<PAGE>
FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION NO. 333-37924
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 26, 2000)
$850,000,000
[LOGO]
THE AES CORPORATION
9.375% SENIOR NOTES DUE 2010
The Senior Notes will bear interest at the rate of 9.375% per year. Interest
on the Senior Notes is payable on March 15 and September 15 of each year,
beginning on March 15, 2001. The Senior Notes will mature on September 15, 2010.
The AES Corporation may redeem some or all of the Senior Notes at any time. The
redemption prices are discussed under the caption "Description of
Notes--Optional Redemption."
The Senior Notes will be unsecured senior obligations of The AES Corporation
and will rank equally with all of The AES Corporation's other unsecured senior
indebtedness.
INVESTING IN THE SENIOR NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement or the related prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
PER SENIOR NOTE TOTAL
<S> <C> <C>
Public Offering Price....................................... 100.000% $850,000,000
Underwriting Discount....................................... 1.500% $ 12,750,000
Proceeds to AES (before expenses)........................... 98.500% $837,250,000
</TABLE>
Interest on the Senior Notes will accrue from the date of issuance.
The underwriters are offering the Senior Notes subject to various
conditions. The underwriters expect to deliver the Senior Notes to purchasers on
or about September 12, 2000.
MORGAN STANLEY DEAN WITTER
LEHMAN BROTHERS
TD SECURITIES
September 7, 2000
<PAGE>
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus supplement or the
accompanying prospectus. You must not rely on any unauthorized information or
representations. This prospectus supplement is an offer to sell only the
securities offered hereby, but only under circumstances and in jurisdictions
where it is lawful to do so. The information contained in this prospectus
supplement and the accompanying Prospectus is current only as of the dates
thereof.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PROSPECTUS SUPPLEMENT
Special Note on Forward-Looking
Statements.......................... S-3
Offering Summary...................... S-4
The Company........................... S-5
Recent Developments................... S-5
Use of Proceeds....................... S-6
Capitalization........................ S-7
Selected Consolidated Financial
Data................................ S-8
Description of Notes.................. S-11
Certain U.S. Federal Income Tax
Considerations...................... S-15
Underwriting.......................... S-18
Legal Matters......................... S-19
Experts............................... S-19
</TABLE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PROSPECTUS
About This Prospectus................. 2
Risk Factors.......................... 3
Where You Can Find More Information... 10
Incorporation of Documents by
Reference........................... 10
Special Note on Forward-Looking
Statements.......................... 11
Use of Proceeds....................... 11
Ratio of Earnings to Fixed Charges.... 12
The Company........................... 12
Description of Capital Stock.......... 12
Description of Debt Securities........ 18
Description of Stock Purchase
Contracts and Stock Purchase
Units............................... 28
Description of Securities Warrants.... 29
Plan of Distribution.................. 30
Legal Matters......................... 31
Experts............................... 31
</TABLE>
S-2
<PAGE>
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus include forward-
looking statements. We have based these forward-looking statements on our
current expectations and projections about future events. These forward-looking
statements are subject to risks, uncertainties, and assumptions related to AES,
including, those set forth under the caption "Risk Factors" in the accompanying
prospectus and those set forth under the caption "Cautionary Statements and Risk
Factors" in our annual report on Form 10-K which is incorporated by reference
herein.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus supplement and the accompanying prospectus
might not occur.
S-3
<PAGE>
OFFERING SUMMARY
THE FOLLOWING INFORMATION IS QUALIFIED ENTIRELY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN AND
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS.
<TABLE>
<S> <C> <C>
SENIOR NOTES OFFERED........................ We are offering $850,000,000 aggregate
principal amount of our 9.375% Senior Notes
due September 15, 2010. Interest on the
Senior Notes will be payable semiannually on
March 15 and September 15, commencing on
March 15, 2001.
RECORD DATE................................. The regular record date for each interest
payment date will be the close of business
on the 15th calendar day prior to such
interest payment date.
RANKING..................................... The Senior Notes will be our direct,
unsecured and unsubordinated obligations,
ranking equal in right of payment with all
of our other unsecured and unsubordinated
obligations. The indenture and the
supplemental indenture under which the
Senior Notes will be issued contain no
restrictions on the amount of additional
indebtedness we may incur.
OPTIONAL REDEMPTION......................... We may redeem some or all of the Senior
Notes at any time at par plus a Make-Whole
Amount (as defined). See "Description of
Notes--Optional Redemption."
COVENANTS................................... We have agreed to certain restrictions on
incurring secured debt and entering into
sale and leaseback transactions. See
"Description of Notes--Certain Covenants of
AES."
USE OF PROCEEDS............................. We intend to use the net proceeds of this
offering of Senior Notes to repay a
$700 million term loan incurred by one of
our subsidiaries and for general corporate
purposes. Affiliates of the underwriters are
lenders under this loan. See "Use of
Proceeds."
</TABLE>
S-4
<PAGE>
THE COMPANY
We are a global power company committed to serving the world's need for
electricity in a socially responsible way.
We have been successful in growing our business and serving additional
customers by, in part, participating in competitive bidding under privatization
initiatives. We have been particularly interested in acquiring existing
businesses or assets in electricity markets that are promoting competition and
eliminating rate of return regulation. Sellers generally seek to complete such
transactions in less than one year, much quicker than the time periods
associated with greenfield development, and usually require payment in full on
transfer. We believe that our experience in competitive markets and our
worldwide integrated group structure, with our significant geographic coverage
and presence, enable us to react quickly and creatively in these situations. Our
significant growth has resulted in generating capacity of 36,675 megawatts or MW
at December 31, 1999, with a total of 111 plants in operation. Additionally, our
total revenues have increased at a compound annual growth rate of 48% from $679
million in 1995 to $3,253 million in 1999.
Our ownership portfolio of power facilities includes new plants constructed
for such purposes, so-called greenfield plants, as well as existing power plants
acquired through competitively bid privatization initiatives and negotiated
acquisitions. In the electricity generation business, we now own and operate
(entirely or in part) a diverse portfolio of electric power plants (including
those within integrated distribution companies) with, as of December 31, 1999,
capacity of 36,675 MW. Of that total, 33% are fueled by coal or petroleum coke,
18% are fueled by natural gas, 15% are hydroelectric facilities, 4% are fueled
by oil, and the remaining 30% are capable of using multiple fossil fuels. A
majority of our sales of electricity are made to customers (generally electric
utilities or regional electric companies), on a wholesale basis for further
resale to end users. This is referred to as the electricity "generation"
business. Sales by these generation companies are made under long-term contracts
from power plants owned by our subsidiaries and affiliates as well as directly
into regional electricity markets without contracts.
We also sell electricity directly to end users such as commercial,
industrial, governmental and residential customers through our "distribution"
business. We have a majority ownership in three distribution companies in
Argentina and individual distribution companies in the United States, Brazil, El
Salvador, Dominican Republic, and The Republic of Georgia. We also have assumed
management control of a heat and electricity distribution business in
Kazakhstan. In addition we have less than majority ownership in three additional
distribution companies in Brazil and one in India. These distribution companies
serve a total of over 15 million customers with annual sales exceeding 109,000
gigawatt hours, as of December 31, 1999. On a net equity basis, our ownership
represents approximately 5.4 million customers and annual sales exceeding over
24,000 gigawatt hours, as of December 31, 1999. We also have three subsidiaries
in the United States that serve retail customers in those states that have
introduced a competitive market for the sale of electricity to end users.
RECENT DEVELOPMENTS
SECOND QUARTER EARNINGS
For the six months ended June 30, 2000, our net income before extraordinary
item was $292 million compared to $58 million for the same period in 1999.
Diluted earnings per share before extraordinary item were $0.66 for the first
six months of 2000, compared to $0.16 for the same period in 1999. Revenues for
the second quarter were approximately $1.5 billion, an increase of 140% from
$640 million in the second quarter of 1999. Operating income increased 48% to
$316 million in the second quarter of 2000, up from $213 million in the second
quarter of 1999. Net income was $111 million for the quarter ended June 30,
2000, a 56% increase over net income of $71 million for the second quarter of
1999.
PENDING ACQUISITIONS
On July 17, 2000, we announced that we had entered into a share exchange
agreement to
S-5
<PAGE>
acquire IPALCO Enterprises, Inc. ("IPALCO") for $25.00 per share, or
approximately $2.15 billion, plus the assumption of $890 million of debt and
preferred stock, in a business combination expected to be accounted for as a
pooling of interests. The assumption of debt and preferred stock will be
non-recourse to AES. IPALCO is a utility holding company headquartered in
Indianapolis, Indiana, whose primary subsidiary, Indianapolis Power & Light, is
an integrated electric utility that owns and operates 3,000 megawatts of
coal-fired generation and provides retail electric service to 433,000 customers
in and around Indianapolis.
Under the terms of the agreement, upon closing, each share of IPALCO common
stock will be exchanged for a number of AES shares such that IPALCO shareholders
will receive a fixed value of $25.00 per IPALCO share. Based on trading prices
prior to July 17, 2000, we would be issuing approximately 43 million shares (an
exchange ratio of approximately 0.50 AES shares per IPALCO share). The final
exchange ratio will be determined five business days prior to closing, based
upon the average daily closing prices of AES common stock for the preceding
twenty trading days. The final exchange ratio can be adjusted for certain
events, including the timing of the closing, and is capped at 0.794 AES shares
per IPALCO share.
The transaction is subject to certain conditions, including receipt of the
approval of IPALCO shareholders and receipt of regulatory approvals, including
that of the Federal Energy Regulatory Commission ("FERC") and the SEC. The
parties anticipate receiving regulatory approvals and closing the transaction by
early 2001. Additionally, as part of the SEC approval process, we may be
required to restructure our ownership interests in CILCORP within a specified
period of time in order to continue as an exempt holding company under the
Public Utility Holding Company Act of 1935.
In February 2000, a subsidiary of ours entered into an agreement to acquire
a 59% equity interest in a Hidroeletrica Alicura S.A. in Argentina from Southern
Energy, Inc. Alicura holds the concession to operate a 1,000 MW peaking hydro
facility located in the province of Neuquen, Argentina. The purchase price of
approximately $205 million includes the assumption of debt obligations. Closing
is expected to occur in the third quarter of 2000.
On May 10, 2000, we won a bid to purchase a controlling interest in the
1,580 MW Mohave Generating Station in Laughlin, Nevada from Southern California
Edison Company and Nevada Power Company for $667 million. Mohave provides power
to Phoenix, Arizona, Las Vegas, Nevada and Southern California. The acquisition
is subject to approval by the FERC and the California Public Utilities
Commission and review by the Nevada Public Utilities Commission. We expect to
have a minimum ownership interest of 70% in the facility upon closing. Closing
is expected to occur before the end of 2000.
USE OF PROCEEDS
The net proceeds (before expenses) from this offering are estimated to be
$837,250,000 million. We intend to use the net proceeds from this offering (1)
to repay a $700 million term loan (the "EDC Loan") incurred by our subsidiary,
AES EDC Funding LLC, to finance its acquisition of C.A. La Electricidad de
Caracas and Corporacion EDC, C.A. also known as EDC and (2) for general
corporate purposes. Affiliates of the underwriters are lenders under the EDC
Loan. The EDC Loan matures September 13, 2001 and bears interest at a rate equal
to 3% over the LIBOR rate.
The EDC Loan is required to be prepaid with proceeds of this offering. We
may seek a waiver of the prepayment provision from the lenders under the EDC
Loan. If we do obtain a waiver, we will use the net proceeds from this offering
for general corporate purposes.
S-6
<PAGE>
CAPITALIZATION
The following table sets forth our cash and cash equivalents, short-term
debt and our consolidated capitalization (1) as of June 30, 2000 and (2) as
adjusted to give effect to the issuance of the Senior Notes in this offering and
the application of the net proceeds therefrom to repay $500 million of the EDC
Loan. See "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 2000
------------------------
ACTUAL AS ADJUSTED
--------- ------------
IN MILLIONS, EXCEPT PAR
VALUE
<S> <C> <C>
CASH AND CASH EQUIVALENTS................................... $ 1,200 $ 1,537
------- -------
SHORT-TERM DEBT:
Non-recourse debt (current portion)......................... $ 2,192 $ 2,192
------- -------
Total short-term debt................................... $ 2,192 $ 2,192
------- -------
LONG-TERM DEBT:
Non-recourse debt(1)........................................ $10,911 $10,411
Senior Notes offered hereby................................. -- 850
Revolving bank loan......................................... 450 450
9.5% Senior Notes due 2009.................................. 750 750
8% Senior Notes due 2008.................................... 200 200
10 1/4% Senior Subordinated Notes due 2006.................. 250 250
8 3/8% Senior Subordinated Notes due 2007................... 325 325
8 1/2% Senior Subordinated Notes due 2007................... 375 375
8 7/8% Senior Subordinated Debentures due 2027.............. 125 125
4 1/2% Convertible Junior Subordinated Debentures due
2005...................................................... 150 150
Unamortized discounts on notes and debentures............... (8) (8)
------- -------
Total long-term debt.................................... 13,528 13,878
------- -------
COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
SECURITIES OF SUBSIDIARY TRUSTS HOLDING SOLELY JUNIOR
SUBORDINATED DEBENTURES OF THE AES CORPORATION............ 1,528 1,528
------- -------
MINORITY INTEREST........................................... 1,720 1,720
------- -------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value: 1,200 shares authorized; 453.7
shares issued and outstanding............................. 5 5
Additional paid-in capital.................................. 3,781 3,781
Retained earnings........................................... 1,406 1,406
Accumulated other comprehensive loss........................ (1,202) (1,202)
------- -------
Total stockholders' equity.............................. 3,990 3,990
------- -------
Total capitalization.................................... $22,958 $23,308
======= =======
</TABLE>
------------------------
(1) As of June 30, 2000, $500 million was drawn under the EDC Loan. The
remaining $200 million was drawn subsequent to June 30, 2000.
S-7
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data,
which should be read in conjunction with our consolidated financial statements
and related notes to the consolidated financial statements incorporated by
reference in this prospectus supplement. The selected consolidated financial
data as of and for each of the five years in the period ended December 31, 1999
have been derived from our audited consolidated financial statements. The
selected financial data presented below as of June 30, 1999 and 2000 are derived
from our unaudited consolidated financial statements. The results of operations
for the six months ended June 30, 2000 are not necessarily indicative of the
results to be expected for the full year. We believe that the unaudited
information for the six months ended June 30, 1999 and 2000 contain all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the operating results for such periods.
Net income for the year ended December 31, 1999, excluding foreign currency
transaction losses and extraordinary items was $377 million and diluted earnings
per share, excluding foreign currency transaction losses and extraordinary items
were $.96.
<TABLE>
<CAPTION>
UNAUDITED
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
IN MILLIONS, EXCEPT RATIO AND PER SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................. $ 679 $ 835 $ 1,411 $2,398 $3,253 $ 1,278 $ 3,014
Cost of Sales............................ (394) (522) (998) (1,609) (2,257) (830) (2,260)
Selling, General and Administrative...... (32) (35) (45) (56) (71) (31) (48)
Interest Expense......................... (127) (144) (244) (485) (641) (276) (582)
Interest and Other Income................ 27 24 34 66 86 31 100
Gain on Contract Buyout.................. -- -- -- -- 91 -- --
Impairment Loss.......................... -- -- -- -- (62) -- --
Equity in Pre-tax Earnings of
Affiliates............................. 22 49 126 232 21 (54) 217
------- ------- ------- ------ ------ ------- --------
Income Before Income Taxes, Minority
Interests, and Extraordinary Items..... 175 207 284 546 420 118 441
Income Taxes............................. 65 74 77 145 111 28 114
Minority Interest........................ 3 8 19 94 64 32 35
------- ------- ------- ------ ------ ------- --------
Income Before Extraordinary Items........ 107 125 188 307 245 58 292
Extraordinary Items-(Loss) Gain on Early
Extinguishment of Debt-Net of
Applicable Income Taxes................ -- -- (3) 4 (17) -- (7)
------- ------- ------- ------ ------ ------- --------
Net Income............................... $ 107 $ 125 $ 185 $ 311 $ 228 $ 58 $ 285
======= ======= ======= ====== ====== ======= ========
Diluted Earnings per Share............... $ 0.35 $ 0.40 $ 0.55 $ 0.85 $ 0.58 $ 0.16 $ 0.64
======= ======= ======= ====== ====== ======= ========
Weighted Average Number of Common and
Potential Common Shares................ 311.4 314.4 355.6 378.0 392.4 377.2 461.6
Ratio of Earnings to Fixed Charges (1)... 2.20x 1.88x 1.46x 1.65x 1.50x 1.56x 1.51x
</TABLE>
S-8
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED
AS OF
AS OF DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
IN MILLIONS
BALANCE SHEET DATA:
Total Assets............................. $2,341 $3,622 $8,909 $10,781 $20,880 $11,243 $29,020
Non-Recourse Debt (Current).............. 84 110 596 1,405 881 676 2,192
Revolving Bank Loan (Current)(2)......... 50 88 -- 8 335 -- --
Non-Recourse Debt (Long Term)............ 1,098 1,558 3,489 3,597 8,651 4,687 10,911
Revolving Bank Loan (Long Term)(2)....... -- 125 27 225 -- 60 450
Recourse Debt (Long Term)(2)............. 125 325 1,069 1,419 2,167 1,919 2,167
Company-Obligated Mandatorily Redeemable
Convertible Preferred Securities of
Subsidiary Trusts...................... -- -- 550 550 1,318 550 1,528
Minority Interest........................ 158 213 525 732 1,148 773 1,720
Stockholders' Equity..................... 549 721 1,481 1,794 2,637 1,514 3,990
</TABLE>
<TABLE>
<CAPTION>
TWELVE
YEAR ENDED DECEMBER 31, MONTHS
---------------------------------------------------- ENDED
1995 1996 1997 1998 1999 JUNE 30, 2000
-------- -------- -------- -------- -------- --------------
IN MILLIONS, EXCEPT RATIOS
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
CONSOLIDATED DATA:
Consolidated EBITDA(3)................. $ 327 $ 392 $ 608 $1,161 $1,224 $1,906
Consolidated interest expense
(including preferred distributions on
trust preferred securities).......... 127 144 244 485 641 947
Ratio of consolidated EBITDA to
consolidated interest expense........ 2.57x 2.72x 2.49x 2.39x 1.91x 2.01x
PARENT ONLY DATA:
Parent EBITDA(4)....................... $ 110 $ 189 $ 259 $ 360 $ 403 $ 501
Parent Interest Charges(4)............. 12 23 46 118 164 199
Ratio of Parent EBITDA to Parent
Interest Charges..................... 9.17x 8.22x 5.63x 3.05x 2.46x 2.52x
</TABLE>
------------------------
(1) 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 depreciation of previously capitalized interest,
plus fixed charges, less capitalized interest, less excess of earnings over
dividends of less-than-fifty-percent-owned companies, less minority interest
in pre-tax income of subsidiaries that have not incurred fixed charges, less
preference security dividend requirements of a consolidated subsidary. Fixed
charges consist of interest (including capitalized interest) on all
indebtedness, amortization of debt discount and capitalized expenses,
preference security dividend requirements of a consolidated subsidiary, and
that portion of rental expense which AES believes to be representative of an
interest factor.
(2) Recourse debt represents obligations of AES, as parent. It does not include
obligations of AES' subsidiaries that are non-recourse to the parent
company. The revolving bank loans are obligations of the parent company.
(3) For purposes of this definition, Consolidated EBITDA includes operating
income plus equity in pre-tax earnings (loss) of affiliates, depreciation
and amortization. This definition may differ from
S-9
<PAGE>
that, or similarly titled measures, used by other companies. Consolidated
EBITDA is not a substitute for cash flows from operating activities as
defined by generally accepted accounting principles.
(4) Parent EBITDA is defined to mean cash flow earnings distributed to parent
less parent operating expense. This definition may differ from that, or
similarly titled measures, used by other companies. Parent EBITDA is not a
substitute for cash flows from operating activities as defined by generally
accepted accounting principles. Parent interest charges include both
interest expensed and capitalized and excludes distributions paid for trust
preferred securities.
On June 14, 2000, we redeemed all $250 million liquidation value of the
$2.6875 Term Convertible Securities, Series A, issued by AES Trust I. In
addition, from time to time, we receive unsolicited inquiries from holders of
our outstanding convertible securities regarding the possibility of effecting
early conversions of the convertible securities in return for additional stock
or cash payments. We may, in the future, decide to enter into such arrangements
or otherwise effect early conversions of such securities.
S-10
<PAGE>
DESCRIPTION OF NOTES
The Senior Notes will be issued under an indenture dated as of December 8, 1998,
2000 and a supplemental indenture, dated as of September 12, 2000, each between
the Company and Bank One, National Association (formerly known as The First
National Bank of Chicago), as trustee (the "Trustee") (collectively, the
"Indenture"). The following summaries of certain provisions of the Indenture do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions of the Indenture, including the
definition in the Indenture of certain terms. Wherever particular sections or
defined terms of the Indenture are referred to, such sections or defined terms
are incorporated in this prospectus supplement by reference. A copy of the
Indenture is available for inspection at the office of the Trustee.
As used herein, the term "AES" means The AES Corporation, and does not
include any of its subsidiaries.
The Indenture does not limit the aggregate principal amount of indebtedness
which may be issued thereunder and provides that senior debt securities may be
issued thereunder from time to time in one or more series. The Senior Notes
constitute a separate series under the Indenture.
GENERAL
The Senior Notes will be issued as a series of Senior Notes under the
Indenture. The Senior Notes will not be limited in aggregate principal amount.
Additional Senior Notes may be issued under the Indenture from time to time as
part of this series of Senior Notes.
The entire principal amount of the Senior Notes will mature and become due
and payable, together with any accrued and unpaid interest thereon, on
September 15, 2010. The Senior Notes are not subject to any sinking fund
provision.
INTEREST
Each Senior Note shall bear interest at 9.375% per annum from the date of
original issuance, payable semi annually on March 15 and September 15 of each
year to the person in whose name such Senior Note is registered at the close of
business on the fifteenth calendar day prior to such payment date. The initial
Interest Payment Date is March 15, 2001. The amount of interest payable will be
computed on the basis of a 360-day year of twelve 30-day months. In the event
that any date on which interest is payable on the Senior Notes is not a Business
Day, then payment of the interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
OPTIONAL REDEMPTION
The Senior Notes are subject to redemption upon not less than 30 nor more
than 60 days' notice by mail, at any time, as a whole or in part, at the
election of AES, at a price equal to the sum of (i) 100% of the principal amount
thereof plus accrued interest to the redemption date plus (ii) the Make-Whole
Amount, if any.
The term "Make-Whole Amount" shall mean, in connection with any optional
redemption of any Senior Note, the excess, if any, of (i) the aggregate present
value as of the date of such redemption of each dollar of principal being
redeemed and the amount of interest (exclusive of interest accrued to the
redemption date) that would have been payable in respect of such dollar if such
prepayment had not been made, determined by discounting, on a semiannual basis,
such principal and interest at the Reinvestment Rate (determined on the Business
Day preceding the date of such redemption) from the respective dates on which
such principal and interest would have been payable if such payment had not been
made, over (ii) the aggregate principal amount of the Senior Notes being
redeemed.
S-11
<PAGE>
The term "Reinvestment Rate" shall mean 0.50% (one-half of one percent) plus
the arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the maturity of the principal being prepaid. If no maturity
exactly corresponds to such maturity, yields for the two published maturities
most closely corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding in each of
such relevant periods to the nearest month. For the purpose of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to the
date of determination of the Make-Whole Amount shall be used.
The term "Statistical Release" shall mean the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded U.S.
government securities adjusted to constant maturities or, if such statistical
release is not published at the time of any determination under the Indenture,
then such other reasonably comparable index which shall be designated by AES.
CERTAIN COVENANTS OF AES
RESTRICTIONS ON SECURED DEBT. If AES shall incur, issue, assume or
guarantee any indebtedness for borrowed money represented by notes, bonds,
debentures or other similar evidences of indebtedness, secured by a mortgage,
pledge or other lien on any Principal Property (as defined below) or any capital
stock or indebtedness held directly by AES of any Subsidiary of AES, AES shall
secure the Senior Notes equally and ratably with (or prior to) such
indebtedness, so long as such indebtedness shall be so secured, unless after
giving effect thereto the aggregate amount of all such indebtedness so secured,
together with all Attributable Debt (as defined below) in respect of sale and
leaseback transactions involving Principal Properties, would not exceed 15% of
the Consolidated Net Assets (as defined below) of AES. This restriction will not
apply to, and there shall be excluded in computing secured indebtedness for the
purpose of such restriction, indebtedness secured by (a) property of any
Subsidiary of AES, (b) liens on property of, or on any shares of stock or debt
of, any corporation existing at the time such corporation becomes a Subsidiary,
(c) liens in favor of AES or any Subsidiary, (d) liens in favor of U.S. or
foreign governmental bodies to secure partial, progress, advance or other
payments, (e) liens on property, shares of stock or debt existing at the time of
acquisition thereof (including acquisition through merger or consolidation),
purchase money mortgages and construction cost mortgages existing at or incurred
within 180 days of the time of acquisition thereof, (f) liens existing on the
first date on which any Senior Notes issued under the Indenture are
authenticated by the Trustee, (g) liens under one or more credit facilities for
indebtedness in an aggregate principal amount not to exceed $900 million at any
time outstanding, (h) liens incurred in connection with pollution control,
industrial revenue or similar financings, and (i) any extension, renewal or
replacement of any debt secured by any liens referred to in the foregoing
clauses (a) through (h), inclusive. As of the date of this Prospectus
Supplement, AES does not own or lease any Principal Property.
The term "Principal Property" means any building, structure or other
facility (together with the land on which it is erected and fixtures comprising
a part thereof) used primarily for manufacturing, processing, research,
warehousing or distribution owned or leased by AES and having a net book value
in excess of 2% of Consolidated Net Assets, other than any such building,
structure or other facility or portion thereof which is a pollution control
facility financed by state or local governmental obligations or which the
principal executive officer, president and principal financial officer of AES
determine in good faith is not of material importance to the total business
conducted or assets owned by AES and its Subsidiaries as an entirety.
S-12
<PAGE>
The term "Consolidated Net Assets" means the aggregate amount of assets
(less reserves and other deductible items) after deducting current liabilities,
as shown on the consolidated balance sheet of AES and its Subsidiaries contained
in the latest annual report to the stockholders of AES and prepared in
accordance with generally accepted accounting principles.
The term "Attributable Debt" means the present value (discounted at the rate
of 9.375% per annum compounded monthly) of the obligations for rental payments
required to be paid during the remaining term of any lease of more than 12
months.
"Subsidiary" means, with respect to any person, any corporation, association
or other business entity of which a majority of the capital stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are at the time
directly or indirectly owned by such person.
RESTRICTIONS ON SALES AND LEASEBACKS. AES may not enter into any sale and
leaseback transaction involving any Principal Property, the acquisition or
completion of construction and commencement of full operation of which has
occurred more than 180 days prior thereto, unless (a) AES could incur a lien on
such property under the restrictions described above under "Restrictions on
Secured Debt" in an amount equal to the Attributable Debt with respect to the
sale and leaseback transaction without equally and ratably securing the Senior
Notes or (b) AES, within 180 days after the sale or transfer by AES, applies to
the retirement of its funded debt (defined as indebtedness for borrowed money
having a maturity of, or by its terms extendible or renewable for, a period of
more than 12 months after the date of determination of the amount thereof) an
amount equal to the greater of (i) the net proceeds of the sale of the Principal
Property sold and leased pursuant to such arrangement or (ii) the fair market
value of the Principal Property so sold and leased (subject to credits for
certain voluntary retirements of funded debt) as determined by the Board of
Directors of AES.
EVENTS OF DEFAULT
In addition to the Events of Default set forth in the accompanying
Prospectus, an Event of Default will occur with respect to the Senior Notes if
an event of default, as defined in any indenture or instrument evidencing or
under which AES has at the date of the Indenture or shall thereafter have
outstanding any indebtedness, shall happen and be continuing and either
(a) such default results from the failure to pay the principal of such
indebtedness in excess of $50 million at final maturity of such indebtedness or
(b) as a result of such default the maturity of such indebtedness shall have
been accelerated so that the same shall be or become due and payable prior to
the date on which the same would otherwise have become due and payable, and such
acceleration shall not be rescinded or annulled within 60 days and the principal
amount of such indebtedness, together with the principal amount of any other
indebtedness of AES in default, or the maturity of which has been accelerated,
aggregates $50 million or more; provided that the Trustee shall not be charged
with knowledge of any such default unless written notice thereof shall have been
given to the Trustee by AES, by the holder or an agent of the holder of any such
indebtedness, by the trustee then acting under any indenture or other instrument
under which such default shall have occurred, or by the holders of not less than
25% in the aggregate principal amount of the Senior Notes at the time
outstanding; and provided further that if such default shall be remedied or
cured by AES or waived by the holder of such indebtedness, then the Event of
Default under the Indenture by reason thereof shall be deemed likewise to have
been remedied, cured or waived without further action on the part of the
Trustee, any holder of Senior Notes or any other person.
FORM, DENOMINATION AND REGISTRATION
The Senior Notes will be issued in fully registered form, without coupons,
in denominations of $1,000 in principal amount and integral multiples thereof.
The Senior Notes will be evidenced by one or more global securities
S-13
<PAGE>
(each, a "Global Senior Note"). The Global Senior Notes will be deposited with,
or on behalf of, DTC or its nominee. Except as set forth in the accompanying
Prospectus, the Global Senior Notes may be transferred, in whole or in part,
only to another nominee of DTC or to a successor of DTC or its nominee. See
"Description of Debt Securities--Book-Entry Systems" in the accompanying
Prospectus.
PAYMENTS OF PRINCIPAL AND INTEREST; TRANSFER OR EXCHANGE
The Indenture will require that payments in respect of the Senior Notes
(including principal, premium, if any, and interest) held of record by DTC be
made in same day funds. Payments in respect of the Senior Notes held of record
by holders other than DTC may, at the option of AES, be made by check and mailed
to such holders of record as shown on the register for the Senior Notes. The
Senior Notes may be surrendered for transfer or exchange at the office of the
Trustee in New York, New York.
GOVERNING LAW
The Indenture and Senior Notes will be governed by and construed in
accordance with the laws of the State of New York, without giving effect to such
state's conflict of laws principles.
INFORMATION CONCERNING THE TRUSTEE
AES and its subsidiaries may maintain deposit accounts and conduct other
banking transactions with the Trustee in the ordinary course of business.
OTHER PROVISIONS
See the accompanying Prospectus for a description of certain additional
provisions of the Indenture, including events of default thereunder and
provisions for amendments and modifications thereof.
S-14
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain U.S. federal income tax
consequences of the ownership and disposition of Senior Notes to an initial
holder purchasing a Senior Note at its "issue price" in this offering and
holding the Senior Note as a capital asset within the meaning of Section 1221 of
the Code (as defined below). The "issue price" is the first price to the public
at which a substantial amount of the Senior Notes is sold for money (excluding
sales to bond houses, brokers or similar persons or organizations acting in the
capacity of underwriters, placement agents or wholesalers).
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations, judicial interpretations and administrative
interpretations as of the date hereof, all of which are subject to change,
including changes with retroactive effect. This discussion does not address all
aspects of U.S. federal income and estate taxation that may be relevant to
holders in light of their particular circumstances or to holders subject to
special rules, such as certain financial institutions, insurance companies,
dealers and certain traders in securities, persons holding Senior Notes in
connection with a hedging transaction, "straddle", conversion transaction or
other integrated transaction, or persons who have ceased to be United States
citizens or to be taxed as resident aliens. This discussion does not address any
tax consequences arising under the laws of any state, local or foreign
jurisdiction. Prospective holders should consult their tax advisers with respect
to the particular tax consequences to them of owning and disposing of Senior
Notes, including the consequences under the laws of any state, local or foreign
jurisdiction.
"U.S. Holder" means an owner of a Senior Note that is, for U.S. federal
income tax purposes, (i) a citizen or resident alien individual of the United
States, (ii) a corporation or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, (iii) an
estate the income of which is subject to U.S. federal income taxation regardless
of its source or (iv) a trust if a court within the United States is able to
exercise primary supervision of the administration of the trust and one or more
United States persons have the authority to control all substantial decisions of
the trust.
"Non-U.S. Holder" means an owner of a Senior Note that is, for U.S. federal
income tax purposes, a non-resident alien individual, a foreign corporation, a
non-resident alien fiduciary of a foreign estate or trust, or a foreign
partnership one or more members of which is a non-resident alien individual, a
foreign corporation or a non-resident alien fiduciary of a foreign estate or
trust.
U.S. HOLDERS
PAYMENTS OF INTEREST. Interest paid on a Senior Note will generally be
taxable to a U.S. Holder as ordinary interest income at the time it accrues or
is received in accordance with the U.S. Holder's method of accounting for U.S.
federal income tax purposes.
DISPOSITION OF THE SENIOR NOTE. Upon the sale, retirement or other taxable
disposition of a Senior Note, a U.S. Holder will recognize taxable gain or loss
equal to the difference between such U.S. Holder's adjusted tax basis in the
Senior Note and the amount realized on the sale, exchange or retirement
(excluding any amounts attributable to unpaid interest accrued between interest
payment dates, which will be includible in income as interest in accordance with
the U.S. Holder's method of accounting for U.S. federal income tax purposes). A
U.S. Holder's adjusted tax basis in a Senior Note will generally equal the cost
of the Senior Note to such U.S. Holder.
Gain or loss realized on the sale, retirement or other taxable disposition
of a Senior Note will be capital gain or loss. Prospective investors should
consult their tax advisers regarding the treatment of capital gains (which may
be taxed at lower rates than ordinary income for certain taxpayers who are
individuals, trusts or estates) and losses (the deductibility of which is
subject to limitations).
S-15
<PAGE>
NON-U.S. HOLDERS
Under present United States federal tax law, and subject to the discussion
below concerning backup withholding:
(a) payments of principal, interest and premium on the Senior Notes by AES
or its paying agent to any Non-U.S. Holder will be exempt from the 30% U.S.
federal withholding tax, provided that (i) such Non-U.S. Holder does not own,
actually or constructively, 10% or more of the total combined voting power of
all classes of our stock entitled to vote and is not a controlled foreign
corporation related, directly or indirectly, to us through stock ownership and
(ii) the statement requirement set forth in Section 871(h) or Section 881(c) of
the Code has been fulfilled with respect to the beneficial owner, as discussed
below; and
(b) a Non-U.S. Holder of a Senior Note will not be subject to U.S. federal
income tax on gain realized on the sale, retirement or other taxable disposition
of such Senior Note, unless such gain is effectively connected with the Holder's
conduct of a trade or business in the United States.
The certification requirement referred to in subparagraph (a) will be
fulfilled if the beneficial owner of a Senior Note certifies on Internal Revenue
Service ("IRS") Form W-8 or W-8BEN (or, after December 31, 2000, a Form W-8BEN)
(referred to herein as "Form W-8"), under penalties of perjury, that it is not a
United States person and provides its name and address, and (i) such beneficial
owner files such Form W-8 with the withholding agent or (ii) in the case of a
Senior Note held by a securities clearing organization, bank or other financial
institution holding customers' securities in the ordinary course of its trade or
business holding the Senior Note on behalf of the beneficial owner, such
financial institution files with the withholding agent a statement that it has
received the Form W-8 from the Holder and furnishes the withholding agent with a
copy thereof. With respect to Senior Notes held by a foreign partnership, under
current law, the Form W-8 may be provided by the foreign partnership. However,
unless a foreign partnership has entered into a withholding agreement with the
IRS, for interest and disposition proceeds paid with respect to a Senior Note
after December 31, 2000, the foreign partnership will be required (and may be
permitted earlier), in addition to providing an intermediary Form W-8, to attach
an appropriate certification by each partner. Prospective investors, including
foreign partnerships and their partners, should consult their tax advisers
regarding possible additional reporting requirements.
If a Non-U.S. Holder of a Senior Note is engaged in a trade or business in
the United States, and if interest on the Senior Note (or gain realized on its
sale, exchange or other disposition) is effectively connected with the conduct
of such trade or business, the Non-U.S. Holder, although exempt from the
withholding tax discussed in the preceding paragraphs, will generally be subject
to regular U.S. federal income tax on such effectively connected income in the
same manner as if it were a U.S. Holder. See "--U.S. Holders" above. In lieu of
the certificate described in the preceding paragraph, such a Holder will be
required to provide to the withholding agent a properly executed IRS Form 4224
or W-8ECI (or, after December 31, 2000, a Form W-8ECI) to claim an exemption
from withholding tax. In addition, if such Non-U.S. Holder is a foreign
corporation, it may be subject to a 30% branch profits tax (unless reduced or
eliminated by an applicable treaty) on its earnings and profits for the taxable
year attributable to such effectively connected income, subject to certain
adjustments.
BACKUP WITHHOLDING AND INFORMATION REPORTING
U.S. HOLDERS. Information reporting will apply to payments of interest made
by us or our paying agent on, and payments of the proceeds of the sale or other
disposition of, the Senior Notes to certain noncorporate U.S. Holders, and
backup withholding at a rate of 31% may apply unless the recipient of such
payment supplies a taxpayer identification number, certified under penalties of
perjury, as well as certain other information or otherwise establishes an
exemption from backup withholding. Any amount withheld under the backup
withholding rules is allowable as a credit against the U.S.
S-16
<PAGE>
Holder's federal income tax, provided that the required information is provided
to the IRS.
NON-U.S. HOLDERS. Under current Treasury Regulations, payments on the sale
or other disposition of Senior Notes made to or through a foreign office of a
broker generally will not be subject to backup withholding. However, if such
broker is (i) a United States person, (ii) a controlled foreign corporation for
United States federal income tax purposes, (iii) a foreign person 50 percent or
more of whose gross income is effectively connected with a United States trade
or business for a specified three-year period or (iv), in the case of payments
made after December 31, 2000, a foreign partnership with certain connections to
the United States, then information reporting will be required unless the broker
has in its records documentary evidence that the beneficial owner is not a
United States person and certain other conditions are met or the beneficial
owner otherwise establishes an exemption. Backup withholding may apply to any
payment that such broker is required to report if the broker has actual
knowledge that the payee is a United States person. Payments to or through the
United States office of a broker will be subject to backup withholding and
information reporting unless the Non-U.S. Holder certifies, under penalties of
perjury, that it is not a United States person or otherwise establishes an
exemption. Any amounts withheld from a payment to a Non-U.S. Holder under the
backup withholding rules will be allowed as a credit against such Non-U.S.
Holder's U.S. federal income tax liability and may entitle such Non-U.S. Holder
to a refund, provided that the required information is furnished to the IRS.
Holders of Senior Notes should consult their tax advisers regarding the
application of information reporting and backup withholding in their particular
situations, the availability of an exemption therefrom, and the procedure for
obtaining such an exemption, if available.
S-17
<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement dated
September 7, 2000, each underwriter named below has severally agreed to
purchase, and AES has agreed to sell to such underwriter, the principal amount
of Senior Notes set forth opposite the name of such underwriter.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NAME OF SENIOR NOTES
---- ----------------
<S> <C>
Morgan Stanley & Co.
Incorporated ..................... $510,000,000
Lehman Brothers Inc................. $255,000,000
TD Securities (USA) Inc............. $ 85,000,000
------------
Total......................... $850,000,000
============
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the Senior Notes included in this offering are subject
to approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the Senior Notes if they purchase
any of the Senior Notes.
The underwriters have advised AES that they propose to offer some of the
Senior Notes directly to the public at the public offering price set forth on
the cover page of this prospectus supplement and some of the Senior Notes to
certain dealers at the public offering price less a concession not in excess of
0.5% of the principal amount of the Senior Notes. The underwriters may allow,
and such dealers may reallow a concession not in excess of 0.25% of the
principal amount of the Senior Notes on sales to certain other dealers. After
the initial offering of the Senior Notes to the public, the public offering
price and such concessions may be changed by the underwriters.
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by AES in connection with this offering (expressed as a
percentage of the principal amount of the Senior Notes).
<TABLE>
<CAPTION>
PAID BY AES
-----------
<S> <C>
Per Senior Note................. 1.50%
</TABLE>
In connection with the offering, Morgan Stanley & Co. Incorporated, on
behalf of the underwriters, may over-allot, or engage in syndicate covering
transactions, stabilizing transactions and penalty bids. Over-allotment involves
syndicate sales of Senior Notes in excess of the principal amount of Senior
Notes to be purchased by the underwriters in the offering, which creates a
syndicate short position. Syndicate covering transactions involve purchases of
the Senior Notes in the open market after the distribution has been completed in
order to cover syndicate short positions. Stabilizing transactions consist of
certain bids on purchases of Senior Notes made for the purposes of preventing or
retarding a decline in the market price of the Senior Notes while the offering
is in progress. Penalty bids permit the underwriters to reclaim a selling
concession from a syndicate member when Morgan Stanley & Co. Incorporated, in
covering syndicate short positions or making stablizing purchases, repurchases
the Senior Notes originally sold by that syndicate member. These activities may
cause the price of the Senior Notes to be higher than the price that otherwise
would exist in the open market in the absence of such transactions. These
transactions may be effected in the over-the-counter market or otherwise and, if
commenced, may be discontinued at any time.
AES estimates that its total expenses of this offering will be $950,000.
In the ordinary course of the underwriters' respective businesses, the
underwriters and their affiliates have engaged and may engage in commercial and
investment banking transactions with AES and its affiliates.
Affiliates of the underwriters are lenders under the EDC Loan, which is
expected to be repaid out of the proceeds of this offering.
Because it is expected that more than 10% of the net proceeds of this
offering may be paid to affiliates of the underwriters, the offering is being
conducted in accordance with Rule 2710(c)(8) of the Conduct Rules of the
S-18
<PAGE>
National Association of Securities Dealers, Inc. (the "NASD"). The rules of the
NASD provide that no NASD member shall participate in such an offering unless
the yield at which a debt issue is to be distributed to the public is
established by a "qualified independent underwriter" meeting certain standards
in accordance with the NASD's rules ("QIU"). In accordance with this
requirement, C.E. Unterberg, Towbin, has assumed the responsibilities of acting
as QIU and has recommended a minimum yield to maturity of the Senior Notes in
compliance with the requirements of the NASD's rules. In connection with the
offering, C.E. Unterberg, Towbin has performed due diligence investigations and
reviewed and participated in the preparation of this prospectus supplement. C.E.
Unterberg, Towbin will receive a fee of $20,000 as compensation for its services
as QIU.
From time to time in the ordinary course of its business, C.E. Unterberg,
Towbin has engaged in, and may in the future engage in investment banking
transactions with AES and its affiliates. Thomas I. Unterberg, a Managing
Director of C.E. Unterberg, Towbin, is a member of AES's Board of Directors and
is a stockholder of AES.
AES has agreed to indemnify the underwriters and the QIU against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the underwriters and the QIU may be required to make in
respect of any of those liabilities.
LEGAL MATTERS
The validity of the Senior Notes offered hereby and certain matters relating
thereto will be passed upon for us by Davis Polk & Wardwell, New York, New York.
Certain legal matters will be passed upon for the underwriters by Shearman &
Sterling, New York, New York.
EXPERTS
See "Experts" in the accompanying Prospectus.
S-19
<PAGE>
PROSPECTUS
$4,000,000,000
[LOGO]
THE AES CORPORATION
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
WARRANTS
---------
We will offer debt securities, preferred stock, depositary shares, common
stock, stock purchase contracts, stock purchase units or warrants from time to
time. Specific terms of these securities will be provided in supplements to this
prospectus. You should read this prospectus and any supplement carefully before
you invest.
--------------
OUR COMMON STOCK TRADES ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL
"AES".
--------------
INVESTING IN THESE SECURITIES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 3.
--------------
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 determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
--------------
THE DATE OF THIS PROSPECTUS IS MAY 26, 2000.
<PAGE>
You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information contained in or incorporated by reference in this prospectus is
accurate as of any date other than the date on the front of this prospectus.
------------------------
TABLE OF CONTENTS
------------------------
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
About This Prospectus................. 2
Risk Factors.......................... 3
Where You Can Find More Information... 10
Incorporation of Documents by
Reference........................... 10
Special Note on Forward-Looking
Statements.......................... 11
Use of Proceeds....................... 11
Ratio of Earnings to Fixed Charges.... 12
The Company........................... 12
</TABLE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Description of Capital Stock.......... 12
Description of Debt Securities........ 18
Description of Stock Purchase
Contracts and Stock Purchase
Units............................... 28
Description of Securities Warrants.... 29
Plan of Distribution.................. 30
Legal Matters......................... 31
Experts............................... 31
</TABLE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf process, we may sell any combination of the securities
described in this prospectus in one or more offerings up to a total dollar
amount of $4,000,000,000. This prospectus provides you with a general
description of the securities we may offer. Each time we sell securities, we
will provide a prospectus supplement that will contain specific information
about the terms of that offering. The prospectus supplement may also add, update
or change information contained in this prospectus. You should read both this
prospectus and any prospectus supplement together with additional information
described under the heading "Where You Can Find More Information."
2
<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.
OUR HIGH DEGREE OF LEVERAGE COULD AFFECT OUR ABILITY TO FULFILL OUR
OBLIGATIONS UNDER OUR SECURITIES. We had approximately $13,715 million of
outstanding indebtedness at March 31, 2000. As a result, we might be
significantly limited in our ability to meet our debt service obligations, to
finance the acquisition, development or completion of additional projects, to
compete effectively or to operate successfully under adverse economic
conditions. As of March 31, 2000, we had a consolidated ratio of total debt to
total book capitalization (including current debt) of approximately 72%.
HOLDERS OF OUR DEBT SECURITIES WILL BE SUBORDINATED TO MANY OF OUR OTHER
CREDITORS. The Senior Subordinated Debt Securities will be subordinated to all
Senior Debt, including, but not limited to, the amounts outstanding under our
current $850 million revolving credit facility. The Junior Subordinated Debt
Securities will be subordinated to all of our Senior and Senior Subordinated
Debt, including, but not limited to, the amounts outstanding under our current
$850 million revolving credit facility. As of March 31, 2000, we had
approximately $1,581 million in aggregate principal amount of Senior Debt (which
includes $346 million of letters of credit) and $2,656 million in aggregate
principal amount of Senior and Senior Subordinated Debt.
Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, receivership, reorganization, assignment
for the benefit of creditors, marshaling of assets and liabilities or any
bankruptcy, insolvency or similar proceedings, the holders of Senior Debt will
be entitled to receive payment in full of all amounts 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 Senior Subordinated Debt Securities;
holders of Senior and Senior Subordinated Debt will be entitled to receive
payment in full of all amounts 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 Junior Subordinated Debt Securities.
No payments in respect of the Senior Subordinated Debt Securities or Junior
Subordinated Debt Securities may be made
- if a default has occurred and is continuing in a payment under the 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 our subsidiaries. At March 31,
2000, the indebtedness and obligations of our subsidiaries aggregated
approximately $13,335 million. Our ability to pay principal of, premium, if any,
and interest on the Debt Securities will be dependent upon the receipt of funds
from our subsidiaries by way of dividends, fees, interest, loans or otherwise.
Most of our subsidiaries with interests in power generation facilities currently
are obligated, pursuant to loan agreements or indentures, to satisfy certain
restricted payment covenants before they may make distributions to us. Moreover,
unless otherwise provided in the prospectus supplement, the Indentures for the
Debt Securities will permit our subsidiaries to maintain or add to such
restrictions. Our subsidiaries are separate and distinct legal
3
<PAGE>
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 we have to receive
any assets of any of our 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 (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).
WE DO A SIGNIFICANT AMOUNT OF OUR BUSINESS OUTSIDE THE UNITED STATES WHICH
PRESENTS SIGNIFICANT RISKS. Our involvement in the development of new
businesses and the acquisition of existing plants in locations outside the
United States is increasing and a large portion of our current development and
acquisition activities are for projects and plants outside the United States.
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, regulation of the electricity business, currency
inconvertibility, tax law, 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 we 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
has become more difficult. Even when such non-recourse financing is available,
lenders may require us to make higher equity investments 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 we
are or in the future may be developing, constructing or operating could make it
more difficult for us to enforce our respective rights under agreements relating
to such businesses. In addition, the laws and regulations of certain countries
may limit our ability to hold a majority interest in some of the businesses that
we may develop or acquire. International businesses we own may, in certain
cases, be expropriated by applicable governments. Although we may have legal
recourse in enforcing our rights under agreements and recovering damages for
breaches thereof, there can be no assurance that any such legal proceedings will
be successful or resolved in a timely manner.
GLOBAL COMPETITION IS INCREASING AND COULD ADVERSELY AFFECT US. 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 ours. 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 we sell or
intend to sell power. There can be no assurance that the foregoing competitive
factors will not have a material adverse effect on us.
DEVELOPMENT UNCERTAINTIES. The majority of the projects that we develop are
large and
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<PAGE>
complex and the completion of any such project is subject to substantial risks.
Development can require us to expend significant sums for preliminary
engineering, permitting, legal and other expenses in preparation for competitive
bids which we 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
of satisfactory 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 we 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
our projects. There can be no assurance that development efforts on any
particular project, or our efforts generally, will be successful. If these
development efforts are not successful, we may abandon a project under
development. At the time of abandonment, we would expense all capitalized
development costs incurred in connection therewith and could incur additional
losses associated with any related contingent liabilities. Our future growth is
dependent, in part, upon the demand for significant amounts of additional
electrical generating capacity and our ability to obtain contracts to supply
portions of this capacity. Any material unremedied delay in, or unsatisfactory
completion of, construction of our projects could, under certain circumstances,
have an adverse effect on our ability to meet our obligations, including the
payment of principal of, premium, if any, and interest on Debt Securities. We
may also be faced with certain development uncertainties arising out of doing
business outside of the United States. See "--We do a significant amount of our
business outside the United States which presents significant risks."
OUR ACQUISITIONS MAY NOT PERFORM AS EXPECTED. We have achieved a majority of
our growth through acquisitions and expect that we will continue to grow, in
part, through acquisitions. Although each of the acquired businesses had a
significant operating history at the time we acquired them, we have a limited
history of owning and operating many of 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. There can be no assurances
that we 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.
WE MAY NOT BE ABLE TO RAISE SUFFICIENT CAPITAL TO FUND ACQUISITIONS AND
GREENFIELD PROJECTS OR REFINANCE EXISTING DEBT. Each of our projects under
development and those independent power facilities we have committed to acquire
or 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, and may be necessary to refinance certain
existing debt. We have utilized project financing loans to fund the capital
expenditures associated with constructing and acquiring our electric power
plants and related assets to the extent possible. Project financing borrowings
have been substantially non-recourse to our other subsidiaries and affiliates
and to us 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. We intend to continue to seek, where possible, such non-recourse
project financing. However, depending on market conditions and the unique
characteristics of individual projects, such financing may not be available or
our traditional providers of project financing, particularly multinational
commercial banks, may seek higher borrowing spreads and increased equity
contributions.
5
<PAGE>
Furthermore, because of the reluctance of commercial lending institutions to
provide non-recourse project financing (including financial guarantees) in
certain less developed economies, we have sought and will continue to seek, in
such locations, 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, we may determine that sufficient financing will
ultimately not be available to fund the related project. In addition, we are
frequently required to provide more sponsor equity for projects that sell their
electricity into the merchant market than for projects that sell their
electricity under long term contracts.
In addition to the project financing loans, if available, we provide 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 our short-term credit facilities and issuances of senior notes,
senior subordinated notes, convertible debentures, convertible trust preferred
securities and common stock.
Our 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, rating agency ratings, investor confidence, 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, we 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 our currently
operating facilities or facilities under construction, such a decision would
affect our future growth.
THE PERFORMANCE OF OUR GENERATION BUSINESS IS DEPENDENT TO A LARGE DEGREE ON
CERTAIN OF OUR LARGER PROJECTS AND THEIR CUSTOMERS. The nature of most of our
generation plants (based on revenues) 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. The
prolonged failure of any significant customer to fulfill its contractual
obligations could have a substantial negative impact on these revenues. We have
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 our plants
in different geographic areas in order to mitigate the effects of regional
economic downturns.
OUR REVENUES ARE BECOMING LESS PREDICTABLE. Our business primarily consists
of businesses with long-term contracts or retail concessions, and we expect the
contract-based portfolio to be an effective hedge against future energy and
electricity market price risks. However, an increasing proportion of our current
and expected future revenues are derived from businesses without significant
long-term revenue contracts. Our increasing reliance on non-contract businesses
could cause our results of operations to become more volatile.
OUR DISTRIBUTION BUSINESSES ARE SUBJECT TO GREATER REGULATORY SCRUTINY THAN
OUR GENERATION BUSINESS. Our distribution businesses face increased regulatory
and political scrutiny in the normal conduct of their operations. This scrutiny
may adversely impact our results of operations, to the extent that such scrutiny
or pressure prevents us from reducing losses as quickly as we planned or denies
us a rate increase called for by our concession agreements. In general, these
businesses have lower margins and are more dependent on regulation to ensure
expected annual rate increases for inflation and increased power costs, among
other things. There can be
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<PAGE>
no assurance that these rate reviews will be granted, or occur in a timely
manner.
WE ARE SUBJECT TO SIGNIFICANT GOVERNMENT REGULATION. Our generation
business in the United States is subject to the provisions of various laws and
regulations, including the Public Utility Regulatory Policies Act of 1978, as
amended, commonly referred to as PURPA, and the Public Utility Holding Company
Act, as amended, commonly referred to as PUHCA. PURPA provides to qualifying
facilities, commonly referred to as QFs, certain exemptions from substantial
federal and state legislation, including regulation as public utilities. PUHCA
regulates public utility holding companies and their subsidiaries. It is
necessary for us to obtain approval under PUHCA in order to maintain majority
ownership in our domestic power plants that are QFs. Currently a material
portion of our domestic revenues are received from QFs. Moreover, all of our
domestic non-QF plants are Exempt Wholesale Generators, commonly referred to as
EWGs. An EWG is a facility that has been authorized by the U.S. Federal Energy
Regulatory Commission, commonly referred to as the FERC, to sell wholesale power
at market-based rates. We enjoy exemptions under PUHCA related to our foreign
utility acquisitions and holdings. We cannot ensure that we will be able to
maintain appropriate PUHCA exemptions for all of our businesses. If we decide to
acquire another U.S. utility or utility assets, we may be required to divest
either all or part of CILCORP or take other steps resulting in a loss of control
or as may be required by the Securities and Exchange Commission. We believe
that, upon the occurrence of an event that would threaten the QF status of one
of our domestic plants, we 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 we
were unable to avoid the loss of such status for one of our plants, to avoid
public utility holding company status, we could apply to the FERC to obtain
status as an 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 our consolidated income tax group or our consolidated financial
statements, or an increase or decrease in our results of operations.
PENDING ELECTRIC UTILITY INDUSTRY RESTRUCTURING PROPOSALS COULD HAVE AN
ADVERSE EFFECT ON US. Several states have passed legislation that allows
electricity customers to choose their electricity supplier in a competitive
electricity market (so-called "retail access" or "customer choice" laws), and
all but two of the remaining states are considering such legislation. In
addition to state restructuring legislation, some members of Congress have
proposed new Federal legislation to encourage customer choice and recovery of
stranded assets. Several bills have been submitted to Congress on electricity
restructuring. In anticipation of restructuring legislation, many U.S. utilities
are seeking ways to lower their costs in order to become more competitive. These
include the costs that utilities are required to pay under QF contracts. Many
utilities are therefore seeking ways to lower these contract prices by
renegotiating the contracts, or in some cases by litigation. In 1999, we
renegotiated contracts for two of our QFs--Thames (a partial prepayment) and
Placerita (a complete buyout). The Thames transaction has been approved by the
Connecticut Department of Public Utilities Commission.
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.
7
<PAGE>
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 margin for United States electricity
sellers. Falling electricity prices, the introduction of commodity markets for
electricity and uncertainty as to the future structure of the industry has
rendered the long-term power purchase contracts obsolete. As a result, in the
generation business we are increasingly dependent upon prices for electricity
determined in electricity spot markets. Such prices can be very volatile and the
effect on us of this volatility cannot be predicted.
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 power generators 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 interconnection. 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 that PUHCA is repealed, competition 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 us.
FROM TIME TO TIME WE ARE SUBJECT TO MATERIAL LITIGATION AND REGULATORY
PROCEEDINGS. From time to time, we and our affiliates are parties to litigation
and regulatory proceedings. Investors should review the descriptions of such
matters contained in our Annual, Quarterly and Current Reports filed with the
Securities and Exchange 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 our consolidated financial position.
OUR BUSINESS IS SUBJECT TO STRINGENT ENVIRONMENTAL REGULATIONS. Our
activities are subject to stringent environmental regulation by federal, state,
local and foreign governmental authorities. These regulations generally involve
effluents into the water, emissions into the air, the use of water, wetlands
preservation, waste disposal, endangered species, and noise regulation, among
others. 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 our power plants. There can be
no assurance that we would be able to recover all or any increased costs from
our customers or that our 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. We have 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 our financial condition or results of operations.
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OUR DIRECTORS AND OFFICERS HAVE SIGNIFICANT OWNERSHIP INTERESTS IN US AND
CAN EXERT SIGNIFICANT INFLUENCE OR CONTROL OVER MATTERS REQUIRING STOCKHOLDER
APPROVAL. As of February 4, 2000 our two founders, Roger W. Sant and Dennis W.
Bakke, and their immediate families together owned beneficially approximately
18.4% of our outstanding Common Stock. As a result of their ownership interests,
Messrs. Sant and Bakke may be able to significantly influence or exert control
over our affairs, including the election of our directors. As of February 4,
2000, all of our officers and directors and their immediate families together
owned beneficially approximately 24.9% of our 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 our directors, our management
and policies and any action requiring stockholder approval, including
significant corporate transactions.
OUR ADHERENCE TO OUR "SHARED PRINCIPLES" COULD HAVE AN ADVERSE IMPACT ON OUR
RESULTS OF OPERATIONS. A core part of our corporate culture is a commitment to
"shared principles": to act with integrity, to be fair, to have fun and to be
socially responsible. We seek 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 we perceive a conflict between these principles and profits,
we will try to adhere to our principles--even though doing so might result in
diminished or foregone opportunities or financial benefits.
SHARES ELIGIBLE FOR FUTURE SALE. From time to time, our subsidiaries incur
indebtedness that is secured by a pledge of shares of our common stock held by
that subsidiary. 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 our 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 our creditors in a lawsuit to
subordinate or avoid Debt Securities in favor of our other existing or future
creditors. Under applicable provisions of the U.S. Bankruptcy code or comparable
provisions of state fraudulent transfer or conveyance laws, if we at the time of
issuance of Debt Securities,
- incurred such indebtedness with intent to hinder, delay or defraud any of
our present or future creditors or contemplated insolvency with a design
to prefer one or more creditors to the exclusion in whole or in part of
others or
- received less than reasonably equivalent value or fair consideration for
issuing Debt Securities and we:
- were insolvent,
- were rendered insolvent by reason of the issuance of the Debt
Securities,
- were engaged or about to engage in business or a transaction for which
our remaining assets constitute unreasonably small capital to carry on
our business, or
- intended to incur, or believed that we would incur, debts beyond our
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 us as a result
of our issuance 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, we would be considered
insolvent if the sum of our debts, including contingent liabilities, were
greater than all of our assets at fair valuation or if the present fair market
value of our assets were less than the amount that would be required to pay the
probable liability on our existing debts, including contingent liabilities, as
they become absolute and mature. There can be no assurance that, after providing
for all prior
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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 we, after the issuance of the Debt
Securities, will be solvent, will have sufficient capital for carrying on our
business and will be able to pay our debts as they mature. There can be no
assurance, however, that a court passing on such questions would agree with
management's view.
THERE IS NO PRIOR PUBLIC MARKET FOR MANY OF THE SECURITIES THAT MAY BE
OFFERED PURSUANT TO THIS PROSPECTUS--AS A RESULT THERE COULD BE SIGNIFICANT
PRICE VOLATILITY FOR SUCH SECURITIES. Prior to the offering, there has been no
public market for many of the securities that may be offered pursuant to this
prospectus. There can be no assurance that an active trading market for any of
such securities will develop or be sustained. If such a market were to develop,
such securities could trade at prices that may be higher or lower than their
initial offering price depending upon many factors, including prevailing
interest rates, our operating results and the markets for similar securities.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission You may read and copy
any document that we file at the public reference rooms of the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
Suite 1300, New York, New York 10048. You may obtain information on the
operation of the public reference rooms by calling the Securities and Exchange
Commission at 1-800-SEC-0330. The Securities and Exchange Commission also
maintains an Internet site at http://www.sec.gov, from where you can access our
filings.
This prospectus constitutes part of a Registration Statement on Form S-3
filed with the Securities and Exchange Commission under the Securities Act of
1933 (the "Securities Act"). It omits some of the information contained in the
Registration Statement, and reference is made to the Registration Statement for
further information on AES and the securities offered hereby. Any statement
contained in this prospectus concerning the provisions of any document filed as
an exhibit to the Registration Statement or otherwise filed with the Securities
and Exchange Commission is not necessarily complete, and in each instance
reference is made to the copy of the document filed.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this prospectus,
and information that we file later with the Securities and Exchange Commission
will automatically update and supersede this information. In particular, our
annual filing on Form 10-K will supersede all previously filed annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. We
incorporate by reference the documents listed below and any future filings made
with the Securities and Exchange Commission under Sections 13(a), 13(c), 14, or
15(d) of the Securities Exchange Act of 1934 until we sell all of the
securities:
(a) Annual Report on Form 10-K for the year ended December 31, 1999;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
(c) Current Reports on Form 8-K filed on May 8, 2000 and May 12, 2000.
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You may request a copy of these filings at no cost, by writing or
telephoning the office of William R. Luraschi, Vice President and Secretary, The
AES Corporation, 1001 North 19th Street, Arlington, Virginia, telephone number
(703) 522-1315.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions related to AES, including those set forth under
"Risk Factors" in this prospectus and those set forth under the caption
"Cautionary Statements and Risk Factors" in our annual report on Form 10-K,
which is incorporated by reference in this prospectus.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
USE OF PROCEEDS
Unless otherwise indicated in a prospectus supplement, proceeds from the
sale of the securities will be used by us for general corporate purposes and may
be temporarily invested in short-term securities.
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RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges is as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- ------------
1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges...................... 2.20 1.88 1.46 1.65 1.50 2.08
</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 depreciation of previously capitalized interest, plus
fixed charges, less capitalized interest, less excess of earnings over dividends
of less-than-fifty-percent-owned companies, less minority interest in pre-tax
income of subsidiaries that have not incurred fixed charges, less preference
security dividend requirements of a consolidated subsidiary. Fixed charges
consist of interest (including capitalized interest) on all indebtedness,
amortization of debt discount and capitalized expenses, preference security
dividend requirements of a consolidated subsidiary, and that portion of rental
expense which we believe to be representative of an interest factor.
During the period from January 1, 1995 until March 31, 2000, no shares of
preferred stock were issued or outstanding, and during that period we did not
pay any preferred stock dividends.
THE COMPANY
We are a global power company committed to serving the world's needs for
electricity in a socially responsible way. Our electricity "generation" business
consists of sales to wholesale customers (generally electric utilities, regional
electric companies or wholesale commodity markets known as "power pools") for
further resale to end-users. We also sell electricity directly to end-users such
as commercial, industrial, governmental and residential customers through our
"distribution" business.
Sales within our generation business are made under long-term contracts from
power plants owned by our subsidiaries and affiliates, as well as directly into
power pools. We own new plants constructed for such purposes ("greenfield"
plants) as well as older power plants acquired through competitively bid
privatization initiatives or negotiated acquisitions.
Electricity sales by our distribution businesses, including affiliates, are
generally made pursuant of the provisions of long-term electricity sale
concessions granted by the appropriate governmental authorities. 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.
DESCRIPTION OF CAPITAL STOCK
Under our certificate of incorporation (the "Certificate of Incorporation"),
we are authorized to issue 1,200,000,000 shares of common stock, par value $.01
per share, and 50,000,000 shares of preferred stock, no par value.
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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
indicated in the prospectus supplement, the terms of any series may differ from
the terms set forth below. The description of certain provisions of the common
stock and the preferred stock is subject to and qualified by reference to the
provisions of our 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 an exhibit to the registration
statement of which this prospectus is a part.
COMMON STOCK
As of May 1, 2000, there were 207,770,572 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 dividends as may be declared from time to time by
our board of directors out of funds legally available to pay dividends. If we
liquidate our business, the holders of common stock are entitled to share
ratably in all assets after we pay our liabilities and the liquidation
preference of any outstanding preferred stock. 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 our common stock is EquiServe.
PRICE RANGE OF AES COMMON STOCK AND COMMON STOCK DIVIDENDS
Our common stock began trading on the New York Stock Exchange on
October 16, 1996 under the symbol "AES." The following table sets forth for the
periods indicated the intra-day high and low sale prices for the common stock as
reported on the Composite Tape. In April 2000, we announced a two-for-one stock
split, in the form of a stock dividend, for holders of record on May 1, 2000 of
our common stock, par value $.01 per share, which is payable on June 1, 2000.
The prices set forth below do not reflect adjustment for such stock split.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1998
First Quarter............. $54.31 $39.38
Second Quarter............ 58.00 45.63
Third Quarter............. 55.38 23.00
Fourth Quarter............ 47.38 32.00
1999
First Quarter............. $49.25 $32.81
Second Quarter............ 59.75 36.75
Third Quarter............. 66.69 53.06
Fourth Quarter............ 76.38 50.44
2000
First Quarter............. $89.44 $68.50
Second Quarter (through
May 25, 2000)........... 92.50 71.13
</TABLE>
No cash dividends have been paid on common stock since December 22, 1993 in
order to provide capital for our equity investments in projects.
Our ability to declare and pay dividends is dependent, among other things,
on
- the ability of our project subsidiaries to declare and pay dividends and
otherwise distribute cash to us;
- our ability to service our parent company debt and
- our ability to meet certain criteria for paying dividends under our
corporate
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credit facility and under existing indentures of our debt securities.
The ability of our subsidiaries to declare and pay dividends and otherwise
distribute cash to us is subject to certain limitations in the project loans and
other documents entered into by our project subsidiaries. These limitations
permit the payment of dividends out of current cash flow for quarterly,
semi-annual or annual periods only at the end of these periods and only after
payment of principal and interest on project loans due at the end of these
periods.
Cash dividend payments on common stock are limited to a certain percentage
of cash flow under our corporate credit agreement. The indentures relating to
our existing senior subordinated notes preclude the payment of cash dividends
if:
- at the time of a payment of cash dividends or after giving effect thereto
an event of default occurred;
- an event that would become an event of default occurred and is continuing;
- certain fixed charge coverage ratios are not met or
- if the payment of dividends, together with other restricted payments,
would exceed certain limits.
PREFERRED STOCK
As of May 1, 2000, there were no shares of Preferred Stock outstanding.
Our board of directors has the authority to issue preferred stock in one or
more classes or series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, 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 by
the stockholders. Preferred stock, if issued, will not be entitled to any
preemptive or similar rights. The prospectus supplement will describe the terms
of any preferred stock being offered, including:
- the specific designation, number of shares, seniority and purchase price;
- any liquidation preference per share;
- any date of maturity;
- any redemption, repayment or sinking fund provisions;
- 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);
- any voting rights;
- 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;
- the method by which amounts in respect of such preferred stock may be
calculated and any commodities, currencies or indices, or value, rate or
price, relevant to such calculation;
- 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;
- the place or places where dividends and other payments on the preferred
stock will be payable; and
- 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
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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 OUR CERTIFICATE OF INCORPORATION AND
BY-LAWS
Our Certificate of Incorporation and By-Laws contain several provisions that
may make the acquisition of control of the AES through a tender offer, open
market purchases, a proxy fight or otherwise more difficult. Below is a
description of certain of these provisions in the Certificate of Incorporation
and By-Laws.
SPECIAL MEETINGS OF STOCKHOLDERS. Our 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 of directors or by the president. Only business as
specified in the notice of stockholders of the special meeting shall be
considered.
STOCKHOLDER NOMINATION OF DIRECTORS. Our 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 our secretary of the intent to make a
nomination. The notice must be given, with respect to an annual meeting, not
later than 90 days in advance of the annual meeting. With respect to a special
meeting, the notice must be given not later than the close of business on the
seventh day following the earlier of
- the date on which notice of such special meeting is first given to
stockholders and
- the date on which a public announcement of such meeting is first made.
Each notice must include:
- 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;
- 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;
- other information regarding each nominee proposed as would have been
included in a proxy statement filed pursuant to Rule 14a-8 under the
Exchange Act and
- 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 described below, the
Certificate of Incorporation eliminates the liability of members of our board of
directors to us or our stockholders for monetary damages resulting from breaches
of their fiduciary duties as directors. Directors remain liable for breaches of
their duty of loyalty to us or our 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 release
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
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the unlawful conduct is willful or results from negligence.
Under our By-Laws, and in accordance with Section 145 of the GCL, we shall
indemnify to the fullest extent permitted by the GCL 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. These include civil, criminal,
administrative or investigative proceedings by reason of the fact that the
person is or was a director or officer of or employed by us, or is or was
serving in that capacity or as an agent at the request of us for another entity.
Our indemnification covers expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with the defense or
settlement of an action, suit or proceeding if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to our
best interests and, with respect to any criminal action or proceeding, had no
reasonable cause to believe was unlawful. We will 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 us
in the performance of his or her duty. Derivative actions are actions by us or
in the right of us to procure a judgment in our favor. Agents of ours 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
incurred in connection with the defense or settlement of a derivative action and
then, where the person is adjudged to be liable to us, only if and to the extent
that the Court of Chancery of the State of Delaware or the court in which the
action was brought determines that the person is fairly and reasonably entitled
to the indemnity and only for those expenses as the court deems proper.
Pursuant to our 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 us. However, these advances will only be made if the
indemnified person undertakes to repay all advanced amounts if it is determined
that the person is not entitled to indemnification.
In addition, under our By-Laws, we may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of us
or of another corporation against any liability arising out of the person's
status as director, officer, employee or agent of us whether or not we would
have the power to indemnify such person against such liability under the
provisions of our By-Laws. We maintain directors' and officers' insurance.
DEPOSITARY SHARES
GENERAL. We may, at our option, elect to offer fractional shares of
preferred stock, rather than full shares of preferred stock. If we exercise this
option, we will issue to the public receipts for depositary shares, and each of
these depositary shares will represent a fraction (to be set forth in the
application prospectus supplement) of a share of a particular series of
preferred stock.
The shares of any series of preferred stock underlying the depositary shares
will be deposited under a deposit agreement between us and a bank or trust
company selected by us. The depositary will have its principal office in the
United States and a combined capital and surplus of at least $50,000,000.
Subject to the terms of the deposit agreement, each owner of a depositary share
will be entitled, in proportion, to the applicable fraction of a share of
preferred stock underlying that depositary share, to all the rights and
preferences of the preferred stock underlying that depositary share. Those
rights include dividend, voting, redemption and liquidation rights.
The depositary shares will be evidenced by depositary receipts issued
pursuant to the deposit agreement. Depositary receipts will be distributed to
those persons purchasing the fractional shares of preferred stock underlying the
depositary shares, in accordance with the terms of the offering. Copies of the
forms of deposit agreement and depositary receipt will be filed as exhibits to
the registration statement.
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The following summary of the deposit agreement, the depositary shares and the
depositary receipts is not complete. You should refer to the forms of the
deposit agreement and depositary receipts that will be filed with the Securities
and Exchange Commission in connection with the offering of the specific
depositary shares.
Pending the preparation of definitive engraved depositary receipts, the
depositary may, upon our written order, issue temporary depositary receipts
substantially identical to the definitive depositary receipts but not in
definitive form. These temporary depositary receipts entitle their holders to
all the rights of definitive depositary receipts which are to be prepared
without unreasonable delay. Temporary depositary receipts will then be
exchangeable for definitive depositary receipts at our expense.
DIVIDENDS AND OTHER DISTRIBUTIONS. The depositary will distribute all cash
dividends or other cash distributions received with respect to the preferred
stock to the record holders of depositary shares relating to the preferred stock
in proportion to the number of depositary shares owned by those holders.
If there is a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary shares
that are entitled to receive the distribution, unless the depositary determines
that it is not feasible to make the distribution. If this occurs, the depositary
may, with our approval, sell the property and distribute the net proceeds from
the sale to the applicable holders.
REDEMPTION OF DEPOSITARY SHARES. If a series of preferred stock represented
by depositary shares is subject to redemption, the depositary shares will be
redeemed from the proceeds received by the depositary resulting from the
redemption, in whole or in part, of that series of preferred stock held by the
depositary. The redemption price per depositary share will be equal to the
applicable redemption fraction of the redemption price per share payable with
respect to that series of the preferred stock. Whenever we redeem shares of
preferred stock that are held by the depositary, the depositary will redeem, as
of the same redemption date, the number of depositary shares representing the
shares of preferred stock so redeemed. If fewer than all the depositary shares
are to be redeemed, the depositary shares to be redeemed will be selected by lot
or pro rata as may be determined by the depositary.
VOTING THE PREFERRED STOCK. Upon receipt of notice of any meeting at which
the holders of the preferred stock are entitled to vote, the depositary will
mail the information contained in such notice to the record holders of the
depositary shares underlying the preferred stock. Each record holder of the
depositary shares on the record date (which will be the same date as the record
date for the preferred stock) will be entitled to instruct the depositary as to
the exercise of the voting rights pertaining to the amount of the preferred
stock represented by such holder's depositary shares. The depositary will then
try, as far as practicable, to vote the number of shares of preferred stock
underlying those depositary shares in accordance with such instructions, and we
will agree to take all actions which may be deemed necessary by the depositary
to enable the depositary to do so. The depositary will not vote the shares of
preferred stock to the extent it does not receive specific instructions from the
holders of depositary shares underlying the preferred stock.
AMENDMENT AND TERMINATION OF THE DEPOSITARY AGREEMENT. The form of
depositary receipt evidencing the depositary shares and any provision of the
deposit agreement may at any time be amended by agreement between us and the
depositary. However, any amendment which materially and adversely alters the
rights of the holders of depositary shares will not be effective unless the
amendment has been approved by the holders of at least a majority of the
depositary shares then outstanding. The deposit agreement may be terminated by
us or by the depositary only if (a) all outstanding depositary shares have been
redeemed or (b) there has been a final distribution of the underlying preferred
stock in connection with our liquidation, dissolution or winding up and the
preferred stock has been distributed to the holders of depositary receipts.
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CHARGES OF DEPOSITARY. We will pay all transfer and other taxes and
governmental charges arising solely from the existence of the depositary
arrangements. We will also pay charges of the depositary in connection with the
initial deposit of the preferred stock and any redemption of the preferred
stock. Holders of depositary receipts will pay other transfer and other taxes
and governmental charges and those other charges, including a fee for the
withdrawal of shares of preferred stock upon surrender of depositary receipts,
as are expressly provided in the deposit agreement to be for their accounts.
MISCELLANEOUS. The depositary will forward to holders of depositary
receipts all reports and communications from us that we deliver to the
depositary and that we are required to furnish to the holders of the preferred
stock.
Neither we nor the depositary will be liable if either of us is prevented or
delayed by law or any circumstance beyond our control in performing our
respective obligations under the deposit agreement. Our obligations and those of
the depositary will be limited to performance in good faith of our respective
duties under the deposit agreement. Neither we nor the depositary will be
obligated to prosecute or defend any legal proceeding in respect of any
depositary shares or preferred stock unless satisfactory indemnity is furnished.
We and the depositary may rely upon written advice of counsel or accountants, or
upon information provided by persons presenting preferred stock for deposit,
holders of depositary receipts or other persons believed to be competent and on
documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY. The depositary may resign at any
time by delivering notice to us of its election to resign. We may remove the
depositary at any time. Any resignation or removal will take effect upon the
appointment of a successor depositary and its acceptance of the appointment. The
successor depositary must be appointed within 60 days after delivery of the
notice of resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and surplus
of at least $50,000,000.
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 AES, as
issuer, and either Bank One, National Association (formerly known as The First
National Bank of Chicago) or The Bank of New York, as trustee. The Senior
Subordinated Debt Securities will be issued under an indenture (the "Senior
Subordinated Debt Indenture") between AES, as issuer, and either Bank One,
National Association (formerly known as The First National Bank of Chicago) or
The Bank of New York, as trustee. The Junior Subordinated Debt Securities will
be issued under an indenture (the "Junior Subordinated Debt Indenture") between
AES, as issuer, and either Bank One, National Association (formerly known as The
First National Bank of Chicago) or The Bank of New York, as trustee. The Senior
Debt Indenture, the Senior Subordinated Debt Indenture and the Junior
Subordinated Debt Indenture are collectively referred to herein as the
"Indentures."
The Indentures 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 (the "Trust
Indenture Act"). Section references contained herein are applicable to each of
the Indentures. The following summaries of the Indentures are not complete.
Where reference is made to particular provisions of the Indentures, these
provisions, including definitions of certain terms, are incorporated by
reference. The Indentures are substantially identical except for provisions
relating to subordination.
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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 by us from time to time. The prospectus supplement will describe the
terms of any debt securities being offered (the "Offered Debt Securities")
including:
- the designation, aggregate principal amount and authorized denominations
of the Offered Debt Securities;
- the date or dates on which the Offered Debt Securities mature;
- the rate or rates per annum at which the Offered Debt Securities will bear
interest and the method of calculating interest rates, if any;
- the dates on which any interest will be payable and the record dates for
any interest payments;
- any mandatory or optional redemption terms or prepayment, conversion,
sinking fund or exchangeability provisions;
- the place where the principal of and interest on the Offered Debt
Securities will be payable;
- if other than denominations of $1,000 or multiples thereof, the
denominations in which the Offered Debt Securities will be issuable;
- whether the Offered Debt Securities will be issued in the form of Global
Securities (as defined below) or certificates;
- additional provisions, if any, relating to the defeasance of the Offered
Debt Securities;
- 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;
- 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;
- any applicable United States federal income tax consequences, including
whether and under what circumstances we 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 we will have
the option to redeem these Offered Debt Securities rather than pay the
additional amounts;
- the dates on which premium, if any, will be payable;
- our right, if any, to defer payment of interest and the maximum length of
any deferral period;
- any listing on a securities exchange;
- the initial public offering price and
- 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 may contain covenants
limiting:
- the incurrence of debt by us;
- the incurrence of debt by subsidiaries of us;
- the making of certain payments by us and our subsidiaries;
- subsidiary mergers;
- business activities of us and our subsidiaries;
- the issuance of preferred stock of subsidiaries;
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- asset dispositions;
- transactions with affiliates;
- liens and
- mergers and consolidations involving AES.
BOOK-ENTRY SYSTEMS
If so specified in any 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 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 us 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.
When a Global Security is issued 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 each Global Security to
the participants' accounts. The accounts to be credited will be designated by
the underwriters, dealers, or agents, if any. If debt securities are offered and
sold directly by us, we will designate the accounts to be credited. 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, the
participants' records. The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of the securities in definitive
form. These 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, we consider the Depositary or its nominee the sole owner or holder of
the debt securities represented by the Global Security for all purposes under
the Indenture under which the 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 the Global Security registered in their
names, and will not receive or be entitled to receive physical delivery of the
Debt Securities in definitive form and will not be considered the owners or
holders thereof under the Indenture under which these debt securities are
issued. Accordingly, each person owning a beneficial interest in a Global
Security must rely on the procedures of the Depositary. Persons who are not
participants must rely on the procedures of the participant through which they
own their interest. We understand that under existing industry practices, if we
request 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
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otherwise act upon the instruction of beneficial owners holding through them.
Payments of principal, 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 the Depositary or nominee, as the registered owner. None
of AES, the trustee or any other agent of us 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 the Global
Security or for maintaining, supervising, or reviewing any records relating to
such beneficial ownership interests.
We have 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. We expect 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 debt
securities hereby is exchangeable for debt securities in definitive form of like
tenor and terms if:
- The Depositary notifies us that it is unwilling or unable to continue as
depositary for the Global Security or if at any time the Depositary is no
longer eligible to be in good standing as a clearing agency registered
under the Exchange Act, and we do not appoint a successor depositary
within 90 days after we receive notice or become aware of the
ineligibility or
- We in our sole discretion at any time determine not to have all of the
debt securities represented in an offering of Offered Debt Securities by a
Global Security and notify the trustee thereof.
A Global Security exchangeable pursuant to the preceding sentence shall be
exchangeable for debt securities registered in the names and in the authorized
denominations as the Depositary for the 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 Euroclear and Clearstream, or with a nominee for that
depositary identified in the prospectus supplement relating to the 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.
SENIOR DEBT SECURITIES
The payment of principal, 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 equally with all unsecured and unsubordinated debt.
SUBORDINATION OF SENIOR SUBORDINATED DEBT SECURITIES
The payment of principal, 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 our creditors upon any
liquidation, dissolution, winding up, receivership, reorganization, assignment
for the benefit of creditors, marshaling of assets and liabilities or
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any bankruptcy, insolvency or similar proceedings, 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, premium, if
any, or interest on the Senior Subordinated Debt Securities.
No payments of principal, premium, if any, or interest in respect of the
Senior Subordinated Debt Securities may be made by us if a default in any
payment with respect to Senior Debt has occurred and is continuing. 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, no payments of principal, premium, if any, or
interest in respect of the Senior Subordinated Debt Securities may be made by us
for a period (the "Payment Blockage Period") beginning on the date of delivery
of written notice of the holders and ending 179 days thereafter (unless the
Payment Blockage Period shall be terminated by written notice to the trustee
from the holders of Designated Senior Debt or from an agent of these holders, or
the 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 beginning of any Payment
Blockage Period shall be the basis for the beginning of any subsequent Payment
Blockage Period by the holders of Designated Senior Debt, unless such event of
default shall have been cured or waived for a period of not less than 90 days.
Due to this 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 we may be unable to
meet fully our 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):
- all indebtedness for borrowed money;
- all obligations evidenced by bonds, debentures, notes or other similar
instruments;
- all obligations in respect of letters of credit or bankers' acceptance or
other similar instruments (or reimbursement obligations with respect
thereto);
- all obligations to pay the deferred purchase price of property or
services, except trade payables;
- all obligations as lessee under capitalized leases;
- all Debt of others secured by a lien on any asset of the person, whether
or not the Debt is assumed by that person; provided that, for purposes of
determining the amount of any Debt of the type described in this clause,
if recourse with respect to that Debt is limited to that asset, the amount
of that Debt shall be limited to the lesser of the fair market value of
the asset or the amount of the Debt;
- all Debt of others guaranteed by that person to the extent that Debt is
guaranteed by such person;
- all redeemable stock valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends; and,
- to the extent not otherwise included in this definition, all obligations
under currency agreements and interest rate agreements.
"Designated Senior Debt" is defined to mean:
- Debt under the Credit Agreement dated as of August 2, 1996 (the "Credit
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Agreement") among The AES Corporation, 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
- Debt constituting Senior Debt which, at the time of its determination
- has an aggregate principal amount of at least $30 million; and
- is specifically designated by us as "Designated Senior Debt."
"Senior Debt" is defined to mean the principal of, premium, if any, and
interest on all of our Debt whether created, incurred or assumed before, on or
after the date of the Senior Subordinated Debt Indenture; provided that Senior
Debt shall not include:
- our 8.875% Senior Subordinated Debentures due 2027, 8.50% Senior
Subordinated Notes due 2007, 8.375% Senior Subordinated Notes Due 2007 and
our 10.25% Senior Subordinated Notes due 2006 which rank equally with the
Senior Subordinated Debt Securities;
- our Debt to any affiliate;
- Debt of ours that, when incurred, and without respect to any election
under Section 1111(b) of Title 11, U.S. Code, was without recourse;
- any other Debt of ours 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
- our redeemable stock.
SUBORDINATION OF JUNIOR SUBORDINATED DEBT SECURITIES
The payment of principal, 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 our Senior and
Subordinated Debt.
Upon any payment or distribution of assets to our 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, 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, premium, if any, or interest on the Junior Subordinated Debt
Securities.
No payments of principal, premium, if any, or interest in respect of the
Junior Subordinated Debt Securities may be made by us if a default in any
payment with respect to Senior and Subordinated Debt has occurred and is
continuing. 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, no
payments on account of principal, premium, if any, or interest may be made by us
during a Payment Blockage Period in respect of these Junior Subordinated Debt
Securities (unless the Payment Blockage Period is terminated by written notice
to the trustee from the holders of Designated Senior and Subordinated Debt or
from an agent of such holders, or the 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 beginning of any Payment Blockage Period with respect to the
Designated Senior and Subordinated Debt initiating the Payment Blockage Period
shall be the basis for the beginning of any subsequent Payment Blockage Period
by the holders of such Designated Senior and Subordinated Debt, unless such
event of
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default shall have been cured or waived for a period of not less than 90
consecutive days.
Due to this 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 to the extent necessary to
pay the Debt in full, and we may be unable to meet fully our obligations with
respect to the Junior Subordinated Debt Securities.
"Designated Senior and Subordinated Debt" is defined to mean
- Debt under the Credit Agreement; and
- Debt constituting Senior and Subordinated Debt which, at the time of its
determination
- has an aggregate principal amount of at least $30 million; and
- is specifically designated in the instrument as "Designated Senior and
Subordinated Debt" by us.
"Senior and Subordinated Debt" is defined to mean the principal, premium, if
any, and interest on all of our Debt whether created, incurred or assumed
before, on or after the date of the Junior Subordinated Debt Indenture; provided
that Senior and Subordinated Debt shall not include
- our Debt to any affiliate;
- Debt of ours that, when incurred and without respect to any election under
Section 1111(b) of Title 11, U.S. Code, was without recourse;
- any other Debt of ours 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 equally with
all other debt securities and guarantees issued to an AES Trust or any
other trust, partnership or other entity affiliated with us which is a
financing vehicle of ours in connection with an issuance of preferred
securities by that financing entity and
- our redeemable stock.
EVENTS OF DEFAULT
An Event of Default, as defined in the Indentures and applicable to debt
securities issued thereunder, will occur with respect to the debt securities of
any series issued under the Indentures if:
1. we default in paying principal or premium, if any, on any debt security
when due, upon acceleration, redemption, mandatory repurchase, or
otherwise;
2. we default in paying interest on any debt security when it becomes due,
and the default continues for a period of 30 days;
3. we default in performing or breach any other covenant or agreement in
the Indentures and the default or breach continues for a period of 60
consecutive days after written notice by the trustee or by the holders
of 25% or more in aggregate principal amount of the debt securities of
all series issued under an Indenture;
4. a court having jurisdiction enters a decree or order for
- relief in respect of AES or any of our Material Subsidiaries in an
involuntary case under any applicable bankruptcy, insolvency, or other
similar law now or hereafter in effect;
- appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official of AES or any of our Material
Subsidiaries or for all or substantially all of the property and
assets of AES or any of our Material Subsidiaries or
- the winding up or liquidation of the affairs of AES or any of our
Material
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Subsidiaries and, in each case, such decree or order shall remain
unstayed and in effect for a period of 60 consecutive days;
5. AES or any of its Material Subsidiaries
- 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,
- consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator, or similar
official of AES or any of its Material Subsidiaries or for all or
substantially all of the property and assets of AES or any of its
Material Subsidiaries or
- effects any general assignment for the benefit of creditors; or
6. 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 (4) or (5) with respect to AES) occurs with respect to the debt
securities of any series and continues, then the trustee or the holders of at
least 25% in principal amount of the outstanding debt securities may, by written
notice to us, and the trustee at the request of at least 25% in principal amount
of the outstanding debt securities will, declare the principal, premium, if any,
and accrued interest on the outstanding debt securities to be immediately due
and payable. Upon a declaration of acceleration, the principal, premium, if any,
and accrued interest shall be immediately due and payable.
If an Event of Default specified in clause (4) or (5) above occurs with
respect to AES, the principal, premium, if any, and accrued interest on the debt
securities shall be immediately due and payable, subject to the prior payment in
full of all Senior Debt, without any declaration or other act on the part of the
trustee or any holder. The holders of at least a majority in principal amount of
the outstanding debt securities may, by written notice to us and to the trustee,
waive all past defaults with respect to debt securities and rescind and annul a
declaration of acceleration with respect to debt securities of that series and
its consequences if:
- all existing Events of Default applicable to debt securities of that
series, other than the nonpayment of the principal, premium, if any, and
interest on the debt securities that have become due solely by that
declaration of acceleration, have been cured or waived and
- 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 principal amount of the outstanding
debt securities 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 debt securities who did
not join in giving that direction and the trustee may take any other action it
deems proper that is not inconsistent with the direction received from holders
of outstanding debt securities. A holder may not pursue any remedy with respect
to the applicable Indenture or the debt securities of any series unless:
- the holder gives the trustee written notice of a continuing Event of
Default;
- the holders of at least 25% in principal amount of outstanding debt
securities make a written request to the trustee to pursue the remedy;
- the holder or holders offer and, if requested, provide the trustee
indemnity satisfactory to the trustee against any costs, liability or
expense;
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- the trustee does not comply with the request within 60 days after receipt
of the request and the offer of indemnity and
- with that 60-day period, the holders of at least a majority in principal
amount of the outstanding debt securities do not give the trustee a
direction that is inconsistent with the request.
However, these limitations do not apply to the right of any holder of a debt
security to receive payment of the principal, premium, if any, or interest on,
that debt security or to bring suit for the enforcement of any 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 of our officers certify, on or
before a date not more than four months after the end of each fiscal year, that
to the best of those officers' knowledge, we have fulfilled all our obligations
under the Indenture. We are also obligated to notify the trustee of any default
or defaults in the performance of any covenants or agreements under any of the
Indentures.
"Material Subsidiary" of a Person is defined to mean, as of any date, any
Subsidiary that would constitute a "significant subsidiary" within the meaning
of Article 1 of Regulation S-X of the Securities Act of 1933.
"Subsidiary" means, with respect to any Person, any corporation, association
or other business entity of which a majority of the capital stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are at the time
directly or indirectly owned by such Person.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
MODIFICATION AND WAIVER
The Indentures may be amended or supplemented without the consent of any
holder of debt securities to:
- cure ambiguities, defects, or inconsistencies;
- comply with the terms in "Restriction on Mergers, Consolidations and Sales
of Assets" described below;
- comply with any requirements of the Securities and Exchange Commission in
connection with the qualification of the Indentures under the Trust
Indenture Act of 1939;
- evidence and provide for the acceptance of appointment with respect to the
debt securities by a successor Trustee;
- establish the form or forms of debt securities of any series;
- provide for uncertificated debt securities and to make all appropriate
changes for such purpose; and
- make any change that does not adversely affect the rights of any holder.
Other modifications and amendments of the Indentures may be made with the
consent of the holders of not less than a majority in principal amount of the
outstanding debt securities of each series affected by the amendment (all such
series voting together as a single class). However, no modification or amendment
may, without the consent of each holder affected:
- change the stated maturity of the principal of, or any sinking fund
obligation or any installment of interest on, any debt security;
- reduce the principal amount, premium, if any, or interest on, any debt
security;
- reduce the above-stated percentage of outstanding debt securities, the
consent of whose holders is necessary to modify or
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amend that Indenture with respect to the debt securities of any series
issued under that Indenture;
- reduce the percentage or principal amount of outstanding debt securities,
the consent of whose holders is necessary for waiver of compliance with
certain provisions of that 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 an
Indenture, or which modifies the rights of holders of debt securities of that
series with respect to that 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 the Indenture or of the coupons appertaining to
those debt securities. It is not 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 is sufficient if the consent approves
the substance thereof. After an amendment, supplement, or waiver under this
section of an Indenture becomes effective, we will give to the holders affected
thereby a notice briefly describing the amendment, supplement, or waiver. We
will mail supplemental indentures to holders upon request. Any failure of us to
mail a notice, or any defect therein, will not affect the validity of any
supplemental indenture or waiver.
RESTRICTION ON MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
Pursuant to the Indentures, we may not consolidate with, merge with or into,
or transfer all or substantially all of our assets to any Person unless:
- AES shall be the continuing Person, or, if AES is not the continuing
Person, the Person formed by such consolidation or into which we merged or
to which properties and assets of ours are transferred is a solvent
corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia and expressly assumes in
writing all the obligations of ours under the Notes,
- immediately after giving effect to such transaction no Event of Default
has occurred and is continuing and
- other conditions as may be established in connection with the issuance of
the applicable Debt Securities are met.
DEFEASANCE AND DISCHARGE
The Indentures provide that we are deemed to have paid and will be
discharged from all obligations in respect of the debt securities of any series
on the 123rd day after the deposit referred to below has been made, and that the
provisions of an Indenture will no longer be in effect with respect to the debt
securities 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,
- we have deposited with the trustee, in trust, money and/or U.S. Government
Obligations that through the payment of interest and principal in respect
thereof, will provide money in an amount sufficient to pay the principal,
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 the Indenture and the applicable debt
securities,
- we have delivered to the trustee
- either
-- 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 exercise of
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our 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 the 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 the Indenture that a ruling is no longer
required or
-- a ruling directed to the trustee received from the Internal
Revenue Service to the same effect as the aforementioned opinion
of counsel and
- 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,
- immediately after giving effect to that deposit on a pro forma basis, no
Event of Default has occurred and is continuing on the date of the deposit
or during the period ending on the 123rd day after the date of the
deposit, and the deposit will not result in a breach or violation of, or
constitute a default under, any other agreement or instrument to which we
are a party or by which we are bound,
- we are not prohibited from making payments in respect of the applicable
debt securities by the subordination provisions contained in an Indenture
and
- if at that time the applicable debt securities are listed on a national
securities exchange, we have delivered to the trustee an opinion of
counsel to the effect that the debt securities will not be delisted as a
result of a deposit, defeasance and discharge.
As more fully described in the prospectus supplement, the Indentures also
provide for defeasance of certain covenants.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
We may issue Stock Purchase Contracts, which represent contracts obligating
holders to purchase from us 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 described 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 us to make periodic payments
to the holders of the stock purchase units or vice versa, and these 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 prospectus supplement will describe the terms of any stock purchase
contracts or stock purchase units. The description in the prospectus supplement
will not be complete and will be qualified by reference to the stock purchase
contracts, and, if applicable, additional arrangements, relating to the stock
purchase contracts or stock purchase units.
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DESCRIPTION OF SECURITIES WARRANTS
We may issue securities warrants for the purchase of debt securities,
preferred stock or common stock. Securities warrants may be issued independently
or together with debt securities, preferred stock or common stock and may be
attached to or separate from any offered securities. Each series of securities
warrants will be issued under a separate warrant agreement to be entered into
between us and a bank or trust company, as warrant agent. The securities warrant
agent will act solely as our agent in connection with the securities warrants
and will not assume any obligation or relationship of agency or trust for or
with any registered holders of securities warrants or beneficial owners of
securities warrants. This summary of some provisions of the securities warrants
is not complete. You should refer to the securities warrant agreement, including
the forms of securities warrant certificate presenting the securities warrants,
relating to the specific securities warrants being offered for the complete
terms of the securities warrant agreement and the securities warrants. That
securities warrant agreement, together with the terms of securities warrant
certificate and securities warrants, will be filed with the Securities and
Exchange Commission in connection with the offering of the specific securities
warrants.
The particular terms of any issue of securities warrants will be described
in the prospectus supplement relating to the issue. Those terms may include:
- the designation, aggregate principal amount, currencies, denominations and
terms of the series of debt securities purchasable upon exercise of
securities warrants to purchase debt securities and the price at which the
debt securities may be purchased upon exercise;
- the designation, number of shares, stated value and terms (including,
without limitation, liquidation, dividend, conversion and voting rights)
of the series of preferred stock purchasable upon exercise of securities
warrants to purchase shares of preferred stock and the price at which such
number of shares of preferred stock of such series may be purchased upon
such exercise;
- the number of shares of common stock purchasable upon the exercise of
securities warrants to purchase shares of common stock and the price at
which such number of shares of common stock may be purchased upon such
exercise;
- the date on which the right to exercise the securities warrants will
commence and the date on which the right will expire;
- United States Federal income tax consequences applicable to the securities
warrants; and
- any other terms of the securities warrants.
Securities warrants for the purchase of preferred stock and common stock
will be offered and exercisable for U.S. dollars only. Securities warrants will
be issued in registered form only. The exercise price for securities warrants
will be subject to adjustment in accordance with the applicable prospectus
supplement.
Each securities warrant will entitle its holder to purchase the principal
amount of debt securities or the number of shares of preferred stock or common
stock at the exercise price set forth in, or calculable as set forth in, the
applicable prospectus supplement. The exercise price may be adjusted upon the
occurrence of certain events as set forth in the prospectus supplement. After
the close of business on the expiration date, unexercised securities warrants
will become void. We will specify the place or places where, and the manner in
which, securities warrants may be exercised in the applicable prospectus
supplement.
Prior to the exercise of any securities warrants to purchase debt
securities, preferred stock or common stock, holders of the securities warrants
will not have any of the rights of holders of the debt securities, preferred
stock or
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common stock purchasable upon exercise, including:
- in the case of securities warrants for the purchase of debt securities,
the right to receive payments of principal of, any premium or interest on
the debt securities purchasable upon exercise or to enforce covenants in
the applicable indenture; or
- in the case of securities warrants for the purchase of preferred stock or
common stock, the right to vote or to receive any payments of dividends on
the preferred stock or common stock purchasable upon exercise.
PLAN OF DISTRIBUTION
We may sell the securities in any of three ways (or in any combination
thereof):
- through underwriters or dealers;
- directly to a limited number of purchasers or to a single purchaser; or
- through agents.
The prospectus supplement will set forth the terms of the offering of such
securities, including
- the name or names of any underwriters, dealers or agents and the
respective amounts of securities underwritten or purchased by each of
them,
- the initial public offering price of the securities and the proceeds to us
and any discounts, commissions or other items constituting compensation
from us and any discounts, commissions or concessions allowed or reallowed
or paid to dealers and any securities exchanges on which the 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 securities, the 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. The securities may be either offered to the public through underwriting
syndicates represented by managing underwriters, or directly by underwriters.
Unless otherwise described in the prospectus supplement, the obligations of the
underwriters to purchase the securities will be subject to certain conditions
and the underwriters will be obligated to purchase all of the securities if any
are purchased.
If a dealer is utilized in the sale of any offered securities, we will sell
those securities to the dealer, as principal. The dealer may then resell the
offered securities to the public at varying prices to be determined by the
dealer at the time of resale.
Offered Securities may be sold directly by us or through agents designated
by us 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 us 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.
We may authorize underwriters, dealers or agents to solicit offers by
certain purchasers to purchase the securities from us 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.
These 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 to indemnification by us against
certain civil liabilities, including liabilities under the
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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 us in
the ordinary course of business.
LEGAL MATTERS
The legality of the Securities offered hereby will be passed upon for us by
Davis Polk & Wardwell, New York, New York.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this prospectus by reference from our Annual Report on
Form 10-K have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and has been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
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