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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): November 30, 1999
THE AES CORPORATION
(exact name of registrant as specified in its charter)
DELAWARE 0-19281 54-1163725
(State of Incorporation) (Commission File No.) (IRS Employer Identification No.)
Registrant's telephone number, including area code:
(703) 522-1315
NOT APPLICABLE
(Former Name or Former Address, if changed since last report)
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This Amendment No. 1 to the Current Report of The AES Corporation (the
"Company") on Form 8-K dated November 30, 1999 relates to the Company's
completion of the acquisition of the Drax power station from National Power plc.
The purpose of this Amendment is to provide an audited balance sheet of the
assets acquired on November 30, 1999, the date of the acquisition, which was
impracticable to provide at the time of the initial filing of the Current Report
on Form 8-K.
ITEM 2. ACQUISITION OF ASSETS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
AES Drax, Ltd.
We have audited the accompanying consolidated balance sheet of AES Drax, Ltd.
(the Company) as of November 30, 1999. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the balance sheet
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the balance sheet. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material respects,
the financial position of the Company at November 30, 1999 in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
February 11, 2000
McLean, Virginia
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AES DRAX, LTD.
CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 1999
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<TABLE>
<CAPTION>
ASSETS $'000
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 18,789
Accounts receivable - net 71,601
Inventory 93,001
Prepaid expenses and other current assets 20,628
Deferred income taxes 15,673
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Total current assets 219,692
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PROPERTY, PLANT, AND EQUIPMENT - Net: 4,111,006
OTHER ASSETS:
Deferred financing costs 60,231
Debt service reserves 37,702
Other long-term assets 15,985
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Total other assets 113,918
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TOTAL $4,444,616
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 42,939
Accrued and other liabilities 118,564
Project financing debt - current portion 81,044
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Total current liabilities 242,547
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LONG-TERM LIABILITIES:
Project financing debt 2,396,631
Other long-term liabilities 27,331
Deferred income taxes 1,150,322
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Total long-term liabilities 3,574,284
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STOCKHOLDERS' EQUITY:
Common stock ($1.60 par value; 1,000,001 shares
authorized, issued and outstanding) 1,598
Additional paid-in capital 626,187
----------
Total stockholders' equity 627,785
----------
TOTAL $4,444,616
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</TABLE>
See notes to consolidated balance sheet.
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AES DRAX LIMITED
NOTES TO CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 1999
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1. GENERAL
AES Drax Limited ("AES Drax" or "the Company") was formed in 1999. AES
Drax is an indirect wholly owned subsidiary of The AES Corporation (AES).
On November 30, 1999, AES Drax acquired the Drax power station from
National Power plc. AES Drax acquired all of the shares of a special
purpose company, National Power Drax Limited, into which the assets of the
power station had been transferred. The purchase price approximated $3
billion.
The balance sheet reflects the purchase of National Power Drax Limited by
AES Drax. The consideration, consisting of cash paid, totaled $2.974
billion. In conjunction with the acquisition, the Company incurred
purchase accounting liabilities related to the following:
<TABLE>
<CAPTION>
($ 000s)
<S> <C>
Involuntary severance $ 7,139
Assumption of unfavorable contract 72,054
Deferred income taxes 1,134,649
----------
Total $1,213,842
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</TABLE>
As a result, the total consideration to include purchase accounting
adjustments is $4.187 billion. The net book value of the net assets
acquired approximated $2.016 billion. The excess of the total purchase
price over the net book value of the assets acquired has been allocated to
property, plant and equipment. The allocation of the purchase price to the
net assets acquired has been completed on a preliminary basis, subject to
adjustments resulting from the completion of valuation, engineering,
environmental and legal analyses. The allocation is expected to be
finalized within twelve months.
AES Drax has assumed the liability of National Power plc. under a
defined benefit pension plan covering the people of AES Drax. AES Drax
is currently in the process of computing the unfunded pension
obligation and the amount receivable from National Power related to
this obligation. Any difference between these amounts will result in an
adjustment to the purchase price allocation.
AES Drax was established for the purpose of owning and operating the Drax
power station. Prior to the acquisition date, AES Drax had no operations.
AES Drax has adopted December 31 as its fiscal year-end.
The acquisition was financed with approximately 80% debt (nonrecourse to
AES) and 20% equity. The debt is held by other wholly owned subsidiaries
of AES who used the proceeds to make equity contributions into AES Drax.
Since collateral for the debt consists of the assets and stock of AES
Drax, the acquisition-related debt has been pushed down to the balance
sheet of AES Drax.
AES Drax sells generated electricity in England and Wales through the
Electricity Pool, an open commodity market. All electricity generating
plants that export more than 50 megawatts are obliged to sell their output
through the Pool and receive payment according to the prevailing market
prices for electricity. AES Drax has also entered into a hedging
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contract with Eastern Power and Energy Trading Ltd. to sell approximately
30% of the energy it anticipates selling into the Pool over the next 15
years.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The consolidated balance sheet has been prepared
using accounting principles generally accepted in the United States of
America. The balance sheet has been translated into United States Dollars
at a rate of US$1.5985 = L1.
PRINCIPLES OF CONSOLIDATION - The consolidated balance sheet includes the
accounts of AES Drax and its wholly owned subsidiary AES Drax Power Ltd.
Because the stock and assets of AES Drax are collateral for acquisition
related loans of other AES entities used to fund the capitalization of AES
Drax, these loans have been pushed down to the balance sheet of AES Drax.
CASH AND CASH EQUIVALENTS - The Company considers cash on hand, deposits
in banks, and short-term marketable securities with original maturities of
three months or less in operating accounts to be cash and cash
equivalents.
INVENTORY - Inventory consists of coal and other raw materials used in
generating electricity, and spare parts, materials, and supplies.
Inventory is recorded at the acquisition price for coal and at National
Power's historical cost for other inventory items (which is estimated as
fair market value).
Inventory at November 30, 1999 consisted of the following:
<TABLE>
<CAPTION>
($000s)
<S> <C>
Coal and other raw materials $91,000
Spare parts, materials, and supplies 2,001
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Total $93,001
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</TABLE>
INVOLUNTARY SEVERANCE - The Company has a plan to involuntarily terminate
certain employees of the power station. The plan has identified the number
of employees and the severance package. The severance accrual approximates
$7.1 million and is included in current liabilities. The Company
anticipates paying all severance amounts within twelve months.
PROPERTY, PLANT, EQUIPMENT, AND RELATED ASSETS - The Company reviews its
long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amounts of such assets may not be
recoverable. Substantially all of the purchase price for the Drax power
station relates to the property, plant, equipment, and related assets.
Initially, property, plant, and equipment have been recorded based on the
historical cost (on a net book value basis) recorded by National Power,
adjusted to reflect the preliminary allocation of the excess of the
purchase price over the net book value of the assets acquired.
Electric generation assets are depreciated, using the straight line
method, over periods ranging from 30 to 40 years. Other property assets
are also depreciated using the straight line method over periods ranging
from 3 to 40 years. Maintenance and repairs are charged
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to expense as incurred. Plant spares are depreciated over the useful life
of the related components.
Property, plant, equipment, and related assets consisted of the following
at November 30, 1999:
<TABLE>
<CAPTION>
($000s)
<S> <C>
Land and buildings $ 432,446
Electric generation assets 3,645,046
Plant spares 33,269
Construction in progress 245
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Total $4,111,006
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</TABLE>
DEFERRED FINANCING COSTS - Financing costs are deferred and amortized over
the related financing period using the effective interest method.
INCOME TAXES - Deferred taxes have been recorded for basis differences for
assets and liabilities recorded for tax and accounting purposes.
USE OF ESTIMATES - The preparation of financial statements in conformity
with United States generally accepted accounting principles requires the
Company to make estimates and assumptions that affect reported amounts of
assets and liabilities, and disclosures of contingent assets and
liabilities, at the acquisition date.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying value of all financial
instruments at November 30, 1999 has been adjusted under purchase
accounting to equal their estimated fair value.
3. PROJECT FINANCING DEBT
Project financing debt at November 30, 1999 consisted of the following:
<TABLE>
<CAPTION>
($000s)
<S> <C>
Senior debt $2,078,050
Subordinated debt 399,625
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Total $2,477,675
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</TABLE>
Senior debt consists of a $2.078 billion nonrecourse syndicated bank loan
bearing interest at LIBOR plus mandatory costs plus a margin based on the
credit rating of the facility (8.03045% at November 30, 1999). Principal
repayments are made semi-annually over 15 years.
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Subordinated debt consists of a $399.6 million bridge loan which the
Company expects to refinance during the first quarter of 2000. The bridge
loan accrues interest semi-annually at an annual rate of 9%.
The senior debt is collateralized by a pledge of the assets and stock of
AES Drax Power Ltd. The bridge loan is collateralized by the capital stock
of the borrower, AES Drax Power Finance, Ltd., an intermediate holding
company of AES Drax.
The terms of the senior and subordinated debt contain certain restrictive
covenants. The covenants provide for, among other items, maintenance of
certain reserves and require that certain financial ratio tests are met.
The most restrictive of these covenants includes limitations on incurring
any additional debt and on the payment of any dividends to stockholders.
Included in other assets are cash and temporary cash investments, totaling
approximately $38 million, which are maintained in accordance with certain
covenants of the debt agreements.
Scheduled maturities of project financing debt at November 30, 1999 are:
<TABLE>
<CAPTION>
($000s)
<S> <C>
2000 $ 81,044
2001 118,449
2002 143,385
2003 143,385
2004 145,464
Thereafter 1,845,948
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Total $2,477,675
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</TABLE>
4. ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities at November 30, 1999 consisted of the
following:
<TABLE>
<CAPTION>
($000s)
<S> <C>
Involuntary severance $ 7,139
Income tax payable 9,689
Unfavorable contract 45,103
Inventory purchases 16,093
Contractual commitment 15,985
Other 24,555
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Total $118,564
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</TABLE>
5. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. These
items are stated at the actual tax rates that are expected to be in effect
when taxes are actually paid and recovered.
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Deferred tax assets and liabilities at November 30, 1999 are as follows:
<TABLE>
<CAPTION>
($000s)
<S> <C>
Differences between book and tax basis of property $ 1,158,521
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Total deferred tax liabilities 1,158,521
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Unfavorable coal contract (21,617)
Other (2,255)
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Total deferred tax asset (23,872)
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Net deferred tax liability $ 1,134,649
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</TABLE>
5. COMMITMENTS AND CONTINGENCIES
COAL PURCHASES - In connection with the acquisition of the Drax power
station, the Company assumed an unfavorable contract to purchase coal for
the plant. The agreement expires in September 2001. As of the acquisition
date, the contract price was above the market price and the Company
recorded a purchase accounting liability for approximately $72 million
related to the fulfillment of its obligation to purchase coal under this
agreement.
6. SUBSEQUENT EVENTS
On December 29, 1999, one of the station's six unit transformers
experienced a fire and has been shut down for repairs. It is expected to
be operational in the first quarter of 2000. The Company has casualty and
business interruption insurance in place which it believes will provide
for the recovery of the repair costs to the transformer and some recovery
of the resulting loss in revenue.
Subsequent to November 30, 1999, AES, through its wholly owned
subsidiaries completed its 20% equity contribution by making additional
equity capital contributions of $32 million.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned here unto duly authorized.
THE AES CORPORATION
Date: February 11, 2000 By /s/ William Luraschi
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(signing officer)
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INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in The AES Corporation's
Registration Statement No. 33-44498 on Form S-8, Registration Statement No.
33-49262 on Form S-8, Registration Statement No. 333-26225 on Form S-8,
Registration Statement No. 333-28883 on Form S-8, Registration Statement No.
333-28885 on Form S-8, Registration Statement No. 333-38535 on Form S-8,
Registration Statement No. 33-95046 on Form S-3 and Registration Statement
No. 333-81953 on Form S-3/A, of our report on the consolidated balance sheet
of AES Draw, Ltd. as of November 30, 1999, dated February 11, 2000, appearing
in this Current Report on Form 8-K/A of The AES Corporation.
DELOITTE & TOUCHE LLP
McLean, Virginia
February 11, 2000
