================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-19281
THE AES CORPORATION
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 54-1163725
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer
Identification No.) Organization)
1001 NORTH 19TH STREET, ARLINGTON, VIRGINIA 22209
(Address of Principal Executive Offices) (Zip Code)
(703) 522-1315
(Registrant's Telephone Number, Including Area Code)
----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
The number of shares outstanding of Registrant's Common Stock, par
value $0.01 per share, at July 30, 1999, was 192,027,295.
================================================================================
<PAGE>
THE AES CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Interim Financial Statements:
Consolidated Statements of Operations 1
Consolidated Balance Sheets 2
Consolidated Statements of Cash Flow 4
Notes to Consolidated Financial Statements 5
Item 2. Discussion and Analysis of Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 21
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE AES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED JUNE 30, 1998 AND 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED) THREE THREE SIX SIX
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
6/30/98 6/30/99 6/30/98 6/30/99
- -------------------------------------------------------------------------------------------------------------------------
($ in millions, except per share amounts)
<S> <C> <C> <C> <C>
REVENUES:
Sales and services $ 565 $ 640 $ 1,140 $ 1,278
OPERATING COSTS AND EXPENSES:
Cost of sales and services 385 421 782 830
Selling, general and administrative expenses 12 15 27 31
Provision for (recovery of) contract receivables - (9) 15 -
-------------- ---------------- ------------ -------------
TOTAL OPERATING COSTS AND EXPENSES 397 427 824 861
-------------- ---------------- ------------ -------------
OPERATING INCOME 168 213 316 417
OTHER INCOME AND (EXPENSE):
Interest expense (99) (143) (202) (276)
Interest and other income 17 17 31 33
Foreign currency transaction loss - (5) - (2)
Equity in earnings (loss) before income tax 43 37 100 (54)
(includes foreign currency transaction -------------- ----------------- ----------- -------------
losses of $1 and $12 for the 3 months ended
June 30, 1998 & 1999, respectively, and $2
and $144 for the 6 months ended June 30,
1998 & 1999, respectively)
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 129 119 245 118
Income tax provision 36 34 69 28
Minority interest 22 14 40 32
-------------- ----------------- ----------- -------------
NET INCOME $ 71 $ 71 $ 136 $ 58
============== ================= =========== =============
BASIC EARNINGS PER SHARE $ 0.41 $ 0.37 $ 0.77 $ 0.31
============== ================= =========== =============
DILUTED EARNINGS PER SHARE $ 0.39 $ 0.36 $ 0.75 $ 0.31
============== ================= =========== =============
</TABLE>
See Notes to Consolidated Financial Statements.
-1-
<PAGE>
THE AES CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND JUNE 30, 1999
- --------------------------------------------------------------------------------
(UNAUDITED)
12/31/98 6/30/99
- --------------------------------------------------------------------------------
($ in millions)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 491 $ 391
Short-term investments 35 31
Accounts receivable, less provision to reduce contract
receivables (1998-$52 and 1999-$42) 365 438
Inventory 119 123
Receivable from affiliates 18 9
Deferred income taxes 71 81
Prepaid expenses and other current assets 155 198
---------- ---------
Total current assets 1,254 1,271
PROPERTY, PLANT AND EQUIPMENT:
Land 135 143
Electric generation and distribution assets 5,301 5,815
Accumulated depreciation and amortization (525) (626)
Construction in progress 634 974
---------- ---------
Property, plant and equipment, net 5,545 6,306
OTHER ASSETS:
Deferred financing costs, net 167 189
Project development costs 103 93
Investments in and advances to affiliates 1,933 1,721
Debt service reserves and other deposits 205 395
Electricity sales concessions and contracts 1,280 993
Goodwill 66 67
Other assets 228 202
---------- ---------
Total other assets
3,982 3,660
---------- ---------
TOTAL $ 10,781 $ 11,237
========== =========
See Notes to Consolidated Financial Statements.
-2-
<PAGE>
THE AES CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
12/31/98 6/30/99
- --------------------------------------------------------------------------------
($ in millions)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 215 $ 237
Accrued interest 113 156
Accrued and other liabilities 235 221
Other notes payable - current portion 8 -
Project financing debt - current portion 1,405 676
---------- ----------
Total current liabilities 1,976 1,290
LONG-TERM LIABILITIES:
Project financing debt 3,597 4,651
Other notes payable 1,644 2,009
Deferred income taxes 268 239
Other long-term liabilities 220 211
---------- ----------
Total long-term liabilities 5,729 7,110
MINORITY INTEREST 732 773
COMPANY-OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF SUBSIDIARY TRUSTS HOLDING
SOLELY JUNIOR SUBORDINATED DEBENTURES OF AES 550 550
STOCKHOLDERS' EQUITY:
Common stock 2 2
Additional paid-in capital 1,243 1,757
Retained earnings 892 950
Accumulated other comprehensive loss (343) (1,195)
---------- -----------
Total stockholders' equity 1,794 1,514
---------- -----------
TOTAL $ 10,781 $ 11,237
========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
THE AES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(Unaudited) SIX SIX
MONTHS MONTHS
ENDED ENDED
6/30/98 6/30/99
- ----------------------------------------------------------------------------------------------------------------
($ in millions)
<S> <C> <C>
OPERATING ACTIVITIES:
Net cash provided by operating activities $ 198 $ 159
INVESTING ACTIVITIES:
Property additions (142) (298)
Acquisitions, net of cash acquired (1,356) (1,374)
Proceeds from the sales of assets 254 666
Sale of short-term investments 47 4
Affiliate advances and equity investments (181) (142)
Project development costs (9) (31)
Debt service reserves and other assets 56 (190)
------------ ------------
Net cash used in investing activities (1,331) (1,365)
FINANCING ACTIVITIES:
Borrowings (repayments) under the revolver 372 (173)
Issuance of project financing debt and other coupon bearing securities 1,449 1,469
Repayments of project financing debt and other coupon bearing securities (458) (614)
Payments for deferred financing costs (10) (30)
Other liabilities (147) (57)
Minority Interest Payments (18) (3)
Sales of common stock 10 514
------------ ------------
Net cash provided by financing activities 1,198 1,106
Increase in cash and cash equivalents 65 (100)
Cash and cash equivalents, beginning 302 491
------------ ------------
Cash and cash equivalents, ending $ 367 $ 391
============ ============
SUPPLEMENTAL INTEREST AND INCOME TAXES DISCLOSURES:
Cash payments for interest $ 156 $ 221
============ ============
Cash payments for income taxes $ 37 $ 24
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
-4-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The consolidated financial statements include the accounts of The AES
Corporation, its subsidiaries and controlled affiliates (the "Company" or
"AES"). Intercompany transactions and balances have been eliminated. Investments
in 50% or less owned affiliates over which the Company has the ability to
exercise significant influence, but not control, are accounted for using the
equity method.
In the Company's opinion, all adjustments necessary for a fair
presentation of the unaudited financial statements for the periods ended June
30, 1998 and 1999, respectively, are included. All such adjustments are accruals
of a normal and recurring nature. The results of operations for the period ended
June 30, 1999 are not necessarily indicative of the results of operations to be
expected for the full year. The financial statements are unaudited and should be
read in conjunction with the Company's consolidated financial statements which
are incorporated by reference in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
2. Foreign Currency Translation
During early 1999, the Brazilian Real experienced a significant
devaluation relative to the U.S. Dollar, declining from 1.21 Reais to the Dollar
at December 31, 1998 to an average of 1.71 Reais to the Dollar for the six
months ended June 30, 1999. This devaluation resulted in significant foreign
currency translation and transaction losses for the Company for both the three
months and the six months ended June 30, 1999. Non-cash charges of approximately
$17 million and $146 million before income taxes were recorded during the three
months and the six months ended June 30, 1999, respectively. The non-cash
charges were approximately $13 million and $100 million after considering income
taxes at the effective tax rate of 32% during the three months and the six
months ended June 30, 1999, respectively. Excluding the effects of foreign
currency transaction losses, the Company incurred net income of $84 million and
diluted earnings per share of $0.43 for the three months ended June 30, 1999,
and net income of $158 million and diluted earnings per share of $0.82 for the
six months ended June 30, 1999.
3. Earnings Per Share
Basic and diluted earnings per share computations are based on the
weighted average number of shares of common stock and potential common stock
outstanding during the period, after giving effect to stock splits. Potential
common stock, for purposes of determining diluted earnings per share, includes
the dilutive effects of stock options, warrants, deferred compensation
arrangements and convertible securities. The effect of such potential common
stock is computed using the treasury stock method or the if-converted method, in
accordance with Statement of Financial Accounting Standards (SFAS) No. 128,
Earnings Per Share. See Exhibit 11 for the computation of the number of shares
outstanding for basic earnings per share and diluted earnings per share in
accordance with SFAS 128.
4. Investments in and Advances to Affiliates
The Company is a party to joint venture/consortium agreements through
which the Company has equity investments in several operating companies. The
joint venture/consortium parties generally share operational control of the
investee. The agreements prescribe ownership and voting percentages
-5-
<PAGE>
as well as other matters. The Company records its share of earnings from its
equity investees on a pre-tax basis. The Company's share of the investee's
income taxes is recorded in income tax expense.
The following table presents summarized financial information (in
millions) for equity method affiliates on a combined 100% basis. Amounts
presented include condensed income statement information of Northern/AES Energy
(45% owned U.S. affiliate), NIGEN Ltd. (47% owned UK Affiliate), Medway Power
Ltd. (25% owned UK affiliate), Elsta (50% owned Netherlands affiliate), Light
(14% and 18%, in 1998 and 1999, respectively, owned Brazilian affiliate), CEMIG
(9.45% owned Brazilian affiliate), affiliates of Chigen, and Kingston (50% owned
Canadian affiliate) for the six months ended June 30, 1998 and 1999. In addition
to the affiliates owned as of June 30, 1998, the Company purchased OPGC (49%
owned Indian affiliate) in late December 1998 which is included in the table
below for the six months ended June 30, 1999.
Six Months Six Months
Ended Ended
6/30/98 6/30/99
------- -------
Revenues $2,328 $1,642
Operating Income 617 740
Net Income (Loss) 526 (381)
5. Litigation
The U.S. Environmental Protection Agency ("EPA") has commenced an
industry-wide investigation of coal-fired electric power generators to determine
compliance with environmental requirements under the Clean Air Act associated
with repairs, maintenance, modifications and operational changes made to the
facilities over the years. The EPA's focus is on whether the changes were
subject to new source review or new performance standards, and whether best
available control technology was or should have been used. AES's Beaver Valley
plant received a request for information pursuant to Section 114 of the Clean
Air Act, and has been visited by EPA personnel. The Beaver Valley plant
cooperated with the request and provided the requested information. On August 4,
1999, the EPA issued a notice of violation ("NOV") to the plant, generally
alleging that the facility failed to obtain the necessary permits in connection
with certain changes made to the facility in the mid-to-late 1980s. The Beaver
Valley facility disagrees with the EPA's findings and may meet with the EPA to
attempt to resolve the issues identified in the NOV. If a mutually acceptable
resolution is not reached, the EPA may seek to enforce the NOV through a
judicial process and seek monetary penalties and/or injunctive relief under the
Clean Air Act. The Company believes that the Beaver Valley facility has
meritorious defenses to such an action and expects the facility to vigorously
defend itself if any action is brought against it. The Company does not believe
that the ultimate resolution of this issue will have a material adverse effect
on its financial position or results of operations.
The Company is also involved in certain legal proceedings in the normal
course of business. It is the opinion of the Company that none of the pending
litigation is expected to have a material adverse effect on its results of
operations or financial position.
6. Acquisitions
In May 1999, a subsidiary of the Company acquired two gas-fired power
plants totaling 966 MW from the government of Victoria, Australia for
approximately $100 million.
-6-
<PAGE>
In January 1999, a subsidiary of the Company acquired 49% of both
Empresa de Generacion Chiriqui S.A. (EGE Chiriqui) and Empresa de Generacion
Bayano (EGE Bayano), two hydroelectric generation companies in Panama, for
approximately $91 million. AES controls the operations of both entities, and
therefore, consolidates them.
In December 1998, a subsidiary of the Company acquired a 75% interest
in Telasi, the electricity distribution company of Tbilisi, Republic of Georgia,
for approximately $26 million.
In June 1998, a subsidiary of AES acquired approximately 90% of Empresa
Distribuidora de La Plata S.A. ("EDELAP"), an electric distribution company in
the province of Buenos Aires, Argentina for approximately $355 million.
In May 1998, a subsidiary of the Company completed the purchase of
three natural gas-fired electric generating stations located in Southern
California for approximately $786 million.
In February 1998, the Company acquired approximately 80% of Compania de
Luz Electrica de Santa Ana ("CLESA"), an electricity distribution company in El
Salvador, for approximately $96 million.
The preceding acquisitions were accounted for as purchases and the
accompanying statements of operations include the operating results for all of
the acquired companies from the dates of their respective acquisitions. The
following table presents supplemental unaudited pro forma operating information
as if each of the acquisitions had occurred at the beginning of the periods
presented (in millions, except per share amounts):
Six Months Six Months
Ended Ended
6/30/98 6/30/99
------- -------
Revenues $1,247 $1,286
Net Income 138 58
Basic Earnings Per Share 0.77 0.31
Diluted Earnings Per Share 0.75 0.31
The pro forma results are based upon assumptions and estimates which
the Company believes are reasonable. The pro forma results do not purport to be
indicative of the results that actually would have been obtained had the
acquisitions occurred at the beginning of the periods presented, nor are they
intended to be a projection of future results. Net income and earnings per share
for the six months ended June 30, 1999 include a non-cash charge of $100
million, net of tax, from foreign currency transaction losses.
In May 1999, a subsidiary of the Company acquired six electric
generating stations for a purchase price of approximately $953 million. These
coal-fired electric generating stations have a total installed capacity of 1,424
MW. Concurrently, the subsidiary sold two of the plants to an unrelated third
party for approximately $670 million and simultaneously entered into a leasing
arrangement with the unrelated party. The former transaction was accounted for
as a purchase of assets while the latter was accounted for as a sale-leaseback,
with operating lease treatment.
In June 1999, a subsidiary of the Company assumed long-term managerial
and voting control of two regional electric distribution companies (RECs) in
Kazakhstan as part of a settlement of receivables outstanding from the
-7-
<PAGE>
government of Kazakhstan. The contractual rights received in this transaction
were valued at approximately $26 million. The two distribution businesses serve
approximately 1.8 million people.
The purchase price allocations for recently completed acquisitions have
been prepared on a preliminary basis subject to adjustments resulting from
additional facts that may come to light when the engineering, environmental and
legal analysis are completed during their respective allocation periods.
7. Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income and foreign currency
translation adjustments. It includes $55 million and $110 million of foreign
currency translation adjustment losses for the quarters ended June 30, 1998 and
1999, respectively, and $95 million and $852 million for the six months ended
June 30, 1998 and 1999, respectively. Comprehensive income is $16 million for
the quarter ended June 30, 1998, and comprehensive loss is $39 million for the
quarter ended June 30, 1999. Comprehensive income is $41 million for the six
months ended June 30, 1998, and comprehensive loss is $794 million for the six
months ended June 30, 1999.
8. Segments
Information about the Company's operations by segment is as follows (in
millions):
<TABLE>
<CAPTION>
Equity
Operating Earnings
Revenue (1) Income / (Loss)
---------------- ------------- -----------
<S> <C> <C> <C>
QUARTER ENDED JUNE 30, 1998
Generation $ 331 $ 136 $ 1
Distribution 230 42 42
Corporate and services 4 (10) -
------------ ------------- -----------
Total $ 565 $ 168 $ 43
============ ============= ===========
QUARTER ENDED JUNE 30, 1999
Generation $ 406 $ 171 $ 11
Distribution 229 50 26
Corporate and services 5 (8) -
------------ ------------- -----------
Total $ 640 $ 213 $ 37
============ ============= ===========
SIX MONTHS ENDED JUNE 30, 1998
Generation $ 656 $ 248 $ 15
Distribution 476 94 85
Corporate and services 8 (26) -
------------ ------------- -----------
Total $ 1,140 $ 316 $ 100
============ ============= ===========
SIX MONTHS ENDED JUNE 30, 1999
Generation $ 791 $ 348 $ 26
Distribution 476 94 (80)
Corporate and services 11 (25) -
----------- ------------- -----------
Total $ 1,278 $ 417 $ (54)
============ ============= ===========
</TABLE>
(1) Intersegment revenues for the quarter ended June 30, 1998 and 1999 were $11
million and $21 million, respectively, and for six months ended June 30, 1998
and 1999 were $25 million and $45 million, respectively.
-8-
<PAGE>
9. Subsequent Events
In July 1999, the Company acquired New Energy Ventures, an energy
services provider formed to serve retail customers in the U.S. where competitive
energy markets are emerging. The acquisition was valued at approximately $90
million, and financed through a combination of cash, debt and AES common stock.
ITEM 2. DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
INTRODUCTION
The AES Corporation (AES or the Company) is a global power company
committed to serving the world's needs for electricity in a socially responsible
way.
The majority of the Company's revenues represent sales of electricity
to customers (generally electric utilities or regional electric companies) for
further resale to end users. This is referred to as the electricity "generation"
business. AES's generation business represented 62% of total revenues for the
-9-
<PAGE>
six months ended June 30, 1999. Sales by these generation companies are made
under long-term contracts from power plants owned by the Company's subsidiaries
and affiliates, as well as through direct sales into regional wholesale
electricity markets without a contract. The Company owns plants that it has
constructed ("greenfield" plants) as well as those that it has purchased.
Because of the significant complexities associated with building new
electric generating plants, construction periods often range from two to five
years. AES currently expects that projects now under construction will reach
commercial operation and begin to sell electricity at various dates through the
year 2002. The completion of each plant in a timely manner is generally
supported by a guarantee from the plant's construction contractor, although in
certain cases, AES has assumed the risk of satisfactory construction completion.
Due to changes in the economic, political, technological, regulatory or
logistical circumstances involving each individual plant, however, commercial
operations may be delayed.
AES also sells electricity directly to end users such as commercial,
industrial, governmental and residential customers. This is referred to as the
electricity "distribution" business. Electricity sales by AES's distribution
businesses are generally made pursuant to the provisions of long-term
electricity sale concessions granted by governments. In certain cases, these
distribution companies are "integrated", in that they also own electric power
plants for the purpose of generating a portion of the electricity they sell.
Each distribution company also purchases electricity from third party wholesale
suppliers, which may include other subsidiaries of the Company.
AES continues to believe that there is significant demand for more
efficiently operated electricity generation and distribution businesses. As a
result, and guided by its commitment to serve the world's needs for electricity,
AES is pursuing additional greenfield development projects and acquisitions in
many countries. Several of these, if consummated, would require the Company to
obtain substantial additional financing, including both debt and equity
financing.
AES is also currently in the process of completing several
acquisitions, including its agreement to acquire the outstanding shares of
Cilcorp, Inc. an integrated distribution company in Illinois.
Certain subsidiaries and affiliates of the Company (domestic and
non-U.S.) have signed long-term contracts or made similar arrangements for the
sale of electricity and are in various stages of developing the related
greenfield power plants. Substantial risks accompany their successful
completion, including, but not limited to, those relating to failures of siting,
financing, construction, permitting, governmental approvals or termination of
the power sales contract as a result of a failure to meet certain milestones. As
of June 30, 1999, capitalized costs for projects under development and in early
stage of construction were approximately $93 million. The Company believes that
these costs are recoverable; however, no assurance can be given that changes in
circumstances related to individual projects will not occur or that any of these
projects will be completed and reach commercial operation.
In May 1999, a subsidiary of the Company, AES Barry Limited, completed
a $195 million non-recourse project refinancing for its 230 MW gas-fired
combined cycle power plant in Barry, South Wales, United Kingdom. Also in May
1999, a subsidiary of the Company, AES Fifoots Point Ltd., completed the $202
million financing for the planned refurbishment, upgrade and environmental
improvement of a 393 MW coal-fired plant in South Wales, United Kingdom.
In June 1999, a subsidiary of the Company, AES Ironwood L.L.C.,
completed a $308.5 million non-recourse bond financing for the construction of a
705 MW natural gas-fired combined cycle plant to be located in South Lebanon
Township, Pennsylvania. Completion of construction and commencement of
operations is expected in the second quarter of 2001. All of the capacity,
associated energy and ancillary services from the plant will be sold under a
20-year tolling agreement with Williams Energy Marketing & Trading Company, a
subsidiary of The Williams Company.
Also in June 1999, a subsidiary of the Company, AES Parana S.A.,
completed a $448 million financing for the construciton of a 826 MW (net)
natural gas-fired combined cycle power plant in San Nicolas, Province of Buenos
Aires, Argentina. The project company is owned by wholly-owned subsidiaries of
The AES Corporation (66.67%) and PSEG Global Inc. (33.33%). The facility is to
be sited adjacent to the 650 MW San Nicolas power facility on the Parana River
west of Buenos Aires, which is owned by AES and PSEG Global.
It may not always be possible to arrange project financing for specific
potential acquisitions. Moreover, acquisitions or the commencement of
construction on several greenfield developments could require the Company to
obtain substantial additional financing including both debt and equity. In order
to enhance its financial capabilities to respond to these more accelerated
opportunities, the Company maintains a $600 million revolving line and letter of
credit facility (the "Revolver"). The Company also currently has a "universal
shelf" registration statement with the SEC, which allows for the public issuance
of various additional debt and preferred or common equity securities, either
individually or in
-10-
<PAGE>
combination, and which currently represents approximately $2.5 billion in unused
potential proceeds from the issuance of public securities.
The Company wishes to caution readers that there are important factors
and areas affecting the Company which involve risk and uncertainty. These
factors are set forth in the Company's Annual Report on Form 10-K filed with the
Commission for the year ended December 31, 1998 under the heading "Cautionary
Statement and Risk Factors", and should be considered when reviewing the
Company's business. Such factors are relied upon by AES in issuing any
forward-looking statements and could affect AES's actual results and cause such
results to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, AES. Some or all of these factors may apply
to the Company's business as currently maintained or to be maintained.
SECOND QUARTER 1999 AND 1998 RESULTS OF OPERATIONS
Revenues increased 13%, or approximately $75 million, to $640 million
from the second quarter of 1998 to the second quarter of 1999. Revenues
increased 12%, or approximately $138 million, to $1.3 billion from the six
months ended June 30, 1998 to the six months ended June 30, 1999. Revenues
increased primarily from the acquisition of new businesses and also from the
completion of greenfield projects during both the second quarter of 1999 and the
six months ended June 30, 1999. Acquisitions that contributed significantly to
the overall increase in revenues include Southland, Edelap, Panama, Telasi, and
certain of the New York plants. The start of commercial operations at Barry also
contributed significantly to the overall increase in revenues. Several other
businesses also experienced modest increases in revenues. Revenues were
negatively impacted at Sul due to the effects of the devaluation of the
Brazilian Real. A few other businesses, including Tiszai, also experienced
modest decreases in revenues.
Cost of sales and services increased 9%, or approximately $36 million,
to $421 million from the second quarter of 1998 to the second quarter of 1999.
Cost of sales and services increased 6%, or approximately $48 million, to $830
million from the six months ended June 30, 1998 to the six months ended June 30,
1999. Cost of sales and services generally varies with changes in revenues.
During both the second quarter of 1999 and the six months ended June 30, 1999,
the change in cost of sales and services was relative to the change in revenues
as previously discussed.
Gross margin, which represents total revenues reduced by cost of sales
and services and the provision to reduce contract receivables, increased 27%, or
approximately $48 million, to $228 million from the second quarter of 1998 to
the second quarter of 1999. Gross margin as a percentage of revenues increased
from 32% for the second quarter of 1998 to 36% for the second quarter of 1999.
Gross margin increased 31%, or approximately $105 million, to $448 million from
the six months ended June 30, 1998 to the six months ended June 30, 1999. Gross
margin as a percentage of revenues increased from 30% for the six months ended
June 30, 1998 to 35% for the six months ended June 30, 1999. The increase in
gross margin as a percentage of revenues was due to higher relative gross
margins at certain of the recently acquired businesses as well as improved gross
margins at certain of the existing businesses. Gross margin as a percentage of
revenues was favorably impacted by the settlement with the government of
Kazakhstan which resulted in a reduction in the provision to reduce contract
receivables.
-11-
<PAGE>
Selling, general and administrative expenses increased 25%, or
approximately $3 million, to $15 million from the second quarter of 1998 to the
second quarter of 1999. Selling, general and administrative expenses as a
percentage of revenues remained constant at 2% for both the second quarter of
1998 and the second quarter of 1999. Selling, general and administrative
expenses increased 15%, or approximately $4 million, to $31 million from the six
months ended June 30, 1998 to the six months ended June 30, 1999. Selling,
general and administrative expenses as a percentage of revenues remained
constant at 2% for both the six months ended June 30, 1998 and the six months
ended June 30, 1999. The increase in selling, general and administrative
expenses is consistent with the Company's overall growth.
Operating income increased 27%, or approximately $45 million, to $213
million from the second quarter of 1998 to the second quarter of 1999. Operating
income as a percentage of revenues increased from 30% for the second quarter of
1998 to 33% for the second quarter of 1999. Operating income increased 32%, or
approximately $101 million, to $417 million from the six months ended June 30,
1998 to the six months ended June 30, 1999. Operating income as a percentage of
revenues increased from 28% for the six months ended June 30, 1998 to 33% for
the six months ended June 30, 1999. The increase in operating income is due
primarily to the increase in gross margin.
Interest expense increased 44%, or approximately $44 million, to $143
million from the second quarter of 1998 to the second quarter of 1999. Interest
expense increased 37%, or approximately $74 million, to $276 million from the
six months ended June 30, 1998 to the six months ended June 30, 1999. Interest
expense increased primarily due to the interest at new businesses, additional
project debt relating to CEMIG and additional corporate interest on the senior
debt and convertible subordinated debentures issued within the past twelve
months to finance new investments.
Interest and other income remained constant at $17 million for both the
second quarter of 1998 and the second quarter of 1999. Interest and other income
increased 6%, or approximately $2 million, to $33 million from the six months
ended June 30, 1998 to the six months ended June 30, 1999.
Equity in earnings of affiliates (before income taxes) decreased 14%,
or approximately $6 million, to $37 million from the second quarter of 1998 to
the second quarter of 1999. Equity in earnings of affiliates (before income
taxes) decreased approximately $154 million to a loss of $54 million from the
six months ended June 30, 1998 to the six months ended June 30, 1999. Equity in
earnings of affiliates (before income taxes) decreased primarily due to foreign
currency transaction losses recorded at the Brazilian businesses from the
devaluation of the Brazilian Real. Equity in earnings of affiliates (before
income taxes) includes $12 million of foreign currency transaction losses for
the second quarter of 1999 and $144 million of foreign currency transaction
losses for the six months ended June 30, 1999. Excluding foreign currency
transaction losses, equity in earnings of affiliates (before income taxes)
increased 11% to approximately $49 million in the second quarter of 1999.
The Company recorded an income tax provision of $36 million for the
second quarter of 1998 and an income tax provision of $34 million for the second
quarter of 1999. Excluding the foreign currency transaction losses, the income
tax provision would have been $38 million for the second quarter of 1999. The
Company recorded an income tax provision of $69 million for the six months ended
June 30, 1998 and an income tax provision of $28 million for the six months
ended June 30, 1999. Excluding the foreign currency transaction losses, the
income tax provision would have been
-12-
<PAGE>
$74 million for the six months ended June 30, 1999. Foreign currency transaction
losses did not have a significant impact on the income tax provision for the
quarter and the six months ended June 30, 1998. The Company's effective tax rate
was 33% for 1998 and 32% for 1999.
Minority interest decreased 36%, or approximately $8 million, to $14
million from the second quarter of 1998 to the second quarter of 1999. Minority
interest decreased 20%, or approximately $8 million, to $32 million from the six
months ended June 30, 1998 to the six months ended June 30, 1999. The decrease
in minority interest is due mainly to a lower contribution from CEMIG during the
second quarter of 1999.
Net income remained constant at $71 million for both the second quarter
of 1998 and the second quarter of 1999. Excluding foreign currency transaction
losses, net income increased 17%, or approximately $12 million, to $84 million
from the second quarter of 1998 to the second quarter of 1999. Net income
decreased 57%, or approximately $78 million, to $58 million from the six months
ended June 30, 1998 to the six months ended June 30, 1999. Excluding foreign
currency transaction losses, net income increased 15%, or approximately $21
million, to $158 million from the six months ended June 30, 1998 to the six
months ended June 30, 1999. The increase in net income excluding foreign
currency transaction losses reflects the increased business activity during the
second quarter of 1999 and the six months ended June 30, 1999.
FINANCIAL POSITION, CASH FLOWS AND FOREIGN CURRENCY EXCHANGE RATES
At June 30, 1999, cash and cash equivalents totaled approximately $391
million, as compared to $491 million at December 31, 1998. The $100 million
decrease in cash, along with $1,106 million from financing activities and $159
million from operating activities were used to fund $1,365 million of investing
activities. Significant investing activities included the acquisitions of two
generation companies in Panama, six generation plants in New York (which also
generated $660 million from the sale and leaseback of these assets,) two
gas-fired plants in Australia, as well as continued construction activities at
various projects. The net source of cash from financing activities was primarily
the result of project finance borrowings of approximately $969 million, the
issuance of $500 million in senior notes and proceeds from the sale of common
stock of $514 million which were offset, in part, by repayment of approximately
$614 million project financing debt. Unrestricted net cash flow of the parent
company for the four quarters ended June 30, 1999 totaled approximately $381
million.
Through its equity investments in foreign affiliates and subsidiaries,
AES operates in jurisdictions with currencies other than the Company's
functional currency, the U.S. dollar. Such investments and advances were made to
fund equity requirements and to provide collateral for contingent obligations.
Due primarily to the long-term nature of the investments and advances, the
Company accounts for any adjustments resulting from translation of the financial
statements of its foreign investments as a charge or credit directly to a
separate component of stockholders' equity until such time as the Company
realizes such charge or credit. At that time, any differences would be
recognized in the statement of operations as gains or losses.
In addition, certain of the Company's foreign subsidiaries have entered
into obligations in currencies other than their own functional currencies or the
U.S. dollar. These subsidiaries have attempted to limit potential foreign
exchange exposure by entering into revenue contracts that adjust to changes in
the foreign exchange rates. Certain foreign affiliates and subsidiaries operate
in countries where the local inflation rates are greater than U.S. inflation
rates. In such cases the foreign currency tends to devalue relative to the U.S.
dollar over time. The Company's subsidiaries and affiliates have entered into
revenue contracts which attempt to adjust for these differences, however, there
can be no assurance that such adjustments will compensate for the full effect of
currency devaluation, if any. The Company had approximately $1,195 million in
cumulative foreign currency translation adjustment losses at June 30, 1999.
In April 1999, AES Cayman Guaiba Limited, an indirect shareholder of
AES Sul Distribuidora Gaucha de Energia S.A. refinanced its existing
non-recourse project financing. The refinanced loan has a principal amount of
$410 million, a three year term, and in connection therewith AES contributed
$320 million as additional equity to AES Sul.
In June 1999, AES Ocean Springs, Ltd, a subsidiary of AES and the
shareholder of Empresa Distribuidora de Energia Norte S.A. ("EDEN") and Empresa
Distribuidora de Energia Sur S.A. ("EDES"), together with EDEN and EDES,
refinanced their existing non-recourse project financings. The refinanced loans
have an aggregate principal amount of approximately $193 million, one year
terms, and in connection therewith AES contributed approximately $39 million as
additional equity.
YEAR 2000
There are three main elements in the provision of electricity:
generation, transmission and distribution, all of which form a tightly
integrated "supplier chain." In addition, the Company's businesses are also
dependent on various industries supplying water, fuel and other utility
-13-
<PAGE>
services. AES, through its subsidiaries and affiliates, is involved in each
aspect of the supplier chain in various countries throughout the world. Set
forth below is information regarding AES's efforts to be prepared for the
problems associated with the potential inability of many existing computer
programs and/or embedded computer chips to recognize the year 2000, both those
in AES's businesses as well as those that AES's businesses depend upon.
Certain of these statements may constitute forward-looking information
as contemplated by the Private Securities Litigation Reform Act of 1995,
including those regarding AES's expected readiness to handle Year 2000 problems,
expected capital expenditures in the areas of remediation and testing, the
future costs associated with business disruption caused by supplier or customer
Year 2000 problems and the success of any contingency plans. AES cautions that
its predictions of the extent of potential problems and the effectiveness of
measures designed to address them are based on numerous assumptions, like those
regarding the accuracy of statements or certifications from critical third
parties and vendors, the ability to identify and remediate or replace embedded
computer chips in affected equipment, and resource availability, among other
things, and readers should be aware that actual results might differ materially
from those discussed below.
AES's approach to analyzing Year 2000 issues is to (1) inventory all
systems and equipment likely to be affected, (2) perform an inventory
assessment, (3) conduct remediations, (4) test all equipment and systems, and
(5) develop contingency plans to aid in business continuity.
AES'S STATE OF READINESS. In 1998, AES established a readiness program,
led by a senior executive and consisting of a team of AES people with extensive
knowledge of AES's businesses and processes, as well as outside consultants who
are being used as advisors to assist with third party analysis and contingency
planning.
Approximately 85-90% of the Company's businesses have completed a
thorough Year 2000 readiness program. The remaining businesses have completed
the testing phase, and are in the process of completing their contingency
planning and remediation programs. The Company expects to have these complete by
the end of the third quarter. This readiness program has included, where
possible, actual Year 2000 simulations as well as off-line tests using dates
occurring after the year 2000, and the development of contingency plans. These
tests disclosed no material difficulties with recognizing and processing dates
after 1999. The Company is still evaluating the status of certain newly-acquired
subsidiaries such as New Energy and Empresa Distribuidora del Electricidad del
Este, S.A.
The Company's generation plants are also significantly dependent on
transmission and distribution systems to carry the electricity to the ultimate
end users. Due to the interdependent nature of the supply chain, the Company has
extended its evaluation of Year 2000 issues to include key suppliers,
transmission companies, customers and vendors, and has organized meetings and
sought written assurance from these parties as to their Year 2000 readiness.
COSTS OF ADDRESSING YEAR 2000 ISSUES. The Company has spent
approximately $9 million to date to achieve full Year 2000 readiness, and
expects to spend an additional $3-4 million (for a total of $12-13 million) to
achieve full Year 2000 readiness company wide. These amounts reflect AES's
portion of expected costs to make its businesses Year 2000 ready, but not
necessarily the costs associated with post- Year 2000 corrective actions or
damages, if any. The Company expects to fund these expenditures through internal
sources.
RISKS OF YEAR 2000 FAILURES. Failures by each of the Company's
generation and distribution companies to address Year 2000 issues may lead to
numerical errors that, if not addressed or mitigated, may cause system
malfunctions resulting in the inability to deliver electricity or the inability
to collect data necessary for proper billing and tariff calculations, among
other things.
-14-
<PAGE>
The Company's generation business may also be unable to deliver
electricity because of the failure of the interconnected distribution companies
to receive or transmit the electricity. Conversely, the Company's distribution
companies may not receive sufficient electricity to deliver to their customers
because of failures by supplying generators. In such instances of business
interruption due to supplier or customer default, the Company will pursue all
contractual remedies available to it to minimize the impact on its results of
operations; however, the Company may be unable to recover damages arising from
third party Year 2000 failures.
CONTINGENCY PLANS. The Company (together with appropriate interested
parties like transmission companies, independent system operators and government
agencies) has identified and is testing appropriate contingency plans addressing
emergency operations, disaster recovery, data preservation and business
continuation plans, and intends to continue testing through the fourth quarter
of 1999. In addition to our remediation programs, the Company's Year 2000
readiness efforts include evaluation of reasonably likely worst case scenarios
and the development of contingency plans to address how we would respond to
problems, should they occur. As part of the contingency planning process, the
Company has addressed the scenarios recommended in the North American Electric
Reliablity Council Year 2000 Contingency Planning Guide, as well as additional
Company specified scenarios.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company believes that there have been no material changes in
exposure to market risks during the second quarter of 1999 from those set forth
in the Company's Annual Report filed with the Commission on Form 10-K for the
year ended December 31, 1998.
-15-
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See discussion of litigation in Part I, above.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
In April 1999, the Company sold 10,000,000 shares of its common stock
for net proceeds of approximately $502 million. In June 1999, the Company issued
$500,000,000 of 9.50% Senior Notes due 2009. The use of proceeds for these
offerings was to meet short-term liquidity needs of the Company related to
financing certain acquisitions, providing equity investments or other credit
support to assist in certain project refinancings, repaying certain
indebtedness, and otherwise for general corporate purpose.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Election of Directors
Nominee For Against/Abstain
Roger W. Sant 152,866,669 2,132,770
Dennis W. Bakke 152,804,533 2,194,906
Alice F. Emerson 151,742,148 3,257,291
Bob Hemphill 152,864,072 2,135,367
Frank Jungers 152,828,709 2,170,730
John McArthur 153,241,696 1,757,743
Hazel O'Leary 138,160,127 16,839,312
Thomas I. Unterberg 151,892,489 3,106,950
Robert H. Waterman, Jr. 152,872,771 2,126,668
Election of Certified Independent Accountants
For Against Abstain
154,653,960 78,532 266,947
-16-
<PAGE>
ITEM 5. OTHER INFORMATION.
In July 1999, La Plata Partners, L.P., the parent of Empresa
Distribuidora La Plata S.A. a subsidiary of AES, refinanced its existing
non-recourse project financing. The refinanced loan has a principal amount of
$193 million, a three year term, and in connection therewith AES contributed
approximately $50,000,000 as additional equity.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
3.1 Fifth Amended and Restated Certificate of Incorporation of The
AES Corporation is incorporated here in by reference to
Exhibit 3.1 to the Quarterly Report on Form 10-Q of the
Registrant for the quarterly period ended June 30, 1998 filed
August 14, 1998.
3.2 By-Laws of The AES Corporation, as amended is incorporated
here in by reference to Exhibit 3.2 to the Quarterly Report on
Form 10-Q of the Registrant for the quarterly period ended
June 30, 1998 filed August 14, 1998.
4.1 Amended and Restated Declaration of Trust of AES Trust I,
among The AES Corporation, The First National Bank of Chicago
and First Chicago Delaware, Inc., to provide for the issuance
of the $2.6875 Term Convertible Securities, Series A is
incorporated herein by reference to Exhibit 4.1 to Annual
Report on Form 10-K of the Registrant for the year ended
December 31, 1997 filed March 30, 1998.
4.2 Junior Subordinated Indenture, between The AES Corporation and
The First National Bank of Chicago, to provide for the
issuance of the $2.6875 Term Convertible Securities, Series A
is incorporated herein by reference to Exhibit 4.1 to Annual
Report on Form 10-K of the Registrant for the year ended
December 31, 1997 filed March 30, 1998.
4.3 First Supplemental Indenture to Junior Subordinated Indenture,
between The AES Corporation and The First National Bank of
Chicago, as trustee, to provide for the issuance of the
$2.6875 Term Convertible Securities, Series A is incorporated
herein by reference to Exhibit 4.1 to Annual Report on Form
10-K of the Registrant for the year ended December 31, 1997
filed March 30, 1998.
4.4 Guarantee Agreement, between The AES Corporation and The First
National Bank of Chicago, as initial guarantee trustee, to
provide for the issuance of the $2.6875 Term Convertible
Securities, Series A is incorporated herein by reference to
Exhibit 4.1 to
-17-
<PAGE>
Annual Report on Form 10-K of the Registrant for the year
ended December 31, 1997 filed March 30, 1998.
4.5 Second Supplemental Indenture dated as of October 13, 1997
between the Company and the First National Bank of Chicago, as
trustee, to provide for the issuance from time to time of the
10.25% Senior Subordinated Notes Due 2006, is incorporated
herein by reference to Exhibit 4.2.1 of the Registration
Statement on Form S-3/A (Registration No.
333-39857) filed November 19, 1997.
4.6 Indenture dated as of October 29, 1997 between The AES
Corporation and The First National Bank of Chicago, as
trustee, to provide for the issuance from time to time of the
8.50% Senior Subordinated Notes due 2007 of the Company and
the 8.875% Senior Subordinated Debentures due 2027, is
incorporated herein by reference to Exhibit 4.1 to the
Registration Statement on Form S-4 (Registration No.
333-44845) filed January 23, 1998.
4.7 First Supplemental Indenture dated as of November 21, 1997
between The AES Corporation and The First National Bank of
Chicago, as trustee, to provide for the issuance from time to
time of the 8.50% Senior Subordinated Notes due 2007 of the
Company and the 8.875% Senior Subordinated Debentures due
2027, is incorporated herein by reference to Exhibit 4.1.2 to
the Registration Statement on Form S-4 (Registration No.
333-44845) filed January 23, 1998.
4.8 Junior Subordinated Debt Trust Securities Indenture dated as
of March 1, 1997 between the Company and The First National
Bank of Chicago, to provide for the issuance of the $2.75 Term
Convertible Securities, Series B, is incorporated herein by
reference to Exhibit 4.1 to the Registration Statement on Form
S-3 (Registration No.
333-46189) filed February 12, 1998.
4.9 Second Supplemental Indenture dated as of October 29, 1997
between the Company and The First National Bank of Chicago, to
provide for the issuance of the $2.75 Term Convertible
Securities, Series B, is incorporated herein by reference to
Exhibit 4.1.1 to the Registration Statement on Form S-3
(Registration No. 333-46189) filed February 12, 1998.
4.10 Amended and Restated Declaration of Trust of AES Trust II, to
provide for the issuance of the $2.75 Term Convertible
Securities, Series B, is incorporated herein by reference to
Exhibit 4.3 to the Registration Statement on Form S-3
(Registration No. 333-46189) filed February 12, 1998.
4.11 Restated Certificate of Trust of AES Trust II, to provide for
the issuance of the $2.75 Term Convertible Securities, Series
B, is incorporated herein by reference to Exhibit 4.4 to the
Registration Statement on Form S-3 (Registration No.
333-46189) filed February 12, 1998.
4.12 Form of Preferred Security, to provide for the issuance of the
$2.75 Term Convertible Securities, Series B, is incorporated
herein by reference to Exhibit 4.5 to the Registration
Statement on Form S-3 (Registration No.
333-46189) filed February 12, 1998.
4.13 Form of Junior Subordinated Debt Trust Security, to provide
for the issuance of the $2.75 Term Convertible Securities,
Series B, is incorporated herein by reference to Exhibit 4.6
to the Registration Statement on Form S-3 (Registration No.
333-46189) filed February 12, 1998.
4.14 Preferred Securities Guarantee with respect to Preferred
Securities, to provide for the issuance of the $2.75 Term
Convertible Securities, Series B, is incorporated herein by
reference to Exhibit 4.7 to the Registration Statement on Form
S-3 (Registration No. 333-46189) filed February 12, 1998.
-18-
<PAGE>
4.15 Junior Subordinated Indenture dated as of August 10, 1998,
between The AES Corporation and The First National Bank of
Chicago, as trustee, to provide for the issuance of the 4.5%
Convertible Junior Subordinated Debentures due 2005 is
incorporated here in by reference to Exhibit 4.15 to the
Quarterly Report on Form 10-Q of the Registrant for the
quarterly period ended June 30, 1998 filed August 14, 1998.
4.16 First Supplemental Indenture dated as of August 10. 1998, to
the Junior Subordinated Indenture dated as of August 10, 1998,
between The AES Corporation and The First National Bank of
Chicago, as trustee, to provide for the issuance of the 4.5%
Convertible Junior Subordinated Debentures due 2005 is
incorporated here in by reference to Exhibit 4.16 to the
Quarterly Report on Form 10-Q of the Registrant for the
quarterly period ended June 30, 1998 filed August 14, 1998.
4.17 Senior Indenture dated December 8, 1998 between the Registrant
and the First National Bank of Chicago to provide for the
issuance of $200 million of 8% Senior Note due 2008 is
incorporated herein by reference to Exhibit 4.01 to the
Current Report on Form 8-K of the Registrant filed December
11, 1998.
4.18 First Supplemental Indenture dated December 8, 1998 to the
Senior Indenture between the Registrant and the First National
Bank of Chicago to provide for the issuance of $200 million of
8% Senior Note due 2008 is incorporated herein by reference to
Exhibit 4.02 to the Current Report on Form 8-K of the
Registrant filed December 11, 1998.
4.19 Other instruments defining the rights of holders of long-term
indebtedness of the Registrant and its consolidated
subsidiaries is incorporated here in by reference to Exhibit
4.17 to the Quarterly Report on Form 10-Q of the Registrant
for the quarterly period ended June 30, 1998 filed August 14,
1998.
10.1 Amended Power Sales Agreement, dated as of December 10, 1985,
between Oklahoma Gas and Electric Company and AES Shady Point,
Inc. is incorporated herein by reference to Exhibit 10.5 to
the Registration Statement on Form S-1 (Registration No.
33-40483).
10.2 First Amendment to the Amended Power Sales Agreement, dated as
of December 19, 1985, between Oklahoma Gas and Electric
Company and AES Shady Point, Inc. is incorporated herein by
reference to Exhibit 10.45 to the Registration Statement on
Form S-1 (Registration No. 33-46011).
10.3 Electricity Purchase Agreement, dated as of December 6, 1985,
between The Connecticut Light and Power Company and AES
Thames, Inc. is incorporated herein by reference to Exhibit
10.4 to the Registration Statement on Form S-1 (Registration
No. 33-40483).
10.4 Power Purchase Agreement, dated March 25, 1988, between AES
Barbers Point, Inc. and Hawaiian Electric Company, Inc., as
amended, is incorporated herein by reference to Exhibit 10.6
to the Registration Statement on Form S-1 (Registration No.
33-40483).
10.5 The AES Corporation Profit Sharing and Stock Ownership Plan is
incorporated herein by reference to Exhibit 4(c)(1) to the
Registration Statement on Form S-8 (Registration No.
33-49262).
10.6 The AES Corporation Incentive Stock Option Plan of 1991, as
amended, is incorporated herein by reference to Exhibit 10.30
to the Annual Report on Form 10-K of the Registrant for the
fiscal year ended December 31, 1995.
10.7 Applied Energy Services, Inc. Incentive Stock Option Plan of
1982 is incorporated herein by reference to Exhibit 10.31 to
the Registration Statement on Form S-1 (Registration No.
33-40483).
-19-
<PAGE>
10.8 Deferred Compensation Plan for Executive Officers, as amended,
is incorporated herein by reference to Exhibit 10.32 to
Amendment No. 1 to the Registration Statement on Form S-1
(Registration No. 33-40483).
10.9 Deferred Compensation Plan for Directors is incorporated
herein by reference to Exhibit 10.9 to the Quarterly Report on
Form 10-Q of the Registrant for the quarter ended March 31,
1998, filed May 15, 1998.
10.10 The AES Corporation Stock Option Plan for Outside Directors is
incorporated herein by reference to Exhibit 10.43 to the
Annual Report on Form 10-K of Registrant for the Fiscal Year
ended December 31, 1991.
10.11 The AES Corporation Supplemental Retirement Plan is
incorporated herein by reference to Exhibit 10.64 to the
Annual Report on Form 10-K of the Registrant for the year
ended December 31, 1994.
11 Statement of computation of earnings per share.
27 Financial Data Schedule (Article 5).
(b) Reports on Form 8-K.
Registrant filed a Current Report on Form 8-K dated April 12, 1999
containing the Registrant's press release about the partial contract
repayment to AES Thames.
Registrant filed a Current Report on Form 8-K dated June 8, 1999
containing a discussion of the failure of Registrant's subsidiary that
is the parent of Empresa Distribuidora de Energia Norte S.A. (Eden) and
Empresa Distribuidora de Energia Sur S.A. (Edes) to repay when due $330
million of short-term indebtedness, which was subsequently cured.
Registrant filed a Current Report on Form 8-K dated June 11, 1999
containing the Registrant's exhibit 4.01 "Form of Supplemental
Indenture" (the "Second Supplemental Indenture") between Registrant and
First National Bank of Chicago.
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE AES CORPORATION
(Registrant)
Date: August 6, 1999 By: /s/ Barry J. Sharp
------------------
Name: Barry J. Sharp
Title: Senior Vice President and
Chief Financial Officer
-21-
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Description of Exhibit Numbered Page
- ------- ---------------------- -------------
11 Statement of Computation of Earnings Per Share.
27 Financial Data Schedule.
THE AES CORPORATION EXHIBIT 11
STATEMENTS REGARDING COMPUTATION OF EARNINGS PER SHARE
FOR THE PERIODS ENDED JUNE 30, 1998 AND 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
THREE THREE SIX SIX
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
6/30/98 6/30/99 6/30/98 6/30/99
- -----------------------------------------------------------------------------------------------------------------
($ in millions, except per share amounts)
<S> <C> <C> <C> <C>
BASIC
WEIGHTED AVERAGE SHARES
OUTSTANDING 175.6 191.6 175.4 184.1
========== ============ ========== ===========
NET INCOME $ 71 $ 71 $ 136 $ 58
========== ============ ========== ===========
PER SHARE AMOUNT $ 0.41 $ 0.37 $ 0.77 $ 0.31
========== ============ ========== ===========
DILUTED
Weighted Average Number of Shares
of Common Stock Outstanding 175.6 191.6 175.4 184.1
Net effect of Dilutive Stock Options and
Warrants Based on the Treasury Stock
Method Using Ending Market Price 4.7 4.5 4.6 4.2
Stock Units Allocated to the Deferred
Compensation Plans for
Executives and Directors 0.3 0.3 0.3 0.3
Effect of Tecons - Based on
the If-Converted Method 6.9 6.9 6.9 -
---------- ------------ ---------- -----------
WEIGHTED AVERAGE SHARES
OUTSTANDING 187.5 203.3 187.2 188.6
========== ============ ========== ===========
NET INCOME $ 71 $ 71 $ 136 $ 58
Additional Contribution to Net Income if
Tecons is fully converted 3 3 5 -
---------- ------------ ---------- -----------
ADJUSTED NET INCOME $ 74 $ 74 $ 141 $ 58
========== ============ ========== ===========
PER SHARE AMOUNT $ 0.39 $ 0.36 $ 0.75 $ 0.31
========== ============ ========== ===========
</TABLE>
-22-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000874761
<NAME> AES
<MULTIPLIER> 1,000,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 391
<SECURITIES> 31
<RECEIVABLES> 480
<ALLOWANCES> (42)
<INVENTORY> 123
<CURRENT-ASSETS> 1271
<PP&E> 6661
<DEPRECIATION> (601)
<TOTAL-ASSETS> 11237
<CURRENT-LIABILITIES> 1290
<BONDS> 6660
550
0
<COMMON> 2
<OTHER-SE> 1512
<TOTAL-LIABILITY-AND-EQUITY> 11237
<SALES> 1262
<TOTAL-REVENUES> 1278
<CGS> 830
<TOTAL-COSTS> 861
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 276
<INCOME-PRETAX> 86
<INCOME-TAX> 28
<INCOME-CONTINUING> 58
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58
<EPS-BASIC> 0.31
<EPS-DILUTED> 0.31
</TABLE>
