ 500,000
Fees of accountants....................................$ 150,000
Fees of trustee........................................$ 15,000
------------
Total...............................................$ 1,279,545
============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Company's By-Laws, and in accordance with Section 145 of the
Delaware General Corporation Law ("GCL"), the Company shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than any action or suit by or in the
right of the Company to procure a judgment in its favor, which is hereinafter
referred to as a "derivative action") by reason of the fact that such person is
or was a director, officer or employee of the Company, or is or was serving in
such capacity or as an agent at the request of the Company for another entity,
to the full extent authorized by Delaware law, against expenses (including, but
not limited to, attorneys' fees), judgments, fines and amounts actually and
reasonably incurred in connection with the defense or settlement of such action,
suit or proceeding if such person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe was unlawful. Agents of the Company may be similarly
indemnified, at the discretion of the Board of Directors.
Under Section 145 of the GCL, a similar standard of care is applicable in
the case of derivative actions, except that indemnification only extends to
expenses (including attorneys' fees) incurred in connection with the defense or
settlement of such an action and then, where the person is adjudged to be liable
to the Company, only if and to the extent that the Court of Chancery of the
State of Delaware or the court in which such action was brought determines that
such person is fairly and reasonably entitled to such indemnity and only for
such expenses as the court shall deem proper.
Pursuant to Company's By-Laws, a person eligible for indemnification may
have the expenses incurred in connection with any matter described above paid in
advance of a final disposition by the Company. However, such advances will only
be made upon the delivery of an undertaking by or on behalf of the indemnified
person to repay all amounts so advanced if it is ultimately determined that such
person is not entitled to indemnification.
In addition, under the Company's By-Laws, the Company may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Company or of another corporation against any liability
asserted against and incurred by such person in such capacity, or arising out of
the person's status as such
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<PAGE>
whether or not the Company would have the power or the obligation to indemnify
such person against such liability under the provisions of the Company's
By-Laws.
ITEM 16. EXHIBITS.
EXHIBITS DESCRIPTION OF EXHIBIT
- -------- ----------------------
1.1 Form of Underwriting Agreement (Debt Securities) (incorporated by
reference to Exhibit 1.1 of Amendment No. 1 to Registration
Statement No. 333-15487 on Form S-3 filed on November 18, 1996)
1.2 Form of Underwriting Agreement (Common Stock and Preferred Stock)
(incorporated by reference to Exhibit 1.2 of Amendment No. 1 to
Registration Statement No. 333-15487 on Form S-3 filed on November
18, 1996)
1.3 Form of Underwriting Agreement (Stock Purchase Contracts and Stock
Purchase Units) (incorporated by reference to Exhibit 1.3 of
Amendment No. 1 to Registration Statement No. 333-15487 on Form S-3
filed on November 18, 1996)
1.4 Form of Underwriting Agreement (Preferred Securities)
4.1 Form of Senior Debt Securities Indenture between the Company and
The First National Bank of Chicago (incorporated by reference to
Exhibit 4.1 of Registration Statement No. 333-15487 on Form S-3
filed on November 4, 1996)
4.2 Senior Subordinated Debt Securities Indenture dated as of July 1,
1996 between the Company and The First National Bank of Chicago
(incorporated by reference to Exhibit 4.2 of Registration Statement
No. 333-15487 on Form S-3 filed on November 4, 1996)
4.3 Form of Junior Subordinated Debt Securities Indenture between the
Company and The First National Bank of Chicago (incorporated by
reference to Exhibit 4.3 of Registration Statement No. 333-15487 on
Form S-3 filed on November 4, 1996)
4.4 Form of Junior Subordinated Debt Trust Securities Indenture between
the Company and The First National Bank of Chicago (incorporated by
reference to Exhibit 4.4 of Registration Statement No. 333-15487 on
Form S-3 filed on November 4, 1996)
4.5 Declaration of Trust of AES Trust III (incorporated by reference to
Exhibit 4.14 of Amendment No. 1 to Registration Statement No.
333-15487 on Form S-3 filed on November 18, 1996)
4.6 Certificate of Trust of AES Trust III (incorporated by reference to
Exhibit 4.15 of Amendment No. 1 to Registration Statement No.
333-15487 on Form S-3 filed on November 18, 1996)
4.7 Form of Amended and Restated Declaration of Trust for AES Trust
III, AES Trust IV and AES Trust V (incorporated by reference to
Exhibit 4.9 of Amendment No. 2 to Registration Statement No. 333-
15487 on Form S-3 filed on November 27, 1996)
4.8 Form of Preferred Security (included in Exhibit 4.7)
4.9 Form of Supplemental Indenture to be used in connection with
issuance of Junior Subordinated Debt Trust Securities and Preferred
Securities (incorporated by reference to Exhibit 4.11 of
Registration Statement No. 333-15487 on Form S-3 filed on November
4, 1996)
4.10 Form of Junior Subordinated Debt Trust Security (included in
Exhibit 4.9)
4.11 Form of Preferred Securities Guarantee with respect to Preferred
Securities (incorporated by reference to Exhibit 4.13 of Amendment
No. 2 to Registration Statement No. 333-15487 on Form S-3 filed on
November 27, 1996)
4.12 Declaration of Trust of AES Trust IV
4.13 Certificate of Trust of AES Trust IV
4.14 Declaration of Trust of AES Trust V
4.15 Certificate of Trust of AES Trust V
4.16 Form of Purchase Contract Agreement (incorporated by reference to
Exhibit 41.6 of Amendment No. 1 to Registration Statement No.
333-15487 on Form S-3 filed on November 18, 1996)
4.17 Form of Pledge Agreement (incorporated by reference to Exhibit 4.17
of Amendment No. 1 to Registration Statement No. 333-15487 on Form
S-3 filed on November 18, 1996)
5.1 Opinion of Davis Polk & Wardwell +
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<PAGE>
EXHIBITS DESCRIPTION OF EXHIBIT
- -------- ----------------------
5.2 Opinion of Delaware counsel +
12.1 Statement re: Computation of ratio of earnings to fixed charges
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Price Waterhouse
23.3 Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
23.4 Consent of Delaware counsel (included in Exhibit 5.2)
24.1 Powers of Attorney for the Company +
24.2 Powers of Attorney for the Company as sponsor, to sign the
Registration Statement on behalf of AES Trust III, AES Trust IV and
AES Trust V (included in Exhibits 4.5, 4.7, 4.12 and 4.14)
25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee, under
the Senior Debt Securities Indenture +
25.2 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee, under
the Senior Subordinated Debt Securities Indenture +
25.3 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee, under
the Junior Subordinated Debt Securities Indenture +
25.4 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee, with
respect to the Junior Subordinated Debt Trust Securities Indenture
+
25.5 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee, with
respect to the Preferred Securities of AES Trust III +
25.6 Statement of Eligibility under The Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee, with
respect to the Preferred Securities of AES Trust IV +
25.7 Statement of Eligibility under The Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee, with
respect to the Preferred Securities of AES Trust V +
25.8 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee, with
respect to the Preferred Securities Guarantee of the Company with
respect to the Preferred Securities of AES Trust III +
25.9 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee, with
respect to the Preferred Securities Guarantee of the Company with
respect to the Preferred Securities of AES Trust IV +
25.10 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee, with
respect to the Preferred Securities Guarantee of the Company with
respect to the Preferred Securities of AES Trust V +
- ---------------------------
+ To be filed by Amendment.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made of
the securities registered hereby, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
II-3
<PAGE>
provided, however, that the undertakings set forth in paragraphs (1)(i) and
(1)(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") that are incorporated by reference in this registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions described under Item 15 above,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrar of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that is has reasonable grounds to believe that it meets all of the
requirements for filing on Forms S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Arlington, State of Virginia on November 7, 1997.
THE AES CORPORATION
By: /s/ Dennis W. Bakke
---------------------------------------
Dennis W. Bakke
President and Chief Executive Officer
The Registrant and each person whose signature appears below constitutes
and appoints Dennis W. Bakke and William R. Luraschi and any agent for service
named in this Registration Statement and each of them, his, her or its true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him, her or it and in his, her, or its name, place and
stead, in any and all capacities, to sign and file any and all amendments
(including post-effective amendments) to this Registration Statement, to sign
any related registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same with all exhibits thereto, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he, she, or it might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on November 7, 1997.
SIGNATURE TITLE DATE
--------- ----- -----
*
- ------------------------- Chairman-of-the-Board November 7, 1997
Roger W. Sant
/s/ Dennis W. Bakke
- ------------------------- President,-Chief-Executive November 7, 1997
Dennis W. Bakke Officer and Director
(Principal Executive Officer)
*
- ------------------------- Director November 7, 1997
Vicki-Ann Assevero
II-5
<PAGE>
*
- ------------------------- Director November 7, 1997
Dr. Alice F. Emerson
*
- ------------------------- Director November 7, 1997
Robert F. Hemphill, Jr.
*
- ------------------------- Director November 7, 1997
Frank Jungers
*
- ------------------------- Director November 7, 1997
Dr. Henry R. Linden
*
- ------------------------- Director November 7, 1997
John H. McArthur
*
- ------------------------- Director November 7, 1997
Hazel O'Leary
*
- ------------------------- Director November 7, 1997
Thomas I. Unterberg
*
- ------------------------- Director November 7, 1997
Robert H. Waterman, Jr.
/s/ Barry J. Sharp
- ------------------------- Vice-President and November 7, 1997
Barry J. Sharp Chief Financial Officer
(Principal Financial and
Accounting Officer)
By: /s/ William R. Luraschi
---------------------- November 7, 1997
William R. Luraschi
Attorney-in-Fact
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, AES Trust III,
AES Trust IV and AES Trust V each certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Forms S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Arlington, State of
Virginia on November 7, 1997.
AES TRUST III
By: The AES Corporation, as Sponsor
By: /s/ William R. Luraschi
------------------------------------------
Name: William R. Luraschi
Title: General Counsel and Secretary
AES TRUST IV
By: The AES Corporation, as Sponsor
By: /s/ William R. Luraschi
-----------------------------------------
Name: William R. Luraschi
Title: General Counsel and Secretary
AES TRUST V
By: The AES Corporation, as Sponsor
By: /s/ William R. Luraschi
-----------------------------------------
Name: William R. Luraschi
Title: General Counsel and Secretary
II-7
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
EXHIBITS DESCRIPTION OF EXHIBIT NUMBERED PAGE
1.1 Form of Underwriting Agreement (Debt Securities)*
1.2 Form of Underwriting Agreement (Common Stock and
Preferred Stock)*
1.3 Form of Underwriting Agreement (Stock Purchase
Contracts and Stock Purchase Units)*
1.4 Form of Underwriting Agreement (Preferred
Securities)
4.1 Form of Senior Debt Securities Indenture between the
Company and The First National Bank of Chicago*
4.2 Senior Subordinated Debt Securities Indenture dated
as of July 1, 1996 between the Company and The First
National Bank of Chicago*
4.3 Form of Junior Subordinated Debt Securities
Indenture between the Company and The First National
Bank of Chicago*
4.4 Form of Junior Subordinated Debt Trust Securities
Indenture between the Company and The First National
Bank of Chicago*
4.5 Declaration of Trust of AES Trust III*
4.6 Certificate of Trust of AES Trust III*
4.7 Form of Amended and Restated Declaration of Trust
for each of AES Trust III, AES Trust IV and AES
Trust V*
4.8 Form of Preferred Security (included in Exhibit 4.7)
4.9 Form of Supplemental Indenture to be used in
connection with issuance of Junior Subordinated Debt
Trust Securities and Preferred Securities*
4.10 Form of Junior Subordinated Debt Trust Security
(included in Exhibit 4.9)
4.11 Form of Preferred Securities Guarantee with respect
to Preferred Securities*
4.12 Declaration of Trust of AES Trust IV
4.13 Certificate of Trust of AES Trust IV
4.14 Declaration of Trust of AES Trust V
4.15 Certificate of Trust of AES Trust V
4.16 Form of Purchase Contract Agreement*
4.17 Form of Pledge Agreement *
5.1 Opinion of Davis Polk & Wardwell
5.2 Opinion of Delaware counsel
12.1 Statement re: Computation of ratio of earnings to
fixed charges
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Price Waterhouse
23.3 Consent of Davis Polk & Wardwell (included in
Exhibit 5.1)
23.4 Consent of Delaware counsel (included in Exhibit
5.2)
24.1 Powers of Attorney for the Company
24.2 Powers of Attorney for the Company as sponsor, to
sign the Registration Statement on behalf of AES
Trust III, AES Trust IV and AES Trust V (included in
Exhibits 4.5, 4.7, 4.12 and 4.14)
25.1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The First National Bank
of Chicago, as Trustee, under the Senior Debt
Securities Indenture
25.2 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The First National Bank
of Chicago, as Trustee, under the Senior
Subordinated Debt Securities Indenture
25.3 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The First National Bank
of Chicago, as Trustee, under the Junior
Subordinated Debt Securities Indenture
II-8
<PAGE>
SEQUENTIALLY
EXHIBITS DESCRIPTION OF EXHIBIT NUMBERED PAGE
25.4 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The First National Bank
of Chicago, as Trustee, with respect to the Junior
Subordinated Debt Trust Securities Indenture
25.5 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The First National Bank
of Chicago, as Trustee, with respect to the
Preferred Securities of AES Trust III
25.6 Statement of Eligibility under The Trust Indenture
Act of 1939, as amended, of The First National Bank
of Chicago, as Trustee, with respect to the
Preferred Securities of AES Trust IV
25.7 Statement of Eligibility under The Trust Indenture
Act of 1939, as amended, of The First National Bank
of Chicago, as Trustee, with respect to the
Preferred Securities of AES Trust V
25.8 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The First National Bank
of Chicago, as Trustee, with respect to the
Preferred Securities Guarantee of the Company with
respect to the Preferred Securities of AES Trust III
25.9 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The First National Bank
of Chicago, as Trustee, with respect to the
Preferred Securities Guarantee of the Company with
respect to the Preferred Securities of AES Trust IV
25.10 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The First National Bank
of Chicago, as Trustee, with respect to the
Preferred Securities Guarantee of the Company with
respect to the Preferred Securities of AES Trust V
- ---------------------------
* Incorporated by reference to other documents (see Item 16) and not included
herein.
II-9
EXHIBIT 1.4
[FORM OF PREFERRED SECURITIES
UNDERWRITING AGREEMENT]
$___________
THE AES CORPORATION
______ Preferred Securities
AES Trust [-] Guaranteed by
------------------
UNDERWRITING AGREEMENT
_______, 199_
Dear Sirs:
AES Trust [_] (the "Trust"), a statutory business trust organized under the
Business Trust Act (the "Delaware Act") of the State of Delaware (Chapter 38,
Title 12, of the Delaware Code, 12 Del. C. ss.3801 et seq.), proposes to issue
and sell ____________ shares of its ___% preferred trust securities (the "Firm
Securities") to the several underwriters named in Schedule I hereto (the
"Underwriters"). The Trust also proposes to issue and sell to the several
Underwriters not more than _______ additional shares of its ___% preferred trust
securities (the "Additional Securities") if requested by the Underwriters as
provided in Section 2 hereof. The Firm Securities and the Additional Securities
are herein collectively called the "Securities". The Securities will be
guaranteed by The AES Corporation, a Delaware corporation (the "Company") to the
extent set forth in the Prospectus (as defined herein).
It is understood that substantially contemporaneously with the offering and
sale of the Firm Securities to the Underwriters contemplated hereby, (i) the
Trust, its trustees (the "Trustees") and the Company shall take all necessary
action to adopt an Amended and Restated Declaration of Trust in substantially
the form of the Form of
<PAGE>
Amended and Restated Declaration of Trust incorporated by reference as Exhibit
4.7 to the Registration Statement referred to below, (as so amended and
restated, the "Declaration") pursuant to which the Trust shall (x) issue and
sell the Securities to the Underwriters pursuant hereto and (y) issue [_] shares
of its [___]% common securities [(and up to an additional [_] shares of such
securities in connection with the issuance and sale of the Additional
Securities)] (the "Common Securities" and, together with the Securities, the
"Trust Securities") to the Company, in each case with such rights and
obligations as shall be set forth in such Declaration, (ii) the Company and The
Bank of New York, as Trustee, shall enter into an Indenture in substantially the
form of the Form of the Junior Subordinated Debt Trust Securities Indenture
incorporated by reference as Exhibit 4.4 to the Registration Statement referred
to below (as supplemented by the Supplemental Indenture substantially in the
form incorporated by reference as Exhibit 4.9 to the Registration Statement
referred to below, the "Indenture") providing for the issuance of
$[____________] in aggregate principal amount of the Company's Junior
Subordinated Debt Trust Securities Debentures, Series [_], due 20[__] (the
"Debentures"), (iii) the Company shall deposit such Debentures in the Trust in
conjunction with the consummation of the sale of the Securities to the
Underwriters contemplated hereby and (iv) the Company and
_________________________, as Guarantee Trustee, shall enter into a Guarantee
Agreement in substantially the form of the Form of Guarantee with respect to
Securities incorporated by reference as Exhibit 4.11 of the Registration
Statement referred to below (the "Guarantee") for the benefit of holders from
time to time of the Securities.
1 Registration Statement and Prospectus. The Trust and the Company have
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively called the "Securities Act"), a registration statement on Form
S-3, including a prospectus, relating to, among other things, certain preferred
securities of AES Trust III, IV and V, certain junior subordinated debt and
guarantees of preferred securities of AES Trust III, IV and V (collectively, the
"Shelf Securities"). The Trust and the Company also have filed with, or propose
to file with, the Commission pursuant to Rule 424 under the Securities Act a
prospectus supplement specifically relating to the Securities. The registration
statement as amended to the date of this Agreement is hereinafter referred to as
the "Base Registration Statement" and any registration statement filed pursuant
to Rule 462(b) under the Securities Act relating to the Securities is herein
referred to as the "Additional Registration Statement", and, together with the
Base Registration Statement, the "Registration Statement". The related
prospectus covering the Shelf Securities in the form first used to confirm sales
of the Securities is hereinafter referred to as the "Basic Prospectus". The
Basic Prospectus as supplemented by the prospectus supplement specifically
relating to the Securities in the form first used to confirm sales of the
Securities is hereinafter referred to as the "Prospectus". Any reference in this
Agreement to the Registration Statement, the Basic Prospectus, any preliminary
form of Prospectus
2
<PAGE>
(a "preliminary prospectus") previously filed with the Commission pursuant to
Rule 424 or the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Securities Act which were filed under the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder
(collectively, the "Exchange Act") on or before the date of this Agreement or
the date of the Basic Prospectus, any preliminary prospectus or the Prospectus,
as the case may be; and any reference to "amend", "amendment" or "supplement"
with respect to the Registration Statement, the Basic Prospectus, any
preliminary prospectus or the Prospectus shall be deemed to refer to and include
any documents filed under the Exchange Act after the date of this Agreement, or
the date of the Basic Prospectus, any preliminary prospectus or the Prospectus,
as the case may be, which are deemed to be incorporated by reference therein.
2 Agreements to Sell and Purchase. On the basis of the representations and
warranties contained in this Agreement, and subject to its terms and conditions,
the Company agrees to issue and sell and each Underwriter agrees, severally and
not jointly, to purchase from the Trust at a price per share of $_____ (the
"Purchase Price"), the number of Firm Securities set forth opposite the name of
such Underwriter in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Trust agrees to issue
and sell the Additional Securities and the Underwriters shall have the right to
purchase, severally and not jointly, up to _______ Additional Securities from
the Trust at the Purchase Price. Additional Securities may be purchased solely
for the purpose of covering over-allotments made in connection with the offering
of the Firm Securities. The Underwriters may exercise their right to purchase
Additional Securities in whole or in part from time to time by giving written
notice thereof to the Company within 30 days after the date of this Agreement.
You shall give any such notice on behalf of the Underwriters and such notice
shall specify the aggregate number of Additional Securities to be purchased
pursuant to such exercise and the date for payment and delivery thereof. The
date specified in any such notice shall be a business day (i) no earlier than
the Closing Date (as hereinafter defined), (ii) no later than ten business days
after such notice has been given and (iii) no earlier than two business days
after such notice has been given. If any Additional Securities are to be
purchased, each Underwriter, severally and not jointly, agrees to purchase from
the Trust the number of Additional Securities (subject to such adjustments to
eliminate fractional shares as you may determine) which bears the same
proportion to the total number of Additional Securities to be purchased from the
Trust as the number of Firm Securities set forth opposite the name of such
Underwriter in Schedule I bears to the total number of Firm Securities.
In view of the fact that the proceeds of the sale of the Securities will be
used to purchase Debentures, the Company agrees to pay as compensation
3
<PAGE>
("Underwriter's Compensation") for the Underwriters' arranging the investment
therein of such proceeds an amount in immediately available funds of $ per
Security purchased hereunder.
[The Trust and the Company hereby agree not to offer, sell, contract to
sell, grant any option to purchase, or otherwise dispose of any preferred trust
securities or any securities convertible into or exercisable or exchangeable for
such preferred trust securities or in any other manner transfer all or a portion
of the economic consequences associated with the ownership of any such preferred
trust securities, except to the Underwriters pursuant to this Agreement, for a
period of ___ days after the date of the Prospectus without the prior written
consent of ____________________________.]
3 Terms of Public Offering. The Company is advised by you that the
Underwriters propose (i) to make a public offering of their respective portions
of the Securities as soon after the effective date of the Registration Statement
as in your judgment is advisable and (ii) initially to offer the Securities upon
the terms set forth in the Prospectus.
4 Delivery and Payment. Delivery to the Underwriters of and payment for the
Firm Securities and payment of the related Underwriters' Compensation shall be
made at 10:00 A.M., New York City time, on ______, 199_, or at such other time
or such other date as the Underwriters and the Company may agree upon in
writing. The time and date of such payment are referred to herein as the
"Closing Date". As used herein, the term "Business Day" means any day other than
a day on which banks are permitted or required to be closed in New York City.
Delivery to the Underwriters of and payment for any Additional Securities
to be purchased by the Underwriters and payment of the related Underwriters'
Compensation shall be made at such place as you shall designate at 10:00 A.M.,
New York City time, on the date specified in the applicable exercise notice
given by you pursuant to Section 2 (an "Option Closing Date"). Any such Option
Closing Date and the location of delivery of and the form of payment for such
Additional Securities may be varied by agreement between you and the Company.
Certificates for the Securities shall be registered in such names and
issued in such denominations as you shall request in writing not later than two
full business days prior to the Closing Date or an Option Closing Date, as the
case may be. Such certificates shall be made available to you for inspection not
later than 9:30 A.M., New York City time, on the business day next preceding the
Closing Date or the applicable Option Closing Date, as the case may be.
Certificates in definitive form evidencing the Securities shall be delivered to
you on the Closing Date or the applicable Option Closing Date, as the case may
be with any transfer taxes thereon duly paid by the Company, for the respective
accounts of the several Underwriters, against payment of the Purchase
4
<PAGE>
Price therefor by wire transfer in immediately available funds to the account
specified by the Company to the Underwriters (no later than noon the Business
Day prior to the Closing Date or the applicable Option Closing Date, as the case
may be) at the office of Davis Polk & Wardwell, counsel to the Company.
5 Agreements of the Company. The Company agrees with you:
(a) To file the Prospectus in a form approved by you with the
Commission within the time periods specified by Rule 424; and to file
promptly all reports and any definitive proxy or information statements
required to be filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the
Prospectus and for so long as the delivery of a prospectus is required in
connection with the offering or sale of the Securities; and to furnish
copies of the Prospectus to the Underwriters in New York City prior to
10:00 a.m., New York City time, on the Business Day next succeeding the
date of this Agreement in such quantities as the Underwriters may
reasonably request;
(b) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) when any post-effective amendment to the
Registration Statement has been filed or becomes effective, (ii) of any
request by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the suspension of
qualification of the Securities for offering or sale in any jurisdiction,
or the initiation of any proceeding for such purposes, and (iv) of the
happening of any event during the period referred to in paragraph (e) below
which makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or which requires the making of any
additions to or changes in the Registration Statement or the Prospectus in
order to make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to
obtain the withdrawal or lifting of such order at the earliest possible
time.
(c) To furnish to you three signed copies of the Registration
Statement as first filed with the Commission and of each amendment to it,
including all exhibits thereto and documents incorporated by reference
therein, and to furnish to you and each Underwriter designated by you such
number of conformed copies of the Registration Statement as so filed and of
each amendment to it, without exhibits thereto and documents incorporated
by reference therein, as you may reasonably request.
5
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(d) Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or
to make any amendment or supplement to the Prospectus of which you shall
not previously have been advised or to which you shall reasonably object;
and to prepare and file with the Commission, promptly upon your reasonable
request, any amendment to the Registration Statement or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Securities by you, and to use its best efforts to cause
the same to become promptly effective.
(e) Promptly after the Registration Statement becomes effective, and
from time to time thereafter for such period as in the opinion of counsel
for the Underwriters a prospectus is required by law to be delivered in
connection with sales by an Underwriter or a dealer, to furnish to each
Underwriter and dealer as many copies of the Prospectus (and of any
amendment or supplement to the Prospectus) as such Underwriter or dealer
may reasonably request.
(f) If during the period specified in paragraph (e) any event shall
occur as a result of which, in the opinion of counsel for the Underwriters,
it becomes necessary to amend or supplement the Prospectus in order to make
the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Prospectus to comply with any law,
forthwith to prepare and file with the Commission an appropriate amendment
or supplement to the Prospectus so that the statements in the Prospectus,
as so amended or supplemented, will not in the light of the circumstances
when it is so delivered, be misleading, or so that the Prospectus will
comply with law, and to furnish to each Underwriter and to such dealers as
you shall specify, such number of copies thereof as such Underwriter or
dealers may reasonably request.
(g) Prior to any public offering of the Securities, to cooperate with
you and counsel for the Underwriters in connection with the registration or
qualification of the Securities for offer and sale by the several
Underwriters and by dealers under the state securities or Blue Sky laws of
such jurisdictions as you may request, to continue such qualification in
effect so long as required for distribution of the Securities and to file
such consents to service of process or other documents as may be necessary
in order to effect such registration or qualification.
(h) To mail and make generally available to its securityholders as
soon as reasonably practicable an earnings statement covering a period of
at least twelve months after the effective date of the Registration
Statement (but in no event commencing later than 90 days after such date)
which shall satisfy the
6
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provisions of Section 11(a) of the Securities Act, and to advise you in
writing when such statement has been so made available.
(i) During the period of five years after the date of this Agreement,
or for such shorter period if the Securities no longer remain outstanding,
(i) to mail as soon as reasonably practicable after the end of each fiscal
year to the record holders of its Securities a financial report of the
Company and its subsidiaries on a consolidated basis (and a similar
financial report of all unconsolidated subsidiaries, if required by
Regulation S-X), all such financial reports to include a consolidated
balance sheet, a consolidated statement of operations, a consolidated
statement of cash flows and a consolidated statement of shareholders'
equity as of the end of and for such fiscal year, together with comparable
information as of the end of and for the preceding year, certified by
independent certified public accountants, and (ii) to mail and make
generally available as soon as practicable after the end of each quarterly
period (except for the last quarterly period of each fiscal year) to such
holders, a consolidated balance sheet, a consolidated statement of
operations and a consolidated statement of cash flows (and similar
financial reports of all unconsolidated subsidiaries, if required by
Regulation S-X) as of the end of and for such period, and for the period
from the beginning of such year to the close of such quarterly period,
together with comparable information for the corresponding periods of the
preceding year.
(j) During the period referred to in paragraph (i), to furnish to you
as soon as available a copy of each report or other publicly available
information of the Company mailed to the securityholders of the Company or
filed with the Commission and such other publicly available information
concerning the Company and its subsidiaries as you may reasonably request.
(k) To pay all costs, expenses, fees and taxes incident to the
performance of its obligations hereunder, including without limiting the
generality of the foregoing, all costs and expenses incident to (i) the
preparation, issuance, and delivery of the certificates for the Securities,
including any expenses of the Trustee, (ii) the preparation, printing,
filing and distribution under the Securities Act of the Registration
Statement (including financial statements and exhibits), each preliminary
prospectus and all amendments and supplements to any of them prior to or
during the period specified in paragraph (e), (iii) the printing and
delivery of the Prospectus and any Preliminary Prospectus and all
amendments or supplements to it during the period specified in paragraph
(e), (iv) the printing and delivery of this Agreement, the Indenture,
Preliminary and Supplemental Blue Sky Memoranda and all other agreements,
memoranda, correspondence and other documents printed and delivered in
connection with the offering of the Securities (including in each case any
disbursements of counsel for the Underwriters relating to such printing and
delivery), (v) the registration or qualification of the Securities
7
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for offer and sale under the securities or Blue Sky laws of the several
states (including in each case the fees and disbursements of counsel for
the Underwriters relating to such registration or qualification and
memoranda relating thereto), (vi) filings and clearance with the National
Association of Securities Dealers, Inc. in connection with the offering,
(vii) furnishing such copies of the Registration Statement, the Prospectus
and all amendments and supplements thereto as may be requested for use in
connection with the offering or sale of the Securities by the Underwriters
or by dealers to whom Securities may be sold and (viii) the rating of the
Securities including, without limitation, fees payable to rating agencies
in connection therewith.
(l) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company
prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Securities.
6 Representations and Warranties of the Company. The Company represents and
warrants to each Underwriter that:
(a) The Registration Statement has been declared effective by the
Commission under the Securities Act; no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or, to the knowledge of the
Company, threatened by the Commission; and the Registration Statement and
Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) comply, or will comply, as the case
may be, in all material respects with the Securities Act and the Trust
Indenture Act of 1939, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Trust Indenture Act"), and do not
and will not, as of the applicable effective date as to the Registration
Statement and any amendment thereto and as of the date of the Prospectus
and any amendment or supplement thereto, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and the
Prospectus, as amended or supplemented at the Closing Date, if applicable,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; except that the
foregoing representations and warranties shall not apply to (i) that part
of the Registration Statement which constitutes the Statement of
Eligibility and Qualification (Form T-1) under the Trust Indenture Act of
the Trustee, and (ii) statements or omissions in the Registration Statement
or the Prospectus made in reliance upon and in conformity
8
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with information relating to any Underwriter furnished to the Company in
writing by such Underwriter through the Representatives expressly for use
therein;
(b) The documents incorporated by reference in the Prospectus, when
they were filed with the Commission, conformed in all material respects to
the requirements of the Exchange Act, and none of such documents contained
an untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and any further documents so
filed and incorporated by reference in the Prospectus, when such documents
are filed with the Commission will conform in all material respects to the
requirements of the Exchange Act, as applicable, and will not contain an
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(c) The Company and each of its subsidiaries and each of its
affiliates which meets the criteria in the definition of "significant
subsidiary" pursuant to Rule 1-02(w) of Regulation S-X under the Securities
Act (each, a "Principal Subsidiary") has been duly incorporated, is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority
required to carry on its business as it is currently being conducted and to
own, lease and operate its properties, and each is duly qualified and is in
good standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure
to be so qualified would not have a material adverse effect on the
business, financial condition or results of operations of the Company and
the Principal Subsidiaries, taken as a whole.
(d) Except as set forth in the Registration Statement or on Annex I
hereto, all of the outstanding shares of capital stock of, or other
ownership interests in, the Principal Subsidiaries have been duly and
validly authorized and issued and are fully paid and non-assessable, and
are owned by the Company or one of the Principal Subsidiaries, free and
clear of any security interest, claim, lien, encumbrance or adverse
interest of any nature.
(e) As of the Closing Date, the Trust Securities will have been duly
authorized by the Declaration and (x) when the Securities are issued in
accordance with the terms of this Agreement and delivered to and paid for
by the Underwriters and (y) the Common Securities are issued against
payment therefor as provided in the Declaration, such Trust Securities will
be duly and validly is sued and (subject to the terms of the Declaration)
will be fully paid and nonassess-
9
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able undivided beneficial interests in the assets of the Trust, not subject
to any preemptive or similar rights. Holders of Trust Securities will be
entitled to the same limitation of personal liability extended to
stockholders of private corpora tions for profit organized under the
General Corporation Law of the State of Delaware.
(f) As of the Closing Date, the Declaration will have been duly
authorized, executed and delivered by the Company and the Trustees and will
be a valid and binding obligation of the Company and the Trustees,
enforceable against the Company and the Trustees in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(g) The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Act, is and will be treated
as a "grantor trust" for Federal income tax purposes under existing law,
has the business trust power and authority to conduct its business as
presently conducted and as described in the Registration Statement and
Prospectus, and is not required to be authorized to do business in any
other jurisdiction.
(h) The Indenture has been duly qualified under the Trust Indenture
Act and has been duly authorized, executed and delivered by the Company and
is a valid and binding agreement of the Company, enforceable in accordance
with its terms except as the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and by equitable principles of general applicability; the
Debentures have been duly authorized and when executed and authenticated in
accordance with the provisions of the Indenture and delivered to the Trust
against payment therefore as provided in the Prospectus will be entitled to
the benefits of the Indenture and the Indenture and the Debentures will
conform in all respects to statements relating thereto contained in the
Registration Statement and the Prospectus.
(i) The Guarantee has been duly qualified under the Trust Indenture
Act of 1939, as amended, and, as of the Closing Date, assuming due authori
zation, execution and delivery by the Company thereunder, of the Guarantee,
the Guarantee will be a valid and binding agreement of the Company,
enforceable in accordance with its terms subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies
generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
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(j) This Agreement has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement of the Company (except as
rights to indemnity and contribution hereunder may be limited by applicable
law).
(k) The Securities conform as to legal matters to the description
thereof contained in the Registration Statement and the Prospectus.
(l) The Company is not in violation of its Restated Certificate of
Incorporation or its By-laws and neither the Trust nor the Principal
Subsidiaries are in violation of, as applicable, their respective
Declaration, charter or, except for any such violations which would not
have a material adverse effect on the Trust, the Company and its
subsidiaries taken as a whole, their by-laws, nor is the Trust, the Company
or any of the Principal Subsidiaries, except as set forth in the
Registration Statement, in default in, as applicable, the performance of
any obligation, agreement or condition contained in any bond, debenture,
note or any other evidence of indebtedness or in any other agreement,
indenture or instrument to which the Trust, the Company or any of the
Principal Subsidiaries is a party or by which the Trust, the Company or any
of the Principal Subsidiaries or their respective property is bound except
for any such defaults which, individually or in the aggregate, would not
have a material adverse effect on the business, financial condition or
results of operations of the Company and the Principal Subsidiaries, taken
as a whole.
(m) The execution, delivery and performance of this Agreement, the
Indenture, the Debentures, the Guarantee, the Declaration and the
Securities and the compliance by the Trust and the Company with all the
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not require any consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body (except such as may be required under the
Securities Act, the Exchange Act, the Trust Indenture Act, or other
securities or Blue Sky laws) and will not conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the
Declaration, charter or by-laws, as applicable, or any agreement, indenture
or other instrument to which the Trust, the Company or any of the Principal
Subsidiaries is a party or by which the Trust, the Company or any of the
Principal Subsidiaries or their respective property is bound, or violate or
conflict with any laws, administrative regulations or rulings or court
decrees applicable to the Trust, the Company, any of the Principal
Subsidiaries or their respective property (except state securities or Blue
Sky laws).
(n) Except as set forth in the Registration Statement, there are no
material legal or governmental proceedings pending to which the Trust, the
Company or any of the Principal Subsidiaries is a party or to which any of
their
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respective property is the subject, and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated. No contract
or document of a character required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement is not so described or filed as required.
(o) Except as set forth in the Registration Statement, neither the
Company nor any of the Principal Subsidiaries has violated any U.S. federal
or state law relating to discrimination in the hiring, promotion or pay of
employees nor any applicable U.S. federal or state wages and hours laws, or
any provisions of the Employee Retirement Income Security Act or the rules
and regulations promulgated thereunder, which in each case could result in
any material adverse change in the business, financial condition or results
of operations of the Company and the Principal Subsidiaries, taken as a
whole.
(p) Except as set forth in the Registration Statement, the Company and
each of the Principal Subsidiaries has good and marketable title, free and
clear of all liens, claims, encumbrances and restrictions which are
required to be described in the Registration Statement except liens for
taxes not yet due and payable, to all property and assets described in the
Registration Statement as being owned by it. All leases to which the
Company or any of the Principal Subsidiaries is a party are valid and
binding and no default by the Company or any such Principal Subsidiary, or,
to the best of the Company's knowledge, by any other party to any such
leases, has occurred or is continuing thereunder, which could result in any
material adverse change in the business, financial condition or results of
operations of the Trust, the Company and the Principal Subsidiaries taken
as a whole, and the Company and the Principal Subsidiaries enjoy peaceful
and undisturbed possession under all such leases to which any of them is a
party as lessee with such exceptions as do not materially interfere with
the use made by the Company or such Principal Subsidiary.
(q) Deloitte & Touche are independent public accountants with respect
to the Company as required by the Securities Act.
(r) The financial statements, together with related schedules and
Notes forming part of the Registration Statement and the Prospectus (and
any amendment or supplement thereto), present fairly the consolidated
financial position, results of operations and statements of cash flow of
the Company and its subsidiaries on the basis stated in the Registration
Statement at the respective dates and for the respective periods to which
they apply; such statements and related schedules and Notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; and the other financial and statistical
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information and data set forth in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), in all material
respects, present fairly the information purported to be shown thereby at
the respective dates or for the respective periods to which they apply and
have been prepared on a basis consistent with such financial statements and
the books and records of the Company.
(s) Each of the Company and the Principal Subsidiaries has such
permits, licenses, franchises and authorizations of governmental or
regulatory authorities ("permits") which are required to have been obtained
by it prior to the date hereof and which are material to the ownership or
leasing and operation of or construction of its respective properties and
to the conduct of its business in the manner described in the Prospectus,
except for any such permits, the failure of which to have, individually or
in the aggregate, would not have a material adverse effect on the business,
financial condition or results of operations of the Company and the
Principal Subsidiaries, taken as a whole, and subject to such
qualifications as may be set forth in the Registration Statement; each of
the Company and the Principal Subsidiaries has fulfilled and performed all
of its material obligations with respect to such permits required to have
been fulfilled and performed prior to the date hereof and no event has
occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or result in any other material
impairment of the rights of the holder of any such permit, subject in each
case to such qualification as may be set forth in the Registration
Statement; and, except as described in the Registration Statement, such
permits do not materially interfere with the use or operation of the
electric power generation facilities of the Principal Subsidiaries as
currently used or operated or as contemplated to be used or operated.
(t) Each of the AES Beaver Valley, the AES Deepwater, the AES
Placerita, the AES Shady Point, the AES Barbers Point and the AES Thames
facilities (each as defined in the Registration Statement) is a "qualifying
cogeneration facility" under the Federal Power Act ("FPA"), as amended by
Section 201 of the Public Utility Regulatory Policies Act of 1978 ("PURPA")
and the FERC's regulations promulgated thereunder, and each such facility's
current use, operation and ownership are consistent with such facility's
status as a "qualifying cogeneration facility".
(u) None of the Trust, the Company or any of the Principal
Subsidiaries is (i) subject to regulation as a "holding company" or a
"subsidiary company" of a holding company or a "public utility company"
under Section 2(a) of the Public Utility Holding Company Act of 1935
("PUHCA"), except that the Company and its subsidiary in the United
Kingdom, Applied Energy Services Electric Limited, are exempt holding
companies under Section 3(a)(5) of PUHCA
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by order of the Commission, (ii) subject to regulation under the FPA, other
than as contemplated by 18 C.F.R. Section 292.601(c), or (iii) except as
described in the Registration Statement (other than contained in the
exhibits thereto), subject to regulation by any state law with respect to
rates or the financial or organizational regulation of electric utilities.
(v) Neither the Trust nor the Company is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(w) Except as set forth in the Registration Statement, each of the
Company, each Principal Subsidiary, and any other subsidiary or entity
which the Company may be deemed to operate (together with the Principal
Subsidiaries, the "Subsidiaries") is in compliance with all applicable
foreign, federal, state and local environmental (including, without
limitation, the Comprehensive Environmental Response, Compensation &
Liability Act of 1980, as amended), safety or similar law, rule and
regulation, and there are no costs or liabilities associated with any such
law, rule or regulation, except for any such noncompliances, costs or
liabilities which, individually or in the aggregate, would not have a
material adverse effect on the business, financial condition or results of
operations of the Company and the Subsidiaries, taken as a whole.
(x) The Trust and the Company have complied with all provisions of
Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
7 Indemnification. (a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages, liabilities and
judgments (i) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (other than that part of
the Registration Statement that constitutes the Form T-1) or the Prospectus (as
amended or supplemented if the Trust and the Company shall have furnished any
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Underwriter furnished in writing
to the Company by or on behalf of any Underwriter through you expressly for use
therein; provided, however, that the foregoing indemnity agreement with respect
to any preliminary prospectus shall not inure to the benefit of any Underwriter
from whom the person asserting any such losses, claims, damages, liabilities or
judgments purchased Securities, or any person controlling such Underwriter, if a
copy of the Prospectus (as then amended
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or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Securities to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such losses, claims, damages, liabilities or judgments.
(b) In case any action shall be brought against any Underwriter or any
person controlling such Underwriter, based upon any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement thereto
and with respect to which indemnity may be sought against the Company, such
Underwriter shall promptly notify the Company in writing and the Company shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all fees and expenses. Any
Underwriter or any such controlling person shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Underwriter or such controlling person unless (i) the employment of such counsel
has been specifically authorized in writing by the Company, (ii) the Company has
failed to assume the defense and employ counsel or (iii) the named parties to
any such action (including any impleaded parties) include both such Underwriter
or such controlling person and the Company and such Underwriter or such
controlling person shall have been advised by such counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the Company (in which case the Company shall not have the
right to assume the defense of such action on behalf of such Underwriter or such
controlling person, it being understood, however, that the Company shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all such Underwriters and controlling persons, which firm shall be designated in
writing by __________________ and that all such fees and expenses shall be
reimbursed as they are incurred). The Company shall not be liable for any
settlement of any such action effected without the written consent of the
Company but if settled with the written consent of the Company, the Company
agrees to indemnify and hold harmless any Underwriter and any such controlling
person from and against any loss or liability by reason of such settlement.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second sentence of this
paragraph, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 10 business days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement.
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No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
(c) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless (i) the Trust, the Trustees, its officers who sign the
Registration Statement and any person controlling the Trust within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act and
(ii) the Company, its directors, its officers who sign the Registration
Statement and any person controlling the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, in each such case to
the same extent as the foregoing indemnity from the Company to each Underwriter
but only with reference to information relating to such Underwriter furnished in
writing by or on behalf of such Underwriter through you expressly for use in the
Registration Statement, the Prospectus, any preliminary prospectus or any
amendment or supplement thereto. In case any action shall be brought against the
Trust, the Trustees, its officers who sign the Registration Statement or any
person controlling the Trust or against the Company, any of its directors, any
such officer or any person controlling the Company based on the Registration
Statement, the Prospectus or any preliminary prospectus or any amendment or
supplement thereto and in respect of which indemnity may be sought against any
Underwriter, the Underwriter shall have the rights and duties given to the
Company (except that if the Company shall have assumed the defense thereof, such
Underwriter shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof but the fees and expenses of such
counsel shall be at the expense of such Underwriter), and the Trust, the
Trustees, its officers who sign the Registration Statement and any person
controlling the Trust, the Company, its directors, any such officers and any
person controlling the Company shall have the rights and duties given to the
Underwriter, by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is unavailable to
an indemnified party in respect of any losses, claims, damages, liabilities or
judgments referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities and judgments (i) in such proportion as is appropriate to reflect
the relative benefits received by the Trust and the Company on the one hand and
the Underwriters on the other hand from the offering of the Securities or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Trust, the Company and the Underwriters in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable
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considerations. The relative benefits received by the Trust, the Company and the
Underwriters shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Trust and
the Company, and the total underwriting discounts and commissions received by
the Underwriters, bear to the total price to the public of the Securities, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault of the Trust, the Company and the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Trust, the Company or the Underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Trust, the Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7(d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
was offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 7(d) are several in proportion to the
respective number of Securities purchased by each of the Underwriters hereunder
and not joint.
8 Conditions of Underwriters' Obligations. The several obligations of the
Underwriters to purchase the Firm Securities under this Agreement are subject to
the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same
force and effect as if made on and as of the Closing Date.
(b) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall
have
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been commenced or shall be pending before or, to the best of the Company's
knowledge, contemplated by the Commission.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have been any downgrading, nor
shall any notice have been given of any intended or potential downgrading
or of any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded to any of the Company's or
the Trust's securities or to any securities of any other AES Trust that is
organized in substantially the form of, and for substantially the same
purpose as, the Trust and whose common equity capital is wholly owned by
the Company or any subsidiary, by any "nationally recognized statistical
rating organization", as such term is defined for purposes of Rule
436(g)(2) under the Securities Act.
(d)(i) Since the date of the latest balance sheet included in the
Registration Statement, there shall not have been any material adverse
change, or any development involving a prospective material adverse change,
in the condition, financial or otherwise, or in the earnings, affairs or
business prospects, whether or not arising in the ordinary course of
business, of the Company and the Principal Subsidiaries, taken as a whole,
from that described in the Registration Statement, (ii) since the date of
the latest balance sheet included in the Registration Statement there shall
not have been any material change, or any development involving a
prospective material adverse change, in the capital stock or in the
long-term debt of the Company from that set forth in the Registration
Statement, (iii) the Trust and the Company shall have no liability or
obligation, direct or contingent, which is material to the Trust, the
Company and the Principal Subsidiaries, taken as a whole, other than those
reflected in the Registration Statement and (iv) on the Closing Date you
shall have received a certificate dated the Closing Date, signed by such
executive officers of the Company as you may designate, and such other
certificates of executive officers and key personnel of the Principal
Subsidiaries as you may specify confirming the matters set forth in
paragraphs (a), (b), (c) and (d) of this Section 8.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of William R. Luraschi, General Counsel of AES, to the effect that:
(i) the Company and each of the Principal Subsidiaries (other
than Principal Subsidiaries that are incorporated or organized outside
of the United States as to which Mr. Luraschi expresses no opinion)
has been duly incorporated, is validly existing as a corporation in
good standing under the laws of its jurisdiction of incorporation and
has the corporate
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power and authority required to carry on its business as it is
currently being conducted and to own its properties;
(ii) the Company and each of the Principal Subsidiaries (other
than Principal Subsidiaries that are incorporated or organized outside
of the United States as to which Mr. Luraschi expresses no opinion) is
duly qualified and is in good standing as a foreign corporation
authorized to do business in each jurisdiction in which the nature of
its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not
have a material adverse effect on the Company and the Principal
Subsidiaries, taken as a whole;
(iii) except as set forth in the Registration Statement or
otherwise set forth on Annex I, all of the outstanding shares of
capital stock of, or other ownership interests in, the Principal
Subsidiaries have been duly and validly authorized and issued and are
fully paid and non-assessable, and are owned of record, and to the
knowledge of such counsel, after due inquiry, beneficially, by the
Company or the Principal Subsidiary as set forth in such opinion; and
such counsel, after due inquiry, is not aware of any security
interest, claim, lien, encumbrance or adverse interest of any nature
on such shares or other ownership interests except as set forth in the
Registration Statement or in Annex I;
(iv) the Company is not in violation of its Restated Certificate
of Incorporation or in violation of its By-laws and none of the
Principal Subsidiaries is in violation of its respective charter or
their by-laws, except for any such violations which would not have a
material adverse effect on the Trust, the Company and its subsidiaries
taken as a whole;
(v) the execution, delivery and performance of this Agreement,
the Indenture, Debentures, Guarantee and Declaration by the Company,
compliance by the Trust and the Company with all the provisions hereof
and thereof, issuance of the Securities and the consummation of the
transactions contemplated hereby and thereby will not require any
consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body
(except such as may be required under the Securities Act, the Exchange
Act, the Trust Indenture Act or other securities or Blue Sky laws) and
will not conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the Declaration, charter or by-laws
of the Trust, the Company or any of the Principal Subsidiaries or any
agreement, indenture or other instrument known to such counsel, to
which the Trust, the Company or any of the Principal Subsidiaries is a
party or by which the Trust, the Company or
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any of the Principal Subsidiaries or their respective properties are
bound that is material to the Trust, the Company and its Principal
Subsidiaries, taken as a whole, or violate or conflict with any laws,
administrative regulations or rulings or court decrees known to such
counsel, after due inquiry, applicable to the Trust, the Company or
any of the Principal Subsidiaries or their respective properties;
(vi) such counsel does not know of any legal or governmental
proceeding pending or threatened to which the Trust, the Company or
any of the Principal Subsidiaries is a party or to which any of their
respective property is subject which is required to be described in
the Registration Statement or the Prospectus and is not so described,
or of any contract or other document which is required to be described
in the Registration Statement or the Prospectus or is required to be
filed as an exhibit to the Registration Statement which is not
described or filed as required;
(vii) each of the applicable Principal Subsidiaries has obtained
all permits, licenses, franchises and authorizations of governmental
or regulatory authorities ("permits") which are required to have been
obtained by it prior to the date hereof and which are material to the
construction, ownership or leasing and operation of each of the
Principal Subsidiaries, as the case may be, as contemplated by the
Registration Statement, except for any such permits, the failure to
have obtained which, individually or in the aggregate would not have a
material adverse effect on the business, financial condition or
results of operations of the Trust, the Company and the Principal
Subsidiaries, taken as a whole, and subject to such qualifications as
may be set forth in the Registration Statement, and all such permits
are in full force and effect; and such counsel has no reason to
believe that any other permits which may be material to the
construction, ownership or leasing and operation of such facilities
will not be obtained in due course;
(viii) each of the AES Beaver Valley, the AES Deepwater, the AES
Placerita, the AES Shady Point, the AES Barbers Point and the AES
Thames facilities is a "qualifying cogeneration facility" under the
FPA, as amended by Section 201 of PURPA and the FERC regulations
promulgated thereunder, and, to the best of such counsel's knowledge,
after due inquiry, each such facility's current use, operation and
ownership are consistent with such facility's status as a "qualifying
cogeneration facility";
(ix) none of the Trust, the Company nor any of the Principal
Subsidiaries is (i) subject to regulation as a "holding company" or a
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"subsidiary company" of a holding company or an "affiliate" of a
subsidiary or holding company or a "public utility company" under
Section 2(a) of PUHCA, except that the Company and its subsidiary in
the United Kingdom, Applied Energy Services Electric Limited, are
exempt holding companies under Section 3(a)(5) of PUHCA by order of
the Commission, (ii) subject to regulation under the FPA, other than
as contemplated by 18 C.F.R. Section 292.601(c), or (iii) except as
described in the Registration Statement, subject to regulation under
any state law with respect to the rates or the financial or
organizational regulation of electric utilities; and
(x) neither the Trust nor the Company is an "investment company"
or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Davis Polk & Wardwell, counsel for the Company, to the effect
that:
(i) the Debentures have been duly authorized and, when executed
and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Trust as set forth in the
Prospectus, will be entitled to the benefits of the Indenture and will
be valid and binding obligations of the Company enforceable in
accordance with their terms except as the enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws affecting creditors' rights
generally and by equitable principles of general applicability;
(ii) this Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company (except as rights to indemnity and contribution hereunder may
be limited by applicable law);
(iii) the Indenture and the Guarantee have been duly qualified
under the Trust Indenture Act, and the Indenture, Declaration and
Guarantee have been duly authorized, executed and delivered by the
Company and (assuming the due authorization, execution and delivery
thereof by the respective Trustees) are valid and binding agreements
of the Company, enforceable in accordance with their terms except as
the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws
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affecting creditors' rights generally and be equitable principles of
general applicability;
(iv) the Securities conform in all material respects as to legal
matters to the description thereof contained in the Registration
Statement and the Prospectus;
(v) the Registration Statement has become effective under the
Securities Act (assuming compliance with clause (2) of Rule 462(b) in
the case of the Additional Registration Statement) and, to the best of
such counsel's knowledge, no stop order suspending its effectiveness
has been issued and no proceedings for that purpose are pending before
or contemplated by the Commission;
(vi) the statements under the captions "____________" in the
Prospectus, insofar as such statements constitute a summary of the
legal matters, documents or proceedings specifically referred to
therein, fairly present all the material information called for with
respect to such legal matters, documents or proceedings;
(vii) except for the order of the Commission making the
Registration Statement effective and permits and similar
authorizations required under the securities or Blue Sky laws of
certain states, no consent, approval, authorization or other order of
any regulatory body, administrative agency or other governmental body
is legally required for the valid issuance and sale of [the Securities
to the Underwriters as contemplated by this Agreement or the public
offering of the Securities contemplated by the Prospectus]; and
(viii) the Registration Statement and the Prospectus and any
supplement or amendment thereto (except for financial statements and
other financial and statistical information included or incorporated
by reference therein as to which no opinion need be expressed) comply
as to form in all material respects with the Securities Act.
In addition, Davis Polk & Wardwell will deliver a separate letter to
the effect that such counsel has participated in conferences with
directors, officers and other representatives of the Company and
representatives of the independent public accountants for the Company, at
which conferences the contents of the Registration Statement and related
matters were discussed, and, although such counsel has not independently
verified and is not passing upon and assume no responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement, except as specified, no facts have come to
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such counsel's attention which lead such counsel to believe that the
Registration Statement (other than any financial statements or other
financial or statistical information included or incorporated by reference
therein and that part of the Registration Statement that constitutes the
Form T-1 as to which no opinion is expressed) at its effective date
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements contained therein not misleading, or that the Prospectus as of
its date or the Closing Date (other than any financial statements or other
financial or statistical information included or incorporated by reference
therein as to which no opinion is expressed), contained any untrue
statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading.
In rendering their opinions above, Davis Polk & Wardwell may rely as
to factual matters on such certificates of the Company's officers or of
governmental officials as they may deem relevant or necessary for such
opinions and as to matters governed by other than federal or New York law
or by the General Corporation Law of Delaware on opinions of local counsel.
In addition, Mr. Luraschi will deliver a separate letter to the effect
that such counsel has participated in conferences with directors, officers
and other representatives of the Company and representatives of the
independent public accountants for the Company, at which conferences the
contents of the Registration Statement and related matters were discussed,
and, although such counsel has not independently verified and is not
passing upon and assume no responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement, except
as specified, no facts have come to such counsel's attention which lead
such counsel to believe that the Registration Statement (other than any
financial statements or other financial or statistical information included
or incorporated by reference therein and that part of the Registration
Statement that constitutes the Form T-1 as to which no opinion is
expressed) at its effective date contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements contained therein not
misleading, or that the Prospectus as of its date or the Closing Date
(other than any financial statements or other financial or statistical
information included or incorporated by reference therein as to which no
opinion is expressed), contained any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements
contained therein, in the light of the circumstances under which they were
made, not misleading.
23
<PAGE>
In rendering the opinions above, Mr. Luraschi may rely as to factual
matters on such certificates of the Company's officers or of governmental
officials as he may deem relevant or necessary for such opinions and as to
matters governed by other than federal or New York law or by the General
Corporation Law of Delaware on opinions of local counsel.
(g) You shall have received on the Closing Date an opinion, dated the
Closing Date, of ___________, counsel for the Underwriters, as to the
matters referred to in clauses (i), (ii), (iii), (vi) (but only with
respect to the statements under the captions "Description of __________"
and "Underwriting") and (viii) of the foregoing paragraph (f).
With respect to subparagraph (viii) of paragraph (f) above and the
final subparagraph of this paragraph (g), __________ may state that their
opinion and belief is based upon their participation in the preparation of
the Registration Statement and the Prospectus and any amendments or
supplements thereto (but not including documents incorporated therein by
reference) and review and discussion of the contents thereof (including
documents incorporated therein by reference), but is without independent
check or verification except as specified.
(h) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date of Richards, Layton & Finger, special counsel for the Trust, to the
effect that:
(i) the Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Act and under the
Declara tion and the Delaware Act has the business trust power and
authority to conduct its business as described in the Registration
Statement and Prospectus;
(ii) assuming due authorization, execution and delivery of the
Declaration by the Company and the Trustees, the Declaration is a
legal, valid and binding agreement of the Company and the Trustees,
enforceable against the Company and the Trustees in accordance with
its terms, except as (a) the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, receivership, reorganization,
liquidation, fraudulent conveyance or other similar laws relating to
or affecting the rights and remedies of creditors generally and (b)
principles of equity, including applicable laws relating to fiduciary
duties (regardless of whether considered and applied in a proceeding
in equity or at law);
(iii) under the Declaration and the Delaware Act, the execution
and delivery of this Agreement by the Trust, and the performance by
the
24
<PAGE>
Trust of its obligations hereunder, have been duly authorized by all
business trust action on the part of the Trust;
(iv) the Trust Securities have been duly authorized by the
Declaration and (x) when the Securities are issued in accordance with
the terms of this Agreement and delivered to and paid for by the
Underwriters and (y) the Common Securities are issued against payment
therefor as provided in the Declaration, such Trust Securities will be
duly and validly issued and, will be fully paid and nonassessable
undivided beneficial interests in the assets of the Trust; the holders
of Trust Securities, as beneficial owners of the Trust, will be
entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware;
(v) under the Declaration and the Delaware Act, the issuance of
the Trust Securities is not subject to preemptive rights; and
(vi) the statements in the Prospectus under the caption
"_____________________" insofar as such statements constitute a
summary of legal matters or documents referred to therein, fairly
present the information called for with respect to such legal matters
and documents.
In rendering such opinion, such counsel may note that holders of Trust
Securities may be obligated, pursuant to the Declaration, to (i) provide
indemnity and security in connection with and pay taxes or other
governmental charges arising from transfers of certificates for Trust
Securities and the issuance of replacement certificates for Trust
Securities, (ii) provide security and indemnity in connection with requests
of or directions to the Property Trustee to exercise its rights and
remedies under the Declaration and (iii) undertake as a party litigant to
pay costs in any suit for the enforcement of any right or remedy under the
Declaration or against the Property Trustee, to the extent provided in the
Declaration. In rendering such opinion such counsel may also note that the
Company, in its capacity as Sponsor and not in its capacity as a holder,
has undertaken certain payment obligations as set forth in the Declaration.
(i) You shall have received a letter on and as of the Closing Date, in
form and substance satisfactory to you, from Deloitte & Touche, independent
public accountants, with respect to the financial statements and certain
financial information contained in the Registration Statement and the
Prospectus and substantially in the form and substance of the letter
delivered to you by Deloitte & Touche on the date of this Agreement.
25
<PAGE>
(j) The Company and the Trust shall not have failed at or prior to the
Closing Date to perform or comply with any of the agreements herein
contained and required to be performed or complied with by the Company or
the Trust at or prior to the Closing Date.
9 Effective Date of Agreement and Termination. This Agreement shall become
effective upon the later of (i) execution of this Agreement and (ii) when
notification of the effectiveness of the Registration Statement has been
released by the Commission.
This Agreement may be terminated at any time prior to the Closing Date by
you by written notice to the Company if any of the following has occurred: (i)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, any adverse change or development involving a
prospective adverse change in the condition, financial or otherwise, of the
Company, any Principal Subsidiary or the earnings, affairs, or business
prospects of the Company or any Principal Subsidiary, whether or not arising in
the ordinary course of business, which would, in your reasonable judgment, make
it impracticable to market the Securities on the terms and in the manner
contemplated in the Prospectus, (ii) any outbreak or escalation of hostilities
or other national or international calamity or crisis or material change in
economic conditions, if the effect of such outbreak, escalation, calamity,
crisis or change on the financial markets of the United States or elsewhere
would, in your reasonable judgment, make it impracticable to market the
Securities on the terms and in the manner contemplated in the Prospectus, (iii)
the suspension or material limitation of trading in securities on the New York
Stock Exchange, the American Stock Exchange or the NASDAQ National Market System
or limitation on prices for securities on any such exchange or National Market
System, (iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of any court or other
governmental authority which in your reasonable judgment materially and
adversely affects, or will materially and adversely affect, the business or
operations of the Company, (v) the declaration of a banking moratorium by either
federal or New York State authorities or (vi) the taking of any action by any
federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your reasonable judgment has a material adverse effect
on the financial markets in the United States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the
Securities which it or they have agreed to purchase hereunder on such date and
the aggregate Firm Securities or Additional Securities, as the case may be,
which such defaulting Underwriter or Underwriters, as the case may be, agreed
but failed or refused to purchase is not more than one-tenth of the total number
of Securities to be purchased by all Underwriters, each non-defaulting
Underwriter shall be obligated severally, in the proportion which the number of
Securities set forth opposite its name in Schedule I bears
26
<PAGE>
to the aggregate number of Securities which all the non-defaulting Underwriters,
as the case may be, have agreed to purchase, or in such other proportion as you
may specify, to purchase the Securities which such defaulting Underwriter or
Underwriters, as the case may be, agreed but failed or refused to purchase on
such date; provided that in no event shall the number of Firm Securities or
Additional Securities, as the case may be, which any Underwriter has agreed to
purchase pursuant to Section 2 hereof be increased pursuant to this Section 9 by
an amount in excess of one-ninth of such number of Firm Securities or Additional
Securities, as the case may be, without the written consent of such Underwriter.
If on the Closing Date or on an Option Closing Date, as the case may be, any
Underwriter or Underwriters shall fail or refuse to purchase Securities and the
aggregate number of Firm Securities or Additional Securities, as the case may
be, with respect to which such default occurs is more than one-tenth of the
aggregate number of Firm Securities to be purchased on such date by all
Underwriters in the event of a default by a Underwriter and arrangements
satisfactory to you and the Company for purchase of such Securities are not made
within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter and the Company. In any
such case which does not result in termination of this Agreement, either you or
the Company shall have the right to postpone the Closing Date or on an Option
Closing Date, as the case may be, but in no event for longer than seven days, in
order that the required changes, if any, in the Registration Statement and the
Prospectus or any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of any such Underwriter under this
Agreement.
10 Miscellaneous. Notices given pursuant to any provision of this Agreement
shall be addressed as follows: (a) if to the Trust, to AES Trust, [ ], c/o The
AES Corporation, 1001 N. 19th Street, Arlington, Virginia 22209, Attention:
General Counsel; (b) if to the Company, to The AES Corporation, 1001 N. 19th
Street, Arlington, Virginia 22209, Attention: General Counsel and (C) if to any
Underwriter or to you, to you c/o ____________________________, Attention:
Syndicate Department, or in any case to such other address as the person to be
notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, its officers and directors of
the Trust, the Trustee and its officers and of the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Securities,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter or by or on behalf of the Company, the
officers or directors of the Company or any controlling person of the Company or
by or on behalf of the Trust, the Trustees or the officers or any controlling
person of the Trust, (ii) acceptance of the Securities and payment for them
hereunder and (iii) termination of this Agreement.
27
<PAGE>
If this Agreement shall be terminated by the Underwriters because of any
failure or refusal on the part of the Trust or the Company to comply with the
terms or to fulfill any of the conditions of this Agreement, the Company agrees
to reimburse the several Underwriters for all out-of-pocket expenses (including
the fees and disbursements of counsel) reasonably incurred by them.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Trust, the Company, the
Underwriters, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Securities from any of the several Underwriters merely because of
such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
28
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
the Trust, the Company and the Underwriters.
Very truly yours,
AES TRUST [_______],
a Delaware statutory business trust
By: THE AES CORPORATION,
as Sponsor
By
-------------------------------------
Title:
THE AES CORPORATION
By
-------------------------------------
Title:
Acting severally on behalf of
itself and the several Underwriters
named above
By
--------------------------------
<PAGE>
SCHEDULE I
----------
Number of Firm Securities
Underwriters to be Purchased
------------ ---------------
Total $
<PAGE>
Annex I
-------
Principal Subsidiaries
----------------------
Ownership Security
Name Interest Interest
- ---- -------- --------
Exhibit 4.12
DECLARATION OF TRUST, dated as of November 5, 1997, between The AES
Corporation, a Delaware corporation, as Sponsor, and The First National Bank of
Chicago, not in its individual capacity but solely as trustee (the "PROPERTY
TRUSTEE"), First Chicago Delaware Inc., not in its individual capacity but
solely as trustee (the "DELAWARE TRUSTEE"), and William R. Luraschi, Willard
Hoagland and Barry J. Sharp, each not in his individual capacity but solely as
trustee (the Property Trustee, Delaware Trustee and each such individual as
trustee, collectively the "TRUSTEES"). The Sponsor and the Trustees hereby agree
as follows:
1. The trust created hereby shall be known as "AES TRUST IV", in which name
the Trustees, or the Sponsor to the extent provided herein, may conduct the
business of the Trust, make and execute contracts, and sue and be sued.
2. The Sponsor hereby assigns, transfers, conveys and sets over to the
Trust the sum of $10. The Trust hereby acknowledges receipt of such amount in
trust from the Sponsor, which amount shall constitute the initial trust estate.
It is the intention of the parties hereto that the Trust created hereby
constitute a business trust under Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code ss. 3801 et seq. (the "BUSINESS TRUST ACT"), and that this document
constitute the governing instrument of the Trust. The Trustees are hereby
authorized and directed to execute and file a certificate of trust with the
Secretary of State of the State of Delaware in the form attached hereto. The
Trust is hereby established by the Sponsors and the Trustees for the purposes of
(i) issuing preferred securities representing undivided beneficial interests in
the assets of the Trust ("PREFERRED SECURITIES") in exchange for cash and
investing the proceeds thereof in junior subordinated debentures of the Sponsor,
(ii) issuing and selling common securities representing undivided beneficial
interest in the assets of the Trust to the Sponsor in exchange for cash and
investing the proceeds thereof in additional junior subordinated debentures of
the Sponsor and, (iii) engaging in such other activities as are necessary,
convenient or incidental thereto.
3. The Sponsor and the Trustees will enter into an amended and restated
Declaration of Trust, satisfactory to each such party and substantially in the
form included as an exhibit to the 1933 Act Registration Statement referred to
below, to provide for the contemplated operation of the Trust created hereby and
the issuance of the Preferred Securities and Common Securities referred to
therein. Prior to the execution and delivery of such amended and restated
Declaration of Trust, the Trustees shall not have any duty or obligation
hereunder or with respect to the trust estate, except as otherwise required by
applicable law or as may be
<PAGE>
necessary to obtain prior to such execution and delivery any licenses, consents
or approvals required by applicable law or otherwise.
4. The Sponsor and the Trustees hereby authorize and direct the Sponsor, as
the sponsor of the Trust, (i) to prepare and file with the Securities and
Exchange Commission (the "COMMISSION") and execute, in each case on behalf of
the Trust, (a) a Registration Statement on Form S-3 (the "1933 ACT REGISTRATION
STATEMENT") including any pre-effective or post-effective amendments to such
Registration Statement, relating to the registration under the Securities Act of
1933, as amended, of the Preferred Securities of the Trust and (b) a
Registration Statement on Form 8-A (the "1934 ACT REGISTRATION STATEMENT")
(including all pre-effective and post-effective amendments thereto) relating to
the registration of the Preferred Securities of the Trust under Section 12(b) of
the Securities Exchange Act of 1934, as amended; (ii) to prepare and file with
the New York Stock Exchange and execute on behalf of the Trust a listing
application and all other applications, statements, certificates, agreements and
other instruments as shall be necessary or desirable to cause the Preferred
Securities to be listed on the New York Stock Exchange; (iii) to prepare and
file and execute on behalf of the Trust such applications, reports, surety
bonds, irrevocable consents, appointments of attorney for service of process and
other papers and documents as shall be necessary or desirable to register the
Preferred Securities under the securities or "BLUE SKY" laws of such
jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or
desirable and (iv) to negotiate the terms of and execute on behalf of the Trust
an underwriting agreement among the Trust, the Sponsor and any underwriter,
dealer or agent relating to the Preferred Securities, substantially in the form
included as Exhibit 1.3 to the 1933 Act Registration Statement. In the event
that any filing referred to in clauses (i)-(iii) above is required by the rules
and regulations of the Commission, the New York Stock Exchange or state
securities or blue sky laws, to be executed on behalf of the Trust by the
Trustees, William R. Luraschi, Willard Hoagland and Barry J. Sharp, in their
capacities as Trustees of the Trust, are hereby authorized and directed to join
in any such filing and to execute on behalf of the Trust any and all of the
foregoing, it being understood that The First National Bank of Chicago and First
Chicago Delaware Inc., in their capacities as Trustees of the Trust, shall not
be required to join in any such filing or execute on behalf of the Trust any
such document unless required by the rules and regulations of the Commission,
the New York Stock Exchange or state securities or blue sky laws. In connection
with all of the foregoing, the Sponsor and each Trustee, solely in its capacity
as Trustee of the Trust, hereby constitutes and appoints Willard Hoagland, Diane
Crockett, William R. Luraschi, Dennis W. Bakke and Barry J. Sharp, and each of
them, his, her or its, as the case may be, true and lawful attorneys-in-fact,
and agents, with full power of substitution and resubstitution, for the Sponsor
or such Trustee and in the Sponsor's or such
2
<PAGE>
Trustee's name, place and stead, in any and all capacities, to sign and file (i)
any and all amendments (including post-effective amendments) to the 1933 Act
Registration Statement and the 1934 Act Registration Statement with all exhibits
thereto, and other documents in connection therewith, and (ii) a registration
statement, and any and all amendments thereto, relating thereto filed pursuant
to Rule 462(b) under the Securities Act of 1933, as amended with the Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as the Sponsor or
such Trustee might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or his or her
substitute or substitutes, shall do or cause to be done by virtue hereof.
5. This Declaration of Trust may be executed in one or more counterparts.
6. The number of Trustees initially shall be five (5) and thereafter the
number of Trustees shall be such number as shall be fixed from time to time by a
written instrument signed by the Sponsor which may increase or decrease the
number of Trustees; provided, however, that the number of Trustees shall in no
event be less than five (5); and provided, further that to the extent required
by the Business Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware and meets other
requirements imposed by applicable law. Subject to the foregoing, the Sponsor is
entitled to appoint or remove without cause any Trustee at any time. The
Trustees may resign upon thirty days prior notice to the Sponsor.
7. First Chicago Delaware Inc., in its capacity as Trustee, shall not have
any of the powers or duties of the Trustees set forth herein and shall be a
Trustee of the Trust for the sole purpose of satisfying the requirements of
section 3807 of the Business Trust Act.
8. The Trust shall terminate before the issuance of any Preferred
Securities at the election of the Sponsor.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Declaration of
Trust to be duly executed as of the day and year first above written.
The AES Corporation,
as Sponsor
By:/s/ William R. Luraschi
-----------------------------------------
Name: William R. Luraschi
Title: General Counsel and Secretary
The First National Bank of
Chicago, not in its individual
capacity but solely as Property Trustee
By:/s/ Melissa G. Weisman
-----------------------------------------
Name: Melissa G. Weisman
Title: Vice President
First Chicago Delaware Inc.,
not in its individual capacity
but solely as Delaware Trustee
By:/s/ Melissa G. Weisman
-----------------------------------------
Name: Melissa G. Weisman
Title: Vice President
/s/ William R. Luraschi
--------------------------------------------
William R. Luraschi,
not in his individual capacity
but solely as Trustee
/s/ Willard Hoagland
--------------------------------------------
Willard Hoagland,
not in his individual capacity
but solely as Trustee
/s/ Barry J. Sharp
--------------------------------------------
Barry J. Sharp,
not in his individual capacity
but solely as Trustee
4
Exhibit 4.13
CERTIFICATE OF TRUST
OF
AES TRUST IV
THIS Certificate of Trust of AES Trust IV (the "Trust"), dated as of
November 5, 1997, is being duly executed and filed by the undersigned, as
trustees, to form a business trust under the Delaware Business Trust Act (12
Del. Code ss. 3801 et seq.).
1. Name. The name of the business trust being formed hereby is AES Trust
IV.
2. Delaware Trustee. The name and business address of the trustee of the
Trust with a principal place of business in the State of Delaware is First
Chicago Delaware Inc., 300 King Street, Wilmington, Delaware 19801 .
3. Effective Date. This Certificate of Trust shall be effective as of its
filing.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust,
have executed this Certificate of Trust as of the date first above written.
First Chicago Delaware Inc.,
as Delaware Trustee
By: /s/ Melissa G. Weisman
---------------------------------
Name: Melissa G. Weisman
Title: Vice President
The First National Bank of
Chicago, as Property Trustee
By: /s/ Melissa G. Weisman
---------------------------------
Name: Melissa G. Weisman
Title: Vice President
/s/ William R. Luraschi
------------------------------------
William R. Luraschi
as Trustee
/s/ William Hoagland
------------------------------------
Willard Hoagland
as Trustee
/s/ Barry J. Sharp
------------------------------------
Barry J. Sharp
as Trustee
2
Exhibit 4.14
DECLARATION OF TRUST, dated as of November 5, 1997, between The AES
Corporation, a Delaware corporation, as Sponsor, and The First National Bank of
Chicago, not in its individual capacity but solely as trustee (the "PROPERTY
TRUSTEE"), First Chicago Delaware Inc., not in its individual capacity but
solely as trustee (the "DELAWARE TRUSTEE"), and William R. Luraschi, Willard
Hoagland and Barry J. Sharp, each not in his individual capacity but solely as
trustee (the Property Trustee, Delaware Trustee and each such individual as
trustee, collectively the "TRUSTEES"). The Sponsor and the Trustees hereby agree
as follows:
1. The trust created hereby shall be known as "AES TRUST V", in which name
the Trustees, or the Sponsor to the extent provided herein, may conduct the
business of the Trust, make and execute contracts, and sue and be sued.
2. The Sponsor hereby assigns, transfers, conveys and sets over to the
Trust the sum of $10. The Trust hereby acknowledges receipt of such amount in
trust from the Sponsor, which amount shall constitute the initial trust estate.
It is the intention of the parties hereto that the Trust created hereby
constitute a business trust under Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code ss. 3801 et seq. (the "BUSINESS TRUST ACT"), and that this document
constitute the governing instrument of the Trust. The Trustees are hereby
authorized and directed to execute and file a certificate of trust with the
Secretary of State of the State of Delaware in the form attached hereto. The
Trust is hereby established by the Sponsors and the Trustees for the purposes of
(i) issuing preferred securities representing undivided beneficial interests in
the assets of the Trust ("PREFERRED SECURITIES") in exchange for cash and
investing the proceeds thereof in junior subordinated debentures of the Sponsor,
(ii) issuing and selling common securities representing undivided beneficial
interest in the assets of the Trust to the Sponsor in exchange for cash and
investing the proceeds thereof in additional junior subordinated debentures of
the Sponsor and, (iii) engaging in such other activities as are necessary,
convenient or incidental thereto.
3. The Sponsor and the Trustees will enter into an amended and restated
Declaration of Trust, satisfactory to each such party and substantially in the
form included as an exhibit to the 1933 Act Registration Statement referred to
below, to provide for the contemplated operation of the Trust created hereby and
the issuance of the Preferred Securities and Common Securities referred to
therein. Prior to the execution and delivery of such amended and restated
Declaration of Trust, the Trustees shall not have any duty or obligation
hereunder or with respect to the trust estate, except as otherwise required by
applicable law or as may be
<PAGE>
necessary to obtain prior to such execution and delivery any licenses, consents
or approvals required by applicable law or otherwise.
4. The Sponsor and the Trustees hereby authorize and direct the Sponsor, as
the sponsor of the Trust, (i) to prepare and file with the Securities and
Exchange Commission (the "COMMISSION") and execute, in each case on behalf of
the Trust, (a) a Registration Statement on Form S-3 (the "1933 ACT REGISTRATION
STATEMENT") including any pre-effective or post-effective amendments to such
Registration Statement, relating to the registration under the Securities Act of
1933, as amended, of the Preferred Securities of the Trust and (b) a
Registration Statement on Form 8-A (the "1934 ACT REGISTRATION STATEMENT")
(including all pre-effective and post-effective amendments thereto) relating to
the registration of the Preferred Securities of the Trust under Section 12(b) of
the Securities Exchange Act of 1934, as amended; (ii) to prepare and file with
the New York Stock Exchange and execute on behalf of the Trust a listing
application and all other applications, statements, certificates, agreements and
other instruments as shall be necessary or desirable to cause the Preferred
Securities to be listed on the New York Stock Exchange; (iii) to prepare and
file and execute on behalf of the Trust such applications, reports, surety
bonds, irrevocable consents, appointments of attorney for service of process and
other papers and documents as shall be necessary or desirable to register the
Preferred Securities under the securities or "BLUE SKY" laws of such
jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or
desirable and (iv) to negotiate the terms of and execute on behalf of the Trust
an underwriting agreement among the Trust, the Sponsor and any underwriter,
dealer or agent relating to the Preferred Securities, substantially in the form
included as Exhibit 1.3 to the 1933 Act Registration Statement. In the event
that any filing referred to in clauses (i)-(iii) above is required by the rules
and regulations of the Commission, the New York Stock Exchange or state
securities or blue sky laws, to be executed on behalf of the Trust by the
Trustees, William R. Luraschi, Willard Hoagland and Barry J. Sharp, in their
capacities as Trustees of the Trust, are hereby authorized and directed to join
in any such filing and to execute on behalf of the Trust any and all of the
foregoing, it being understood that The First National Bank of Chicago and First
Chicago Delaware Inc., in their capacities as Trustees of the Trust, shall not
be required to join in any such filing or execute on behalf of the Trust any
such document unless required by the rules and regulations of the Commission,
the New York Stock Exchange or state securities or blue sky laws. In connection
with all of the foregoing, the Sponsor and each Trustee, solely in its capacity
as Trustee of the Trust, hereby constitutes and appoints Willard Hoagland, Diane
Crockett, William R. Luraschi, Dennis W. Bakke and Barry J. Sharp, and each of
them, his, her or its, as the case may be, true and lawful attorneys-in-fact,
and agents, with full power of substitution and resubstitution, for the Sponsor
or such Trustee and in the Sponsor's or such
2
<PAGE>
Trustee's name, place and stead, in any and all capacities, to sign and file (i)
any and all amendments (including post-effective amendments) to the 1933 Act
Registration Statement and the 1934 Act Registration Statement with all exhibits
thereto, and other documents in connection therewith, and (ii) a registration
statement, and any and all amendments thereto, relating thereto filed pursuant
to Rule 462(b) under the Securities Act of 1933, as amended with the Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as the Sponsor or
such Trustee might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or his or her
substitute or substitutes, shall do or cause to be done by virtue hereof.
5. This Declaration of Trust may be executed in one or more counterparts.
6. The number of Trustees initially shall be five (5) and thereafter the
number of Trustees shall be such number as shall be fixed from time to time by a
written instrument signed by the Sponsor which may increase or decrease the
number of Trustees; provided, however, that the number of Trustees shall in no
event be less than five (5); and provided, further that to the extent required
by the Business Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware and meets other
requirements imposed by applicable law. Subject to the foregoing, the Sponsor is
entitled to appoint or remove without cause any Trustee at any time. The
Trustees may resign upon thirty days prior notice to the Sponsor.
7. First Chicago Delaware Inc., in its capacity as Trustee, shall not have
any of the powers or duties of the Trustees set forth herein and shall be a
Trustee of the Trust for the sole purpose of satisfying the requirements of
section 3807 of the Business Trust Act.
8. The Trust shall terminate before the issuance of any Preferred
Securities at the election of the Sponsor.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Declaration of
Trust to be duly executed as of the day and year first above written.
The AES Corporation,
as Sponsor
By:/s/ William R. Luraschi
-----------------------------------------
Name: William R. Luraschi
Title: General Counsel and Secretary
The First National Bank of
Chicago, not in its individual
capacity but solely as Property Trustee
By:/s/ Melissa G. Weisman
-----------------------------------------
Name: Melissa G. Weisman
Title: Vice President
First Chicago Delaware Inc.,
not in its individual capacity
but solely as Delaware Trustee
By:/s/ Melissa G. Weisman
-----------------------------------------
Name: Melissa G. Weisman
Title: Vice President
/s/ William R. Luraschi
--------------------------------------------
William R. Luraschi,
not in his individual capacity
but solely as Trustee
/s/ Willard Hoagland
--------------------------------------------
Willard Hoagland,
not in his individual capacity
but solely as Trustee
/s/ Barry J. Sharp
--------------------------------------------
Barry J. Sharp,
not in his individual capacity
but solely as Trustee
4
Exhibit 4.15
CERTIFICATE OF TRUST
OF
AES TRUST V
THIS Certificate of Trust of AES Trust V (the "Trust"), dated as of
November 5, 1997, is being duly executed and filed by the undersigned, as
trustees, to form a business trust under the Delaware Business Trust Act (12
Del. Code ss. 3801 et seq.).
1. Name. The name of the business trust being formed hereby is AES Trust V.
2. Delaware Trustee. The name and business address of the trustee of the
Trust with a principal place of business in the State of Delaware is First
Chicago Delaware Inc., 300 King Street, Wilmington, Delaware 19801 .
3. Effective Date. This Certificate of Trust shall be effective as of its
filing.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust,
have executed this Certificate of Trust as of the date first above written.
First Chicago Delaware Inc.,
as Delaware Trustee
By: /s/ Melissa G. Weisman
----------------------------------
Name: Melissa G. Weisman
Title: Vice President
The First National Bank of
Chicago, as Property Trustee
By: /s/ Melissa G. Weisman
----------------------------------
Name: Melissa G. Weisman
Title: Vice President
/s/ William R. Luraschi
------------------------------------
William R. Luraschi
as Trustee
/s/ William Hoagland
------------------------------------
Willard Hoagland
as Trustee
/s/ Barry J. Sharp
------------------------------------
Barry J. Sharp
as Trustee
2
EXHIBIT 12.1
THE AES CORPORATION AND SUBSIDIARIES
STATEMENT RE: CALCULATIONS OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions, unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
Year Ended December 31, June 30,
1992 1993 1994 1995 1996 1997
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Actual:
COMPUTATION OF EARNINGS:
Income from continuing operations $ 65 $ 89 $ 142 $ 164 $ 185 $ 117
before income taxes
Adjustment for undistributed equity
earnings, net of distributions (3) (11) (6) 3 (20) (4)
Interest expense 97 125 122 122 138 87
Depreciation of previously capitalized
interest 4 4 4 4 4 2
Net amortization of issuance costs 3 3 4 5 6 5
----- ----- ----- ----- ----- -----
Earnings $ 166 $ 210 $ 266 $ 298 $ 313 $ 207
===== ===== ===== ===== ===== =====
COMPUTATION OF FIXED CHARGES:
Interest expensed and capitalized
amounts (including construction
related fixed charges) $ 118 $ 127 $ 124 $ 132 $ 165 $ 116
Net amortization of issuance costs
(including capitalized amounts) 3 3 4 5 6 5
----- ----- ----- ----- ----- -----
Fixed charges $ 121 $ 130 $ 128 $ 137 $ 171 $ 121
===== ===== ===== ===== ===== =====
Ratio of earnings to fixed charges 1.37x 1.62x 2.08x 2.18x 1.83x 1.71x
</TABLE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The AES Corporation on Form S-3 of our report dated January 30, 1997, except for
the penultimate paragraph of Note 6, as to which the date is March 13, 1997, the
pre-penultimate paragraph of Note 6, as to which the date is August 8, 1997, the
subsequent event paragraph of Note 7, as to which the date is July 15, 1997, and
Note 13, as to which the date is October 27, 1997, appearing in The Company's
Current Report on Form 8-K, dated November 6, 1997, and of our report on the
consolidated financial statement schedules dated January 30, 1997, appearing in
the Annual Report on Form 10-K of The AES Corporation, for the year ended
December 31, 1996 and to the reference to us under the headings "Experts" in
each Prospectus, which is part of such Registration Statement.
/s/ Deloitte & Touche LLP
- ------------------------------
Washington, D.C.
November 7, 1997
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statement on Form S-3 of The AES
Corportion of our report dated February 28, 1997 relating to the financial
statements of Companhia Energetica de Minas Gerais - CEMIG as at and for the
years ended December 31, 1996 and 1995 prepared in accordance with accounting
principles generally accepted in Brazil, which appears in Item 7 of the Current
Report on Form 8-K of The AES Corporation dated July 16, 1997 and to the
reference to us under the heading "Experts" in the Prospectus or Prospectus
Supplement which are part of such Registration Statement.
/s/ Price Waterhouse
- ----------------------------
Auditores Independentes
Belo Horizonte, MG-Brazil
November 7, 1997
EXHIBIT 24.1
POWER OF ATTORNEY
The undersigned (other than Dennis W. Bakke and Barry J. Sharp), acting in the
capacity or capacities stated opposite their respective names below, hereby
constitute and appoint DENNIS W. BAKKE, BARRY J. SHARP and WILLIAM R. LURASCHI
and each of them severally, the attorneys-in-fact of the undersigned with full
power to them and each of them to sign for and in the name of the undersigned in
the capacities indicated below the Registration Statement on Form S-3 relating
to the Debt Securities of this Company to be filed and to become effective in
accordance with Rule 462 (b) under the Securities Act of 1933, as amended, and
any and all exhibits, amendments and supplements thereto, and any other
documents necessary, appropriate or desirable in connection therewith, and to
file the same and to do and perform each and every act and thing necessary,
appropriate or desirable in connection therewith.
<TABLE>
<CAPTION>
SIGNATURE POSITION WITH AES DATE
- --------------------------- ---------------------------------------- -----------------
<S> <C> <C>
/s/ Roger W. Sant Chairman of the Board and Director October 14, 1997
- -------------------------
Roger W. Sant
/s/ Dennis W. Bakke President, Chief Executive Officer and October 14, 1997
- ------------------------- Director (Principal Executive Officer)
Dennis W. Bakke
/s/ Vicki-Ann Assevero Director October 14, 1997
- -------------------------
Vicki-Ann Assevero
/s/ Dr. Alice F. Emerson Director October 14, 1997
- -------------------------
Dr. Alice F. Emerson
/s/ Robert F. Hemphill, Jr. Director October 14, 1997
- -------------------------
Robert F. Hemphill, Jr.
/s/ Frank Jungers Director October 14, 1997
- -------------------------
Frank Jungers
/s/ Dr. Henry R. Linden Director October 14, 1997
- -------------------------
Dr. Henry R. Linden
/s/ John H. McArthur Director October 14, 1997
- -------------------------
John H. McArthur
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Hazel O'Leary Director October 14, 1997
- -------------------------
Hazel O'Leary
/s/ Thomas I. Unterberg Director October 14, 1997
- -------------------------
Thomas I. Unterberg
/s/ Robert H. Waterman, Jr. Director October 14, 1997
- -------------------------
Robert H. Waterman, Jr.
/s/ Barry J. Sharp Vice President and Chief Financial Officer October 14, 1997
- ------------------------- (Principal Financial and Accounting
Barry J. Sharp Officer)
</TABLE>
