UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1996
Commission file number 0-23148
AES CHINA GENERATING CO. LTD.
(Exact name of registrant as specified in its charter)
BERMUDA 98-0152612
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
3/F(W), Golden Bridge Plaza
No. 1 (A) Jianguomenwai Avenue
Beijing 100020
People's Republic of China Not Applicable
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 8610-6508-9619
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $0.01 per share (NASDAQ National Market System)
(Title of each class)
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AMENDMENT 1
The undersigned registrant hereby amends, as set forth in the
pages attached hereto, its Annual Report on Form 10-K for the fiscal year ended
November 30, 1996:
The Registrant's Annual Report on Form 10-K for the fiscal
year ended November 30, 1996 is hereby amended to file (1) amended Item 7,
Discussion and Analysis of Financial Condition and Results of Operations, (2)
amended Item 14, Exhibits, Financial Statement Schedules and Reports on Form 8-K
and (3) revised version of Exhibit 23.1, Independent Auditors' Consent. Item 7,
Item 14, Exhibit 23.1 and Exhibit 27.1 are attached hereto.
<PAGE>
Item 7. Discussion and Analysis of Financial Condition and Results of
Operations.
The Company, directly and through its wholly owned offshore
subsidiaries, engages in the development, construction, operation and ownership
of electric power generating facilities in the PRC by means of its participation
in joint ventures. The Company currently owns interests in eight power plants
with an aggregate nameplate capacity of approximately 818 MW. See "Description
of the Current Projects." The Company is considering an investment in Yangcheng
Sun City, a project with an aggregate nameplate capacity of 2,100 MW, and is
also considering investments in two other power projects. See "Description of
the Potential Projects." After the Amalgamation, the Company's ability to invest
in projects will be substantially limited by the AES Debt Covenants.
Because of the significant magnitude and complexity of
constructing electric power plants in the PRC, construction periods generally
range from one to five years, depending on the size of the power plant, the
technology utilized and the location. A power plant does not produce revenues
until it is completed. If construction is delayed, revenues from the power plant
will be similarly delayed and perhaps, if the delay is extended, lost.
Additionally, the cost of developing power plants is substantial. The Company
capitalizes its development costs and seeks to recover them at the financial
closing of a power plant and by amortizing them over the life of the Joint
Venture. However, if a power plant under development is abandoned or not
financed and completed, such development costs may be unrecoverable.
The construction of an electric power generation plant,
including its ancillary facilities such as a transmission line or substation,
may be adversely affected by many factors commonly associated with the
construction of infrastructure projects, including shortages of equipment,
materials and labor, as well as labor disputes, adverse weather conditions,
natural disasters, accidents and other unforeseen circumstances and problems.
Any of these could cause completion delays and cost overruns. Delays in
obtaining requisite licenses, permits or approvals from government agencies or
authorities could also increase the cost or delay or prevent the commercial
operation of a project. Construction delays can result in the loss or delayed
receipt of revenues and, if completion is delayed beyond the completion date
specified in the power purchase contract, the payment of penalties.
Additionally, the failure to complete construction according to specifications
can result in reduced plant efficiency, higher operating costs and reduced or
delayed earnings.
The economics of any electric power project, once in
commercial operation, are primarily a function of the tariffs to be paid and the
quantity of electricity which is purchased. The Company shares in the net income
of the Joint Ventures for the duration of their terms. The Joint Ventures
generate revenues through the sale of electricity to power purchasers pursuant
to long-term power purchase contracts. These contracts require the power
purchaser to purchase and pay for minimum quantities of electricity annually or
to pay for such quantities if not purchased, in either case at prices determined
according to tariff formulas set forth in the power purchase contracts. These
tariff formulas are designed, based on the minimum take obligation of the power
purchaser, to be sufficient to pay the operating costs and financing costs of
the project and to enable the Company to realize a return on its investment.
While the relevant PRC pricing bureaus have committed to
utilize the Joint Ventures' formulas in establishing and adjusting tariffs,
there can be no assurance that the relevant pricing bureaus will calculate and
adjust tariffs in accordance with these tariff formulas. On April 1, 1996, a new
law governing the electric power sector in the PRC came into effect. The law
establishes, among other things, broad principles with respect to the
methodology of calculating and setting electric power tariffs. Detailed
regulations with respect to tariff calculation and tariff setting are expected
to be promulgated in the near future by the Central Government. There can be no
assurance that such regulations, when promulgated, will not adversely affect the
tariff structures which the Company's Joint Ventures have adopted.
Demand for power produced by a power plant is determined by
the demand for electric power in the area served by the power plant and the
degree to which the power plant is dispatched. If the plant is dispatched above
the minimum quantity required to be purchased under the power purchase contract,
these sales will generate additional income for the joint venture and enhance
its profitability. If demand is significantly below the minimum level, the joint
venture can look only to the credit of the power purchaser to pay the required
<PAGE>
amount. The Company focuses its development efforts on power plants that will
provide power to areas of high demand relative to existing and planned capacity.
Some regions or cities in the PRC have experienced slower
economic development in recent years. As a consequence, load growth in the PRC,
while generally increasing in the country overall, has exhibited uneven
development. Some of the Joint Ventures' power plants are designed to provide
peaking power. Such plants are dispatched only after base load power stations
have been brought on-line and reached maximum capacity. If electric power demand
proves less than expected in an area, additional peak or base load power may not
be required in the area or may be required at lower than expected levels. The
Company's Joint Ventures seek to mitigate this risk by entering into take-or-pay
power purchase arrangements and by entering into dispatch contracts with PRC
electric power dispatching authorities which obligate the dispatchers to
dispatch the power plants at their full capacity for a minimum number of hours
each year. There can be no assurance, however, that the Joint Ventures will not
experience difficulty in enforcing take or pay contract obligations or such
dispatch contract obligations if electric power in an area proves not to be
needed by the affected power purchaser and dispatcher.
The operation of an electric power generation plant may be
adversely affected by many factors such as the breakdown or failure of equipment
or processes, performance below expected levels of output or efficiency, labor
disputes, operational errors, natural disasters, and the need to comply with the
directions of the relevant government authorities, the dispatcher and power
purchaser of a power plant. In addition, such operation may be hampered by
insufficient or poor quality fuel caused by either inadequate supply or
transportation or arrangements therefor.
In all of its projects, the Company and its Joint Ventures are
relying on the reliability and creditworthiness of PRC entities such as its
partners, contractors, customers, suppliers, operators, guarantors, lenders and
others who are parties to agreements with the Company or its Joint Ventures.
While the Company believes that these counterparties have the ability to perform
and will perform their obligations, the reliability and creditworthiness of PRC
entities are difficult to ascertain. In most cases, the Company, in assessing
the reliability and credit standing of counterparties, is relying on financial
or other information provided to the Company or its Joint Ventures by such
parties or others, or from information and sources publicly available in the
PRC. The Company can offer no assurance that this information is accurate or
that these counterparties will meet their contractual obligations. The failure
of any one of these counterparties to fulfill its obligations to a Joint Venture
could have a substantial negative impact on such Joint Venture's operations.
In a number of cases, the Company's partner in a Joint Venture
controls or is affiliated with the power purchaser, contractor, operator and/or
fuel supplier of the project. It is possible, in these cases, that such
arrangements may result in one or more of these parties having a conflict of
interest in a project, which could have an adverse effect on the Joint Ventures'
operations.
The Company receives cash from the Joint Ventures in the form
of equity distributions and payments of principal and interest on shareholder
loans made by the Company or by its wholly owned subsidiaries to the Joint
Ventures. In a number of cases, the Company has, or anticipates having, priority
in the payment of dividends over the Chinese partners to the Joint Venture. The
Company's shareholder loans rank as general obligations of the Joint Ventures,
except in some instances in which third party financing has been secured or will
be secured for the Joint Venture. Under these circumstances the shareholder
loans generally are, or will be, subordinated to such third party debt.
The Company's revenue growth will depend in large part on the
Company's ability to bring the Joint Ventures' power plants currently under
construction into commercial operation. The Company's revenue growth will also
depend on its ability to secure financing and achieve financial closing,
construction completion and commercial operation of the Potential Projects and
other future project opportunities, subject to the limitations that would be
imposed by the AES Debt Covenants following the Amalgamation.
<PAGE>
Results of Operations
The discussion set forth below relates to the results of
operations and financial condition of the Company for, and as of the end of, the
years ended November 30, 1996 and 1995 and the year ended November 30, 1995 and
the period from December 7, 1993 (the date of the Company's establishment) to
November 30, 1994, and the following should be read in conjunction with the
Consolidated Financial Statements of the Company included elsewhere in this
Annual Report on Form 10-K.
Years ended November 30, 1996 and 1995
Revenues and Costs of Sales. Total revenues increased from
approximately $1.4 million to $9.2 million from 1995 to 1996. Costs of sales,
which include fuel, operations and maintenance expenses, depreciation and
amortization, increased from approximately $600,000 to $5.4 million from 1995 to
1996. The increases in revenues and costs of sales were due primarily to the
commencement of operations of the Wuxi Tin Hill project. The increase in
revenues generated in 1996 from the operations of the Wuxi Tin Hill project was
offset, in part, by a decrease in revenues generated pursuant to the payment of
construction delay fees paid by the contractor of the Cili Misty Mountain
project. The Company was entitled to construction delay payments from the
contractor through March 11, 1996 to compensate for the lost generation.
Development, Selling, General and Administrative Expenses.
Development, selling, general and administrative expenses decreased $5.8 million
from $9.3 million in 1995 to $3.5 million in 1996. The decrease was primarily
due to the capitalization of a higher proportion of development costs associated
with projects which have achieved financial closing or which have achieved
certain project-related milestones.
Interest Income. Interest income in 1996 and 1995 was
primarily generated by income from marketable securities purchased with the
proceeds received from the Company's 1994 initial public offering. Interest
income in 1996 decreased $4.1 million from $10.5 million to $6.4 million
compared with 1995. The decrease in interest income for 1996 was primarily due
to a lower average amount of funds available for marketable securities
investment due to capital investments in Joint Ventures, as well as the
repurchase of a portion of the outstanding shares of the Class A Common Stock.
Interest Expense. In 1996, interest expense of $1.1 million
related primarily to the interest on two minority shareholder loans to
Wuxi-AES-CAREC.
Amalgamation Cost. In 1996, amalgamation cost of $1.4 million
related to expenses incurred in pursuing the proposed Amalgamation with AES
announced in November 1996.
Year ended November 30, 1995 and the period from December 7,
1993 (the date of the Company's establishment) to November 30,
1994
Revenues and Costs of Sales. Total revenues increased from
approximately $38,000 to $1.4 million from 1994 to 1995. There were two
components to revenues generated in 1995: (i) revenue generated by electricity
sales from the Cili Misty Mountain project, which increased from approximately
$38,000 to $0.7 million from 1994 to 1995, and (ii) revenue generated pursuant
to the payment of construction delay fees of approximately $0.7 million paid by
the contractor of the Cili Misty Mountain project. Costs of sales increased from
approximately $68,000 to $0.6 million in 1995. The significant increases in
revenues generated and costs of sales in 1995 were primarily attributable to a
full year of operations for the Cili Misty Mountain project, commencing in
November 1994.
Development, Selling, General and Administrative Expenses.
Development, selling, general and administrative expenses increased by $2.3
million from $6.9 million in 1994 to $9.2 million in 1995. The increase in
development, selling, general and administrative expenses was primarily due to
the hiring of additional employees in 1994 and 1995 for the development of power
plants and the financial management of the Joint Ventures in China. The increase
was offset in part by capitalization of development costs associated with
projects which achieved certain project related milestones.
<PAGE>
Interest Income. Interest income increased approximately $3.9
million from $6.6 million to $10.5 million from 1994 to 1995. The increase was
due primarily to proceeds received from the Company's initial public offering
being available for investment in marketable securities for all of 1995, while
such proceeds were only available the previous year beginning in the second
quarter of 1994. In addition, interest rates on the Company's marketable
securities were somewhat higher during 1995. These factors were offset in part
by the Company's investment in Yangchun Fuyang in March and September 1995 and
Wuxi-AES-CAREC and Wuxi-AES-Zhonghang beginning in May 1995 and due to the
repurchase by the Company during 1995 of a portion of the outstanding shares of
Class A Common Stock.
Liquidity and Capital Resources
The Company's business has required substantial investment
associated with the development, acquisition and construction of electric power
plants and related facilities through its Joint Ventures. Since commencing
business, the Company had entered into commitments to invest a total of
approximately $259.6 million in the form of equity contributions and loans to
its Joint Ventures, of which $165.7 million had been invested as of January 31,
1997. If the Amalgamation is not consummated or the AES Debt Covenants otherwise
do not apply, the Company would expect to incur additional commitments in the
future in connection with the development, acquisition, construction, ownership
and operation of additional electric power plant and related facilities in
China.
The Company has financed its investments to date out of the
proceeds of its initial public offering in 1994. On December 19, 1996, the
Company completed the issuance of $180 million principal amount of the 2006
Notes. The proceeds, net of underwriting discounts and commissions and other
offering costs, were approximately $173.9 million. Pursuant to the terms of the
Indenture for the 2006 Notes, the Company was required to deposit approximately
$27.1 million in an interim reserve account to make interest payments on the
2006 Notes through June 15, 1998, and approximately $9.1 million in a debt
payment reserve. The Company intends to use the available proceeds of the 2006
Notes to fund investment commitments to the Current Projects, for general
corporate purposes and, to the extent funds are available and subject to the AES
Debt Covenants, for the Potential Projects and other future projects. Pending
such use, the Company will invest such proceeds in marketable securities that
are Permitted Investments as defined in the Indenture for the Notes. The
proceeds of the Notes together with the Company's existing cash and cash
equivalents are expected to be sufficient to enable it to fund its commitments
to the Current Projects together with its investment in a portion of one or more
of the Potential Projects or other future projects. In addition, the Company
expects to obtain additional funds from operating activities as more of its
electric power plants become operational. However, if the Amalgamation is
consummated and the AES Debt Covenants become applicable, the Company will be
restricted in its ability to invest cash flows from operating activities in its
projects. If the Amalgamation is not consummated or the AES Debt Covenants
otherwise do not apply, the Company may raise additional equity or debt, if
needed, to fund future investment opportunities, subject to its ability to raise
debt financing under certain covenants governing the 2006 Notes.
The Indenture for the 2006 Notes limits, among other things,
(i) the payment of dividends and redemption of equity interests by the Company
and its project companies; (ii) the redemption of subordinated indebtedness;
(iii) the making of certain investments; (iv) the incurrence by the Company and
its project companies of certain indebtedness; (v) the imposition by the Company
or any of its project companies of restrictions on the payment of dividends and
other actions; (vi) the creation by the Company or any of its project companies
of certain liens; (vii) certain transactions with affiliates of the Company;
(viii) certain asset sales and the incurrence of indebtedness to refinance
existing indebtedness; (ix) the issuance of stock by certain subsidiaries of the
Company; (x) any change in the nature of the Company's business; and (xi) the
merger or consolidation of the Company or its project companies with other
entities. The Indenture also obligates the Company and its project companies to
maintain certain insurance, obtain required government approvals, maintain good
title to their properties and operate and maintain their power generation
facilities in accordance with prudent industry operating and maintenance
practices. The events of default under the Indenture include, among other
things, (i) failure to pay interest within 30 days or failure to pay principal
at maturity or upon redemption or repurchase of the 2006 Notes; (ii) a default
<PAGE>
in the performance of covenants contained in the Indenture; (iii) a default
under indebtedness of the Company or any of its project companies in the amount
of $5 million or more (other than under the 2006 Notes or any non-recourse
debt); and (iv) a judgment against the Company or any of its project companies
in an amount in excess of $5 million.
The Company and its Joint Venture partners will need to raise
limited-recourse or non-recourse financing from third parties for certain large
projects. The Company believes such projects will be successfully developed only
if such debt is obtained. The Company's Nanpu Southern Delta project is one
example of a potential project that is likely to be completed only with
substantial third party financing.
The ability of Wuhu Shaoda Joint Venture to pay dividends or
distribute earnings to the Company is restricted by the terms of a bank facility
which has been entered into by the Joint Venture. See "Description of the
Current Projects -- Wuhu Grassy Lake." The declaration of equity distributions
by certain Joint Ventures in which the Company is not entitled to appoint a
majority of the board of directors may depend on the assent of the other
directors. The Company believes that neither of these restrictions is likely to
have a material adverse effect on its liquidity. Also, the ability of the Joint
Ventures to make payment in US dollars to lenders with respect to third party
debt, to make payment in US dollars to the Company with respect to its
shareholder loans to the Joint Ventures and to make equity distributions in US
dollars may be subject to certain constraints.
In the event that the Amalgamation is consummated, and any
holder of shares of Class A Common Stock exercises dissenter's rights under
Bermuda law, the Company would be obligated to pay any amounts awarded by a
Bermuda court, which would reduce the amounts available for investment in the
Current Projects or the Potential Projects.
The Company is not currently affected by the AES Debt
Covenants because it is not a subsidiary of AES. After the Amalgamation, the
Company will be subject to the AES Debt Covenants, including those contained in
the documents governing AES's 10 1/4% Subordinated Notes due 2006, 9 3/4% Senior
Subordinated Notes due 2000 and $425 million credit facility due 1999. If the
Amalgamation occurs, the material limitations applicable to the Company will
include those described below.
Under the AES Debt Covenants, AES may not permit any
subsidiary with a direct or indirect interest in a power generation facility (as
defined in the relevant agreements) to make any investment in, or to consolidate
or merge with, any other entity with a direct or indirect interest in any other
power generation facility or other business.
Immediately prior to the expected consummation of the
Amalgamation, the Company intends to contribute the net proceeds of the 2006
Notes remaining after the funding of an interim reserve account and a debt
service reserve account, along with certain of its existing funds, to its
subsidiaries to provide funding for potential projects and other future
projects, as well as additional funding for current projects. It is anticipated
that these amounts will not in the aggregate be more than approximately $95
million. Under the AES Debt Covenants, as a general matter, after exhaustion of
these amounts, no additional AES Chigen funds would be available to fund
investment in additional power projects or to fund the capital requirements and
construction cost overruns for current projects. As a consequence, opportunities
for investment, along with the associated risks, that would otherwise be
available to the Company may instead be taken by other investors, including AES.
Additional capital requirements for AES Chigen-invested projects would have to
be funded by other parties, including AES, which would result in a dilution of
the Company's interest in any such project. In addition, due to the application
of the AES Debt Covenants, cash flow generated from projects would not be
permitted to be invested in any other project. As a result, to the extent these
funds are not required to pay expenses incurred by the Company, they may
accumulate over time. The Company is permitted, pursuant to the terms of the
Indenture under which the 2006 Notes were issued, to pay a portion of such funds
as dividends, provided that the Company satisfies certain conditions.
In addition, under the AES Debt Covenants, investment could
not be made in a project directly by the Company (as opposed to through one of
its subsidiaries). Accordingly, prior to the Amalgamation, the Company intends
to transfer its interests in certain potential projects, such as Yangcheng Sun
City and Nanpu Southern Delta, to wholly owned subsidiaries of the Company. In
the case of each of these projects, the consent of the Company's partners in
<PAGE>
such project and the examination and approval of the relevant PRC government
authority are required to effect the transfers of the Company's interest. There
can be no assurance that such consents and approvals will be obtained in order
to permit investments to be made in these projects following the Amalgamation.
Under the AES Debt Covenants, the Company and its subsidiaries
would be effectively prohibited from incurring additional indebtedness (as
defined in the relevant instruments), except that a subsidiary would under some
circumstances be permitted to incur indebtedness for the purpose of financing a
power project as long as such indebtedness did not have recourse to AES, the
Company or another subsidiary.
Both the AES Debt Covenants and the covenants contained in the
Indenture for the 2006 Notes applicable to the Company require the repayment or
purchase of indebtedness under specified circumstances involving asset
dispositions. Insofar as separate repayments are required at the AES and the
Company levels with respect to a single asset sale, this covenant may tend to
cause the Company not to make an asset sale under circumstances where it
otherwise would.
Under the AES Debt Covenants, an AES subsidiary is not
permitted to make an investment in a project company following the occurrence of
a condition permitting the acceleration of indebtedness relating to the project
or any failure to pay such indebtedness at its final maturity.
Years ended November 30, 1996 and 1995
Cash from Operations. Net cash used in operating activities
totaled $1.5 million for 1996 as compared to $0.8 million used in operating
activities for 1995. The increase in 1996 resulted primarily from an increase in
net income due to the commencement of operations of Wuxi Tin Hill offset by an
adjustment of the provision for project development costs and a net reduction in
the components of working capital.
Cash from Investing Activities. Net cash used in investing
activities totaled $66.6 million during 1996 as compared to $22.8 million
provided by investing activities during 1995. The 1996 amount primarily
reflected the purchase of property, plant and equipment and other project
related investments of $101.5 million which was partially offset by cash of
$34.7 million provided by the maturity of short-term investments (net of
purchases). The 1995 amount primarily reflected cash provided by the maturity of
short-term investments (net of purchases) of $64.5 million. This amount was
partially offset by the cash used in purchases of property, plant and equipment
and other project related investments of $41.7 million.
Cash from Financing Activities. Net cash used in financing
activities aggregated $1.4 million during 1996 as compared to $8.2 million
provided by financing activities during 1995. During 1996, the Company
repurchased shares of its Class A Common Stock for $11.4 million which was
partially offset by $8.5 million of loans and contributions made to subsidiaries
by minority shareholders and net proceeds from notes payable of $1.9 million.
The 1995 amount reflected cash of $13.5 million provided to the Company's
subsidiaries by minority shareholders and $1.0 million from notes payable, less
$6.4 million in cash used for the repurchase of shares of Class A Common Stock.
Inflation
Over the last few years, the PRC economy has registered high
growth rates and high rates of inflation. In response, the PRC Government has
taken measures to curb inflation. These measures, along with other factors, have
reduced inflation in the PRC in 1996. However, there can be no assurance that
these austerity measures alone will succeed in controlling inflation, nor that
they will not result in severe dislocations in the PRC economy in general.
The Company will attempt, whenever possible, to take measures
to hedge its projects against the effects of inflation. Generally, this will be
done by structuring the tariff formulas in its power purchase contracts to pass
through increased costs resulting from inflation.
<PAGE>
Foreign Currency Exchange
The Company anticipates that its Joint Ventures will receive
nearly all of their revenues in Renminbi. A significant portion of this revenue
will need to be converted to other currencies, primarily US dollars, and
remitted outside of the PRC to meet foreign currency obligations to equipment
suppliers, to repay borrowings from foreign third party lenders and to make
payments to the Company in respect of equity distributions and shareholder
loans. However, the Renminbi is not freely convertible into US dollars. Although
the receipt of approvals to convert Renminbi into foreign currencies and to
remit foreign currencies outside of the PRC is routine for approved foreign
investment enterprises such as the Joint Ventures, there can be no assurance
that the PRC Government will continue to provide such approvals. Moreover, while
in the last two years foreign currency has been readily available, no assurance
can be given that the Joint Ventures will in the future be able to convert
sufficient amounts of Renminbi to foreign currency in China's foreign exchange
markets to meet their foreign currency obligations, or that the Joint Ventures
will freely be able to remit foreign currency abroad.
Prior to 1994, the Renminbi had experienced a significant net
devaluation against most major currencies, and during certain periods,
significant volatility in the market-based exchange rate. Since the beginning of
1994, the Renminbi to US dollar exchange rate has largely stabilized. While the
Joint Ventures will receive nearly all of their revenues in Renminbi, the
Company expects its Joint Ventures to have significant US dollar obligations
with respect to distributions to the Company. Under the terms of all of their
power purchase contracts, the Company's Joint Ventures are entitled to obtain
tariff adjustments for future Renminbi devaluation. While the Company expects
that its Joint Ventures will be able to pass on increased costs resulting from a
devaluation of the Renminbi by means of such tariff adjustments, no assurance
can be given that the Joint Ventures will be able to obtain approval for a
sufficient tariff adjustment.
Special Note Regarding Forward-Looking Statements
Certain statements in this Discussion and Analysis of
Financial Condition and Results of Operations and under the caption "Business"
and elsewhere in this Annual Report on Form 10-K constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 ("Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance and achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, the following: political and economic considerations,
restrictions on foreign currency convertibility and remittance abroad, exchange
rate fluctuations and developing legal system, in each case pertaining to the
PRC; holding company structure of the Company; regulation and restrictions;
tariffs; governmental approval processes; environmental matters; construction,
operating and fuel risks; load growth, dispatch and transmission constraints;
reliance on and creditworthiness of PRC counterparties; conflict of interest of
contracting parties; control by and reliance on AES; limitations resulting from
the Amalgamation and adherence to the AES principles; and other factors
referenced in this Annual Report on Form 10-K.
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Financial Statements, Financial Statement Schedules and Exhibits.
(1) The following financial statements of the Company
and its consolidated subsidiaries are attached to
this Annual Report on Form 10-K following the
signature page:
- Report of Independent Auditors.
- Consolidated Statements of Operations for
the fiscal years ended November 30, 1996 and
1995 and for the period from December 7,
1993 (inception) to November 30, 1994.
- Consolidated Balance Sheets as of November
30, 1996 and 1995.
- Consolidated Statements of Shareholders'
Equity for the fiscal years ended November
30, 1996 and 1995 and for the period from
December 7, 1993 (inception) to November 30,
1994.
- Consolidated Statements of Cash Flows for
the fiscal years ended November 30, 1996 and
1995 and for the period from December 7,
1993 (inception) to November 30, 1994.
- Notes to Consolidated Financial Statements
for the fiscal years ended November 30, 1996
and 1995 and for the period from December 7,
1993 (inception) to November 30, 1994.
(2) Financial Statement Schedules
- Schedule I - Condensed Financial
Information.
Schedules other than that listed above are
omitted as the information is either not
applicable, not required or has been
furnished in the financial statements or
notes thereto included in this Annual Report
on Form 10-K.
(3) Exhibits
1.1 Underwriting Agreement dated December 12,
1996 between the Company and Morgan Stanley
& Co. Incorporated and Donaldson, Lufkin &
Jenrette Securities Corporation.
3.1 Memorandum of Association of the Company is
incorporated herein by reference to Exhibit
3.1 to the Registration Statement on Form
S-1 (Registration No. 33-73668).
3.2 Bye-laws of the Company, as amended March
27, 1995, are incorporated herein by
reference to Exhibit 3.2 to the Company's
Quarterly Report on Form 10-Q for the
quarter ended February 28, 1995.
4.1 Indenture dated as of December 19, 1996
between the Company and Bankers Trust
Company, as Trustee.
4.2 Form of 2006 Note.
4.3 Security Agreement, dated as of December
19, 1996, among the Company, Bankers Trust
Company, as Trustee, and Bankers Trust
Company, as Collateral Agent.
10.1 Stock Purchase and Shareholder's Agreement,
dated as of December 29, 1993, between the
Company and AES is incorporated herein by
reference to Exhibit 10.1 to the
Registration Statement on Form S-1
(Registration No. 33-73668).
10.2 Project Services Agreement, dated as of
December 29, 1993, between the Company and
AES is incorporated herein by reference to
Exhibit 10.2 to the Registration Statement
on Form S-1 (Registration No. 33-73668).
10.3 Non-Competition and Non-Disclosure
Agreement, dated as of December 29, 1993 and
amended and restated as of February 1, 1994,
between the Company and AES is incorporated
herein by reference to Exhibit 10.3 to
Amendment No. 1 to the Registration
Statement on Form S-1 (Registration No.
33-73668).
10.4 Form of AES Affiliate's Agreement, dated
February 1, 1994, between the Company and
each Director and Executive Officer of AES
is incorporated herein by reference to
Exhibit 10.4 to Amendment No. 1 to the
Registration Statement on Form S-1
(Registration No. 33-73668).
10.5 Joint Venture Agreement to Establish
Yangcheng International Power Generating
Company, Limited, initialed draft dated
December 20, 1994, among North China
Electric Power Group Corporation, Jiangsu
Province Investment Corporation, Shanxi
Energy Enterprise (Group) Company, Shanxi
Provincial Power Company, Jiangsu Provincial
Power Company and the Company is
incorporated herein by reference to Exhibit
10.5 to the Annual Report on Form 10-K of
the Company for the fiscal year ended
November 30, 1994.
10.6 Assignment and Assumption dated as of
December 29, 1993 between AES and certain
subsidiaries of AES and the Company is
incorporated herein by reference to Exhibit
10.11 to the Registration Statement on Form
S-1 (Registration No. 33-73668).
10.7 AES China Generating Co. Ltd. Incentive
Stock Option Plan, as amended March 27,
1995, is incorporated herein by reference to
Exhibit 10.12 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
February 28, 1995.
10.8 Agreement to Establish a Sino-U.S.
Cooperative Joint Venture, Nanpu Thermal
Power Plant in Fujian Province, executed on
April 21, 1994 between Fujian Provincial
Electric Power Bureau and the Company is
incorporated herein by reference to Exhibit
10.13 to the Annual Report on Form 10-K of
the Company for the fiscal year ended
November 30, 1994.
10.9 Cooperative Joint Venture Contract for the
Establishment of Sichuan Fuling Aixi Power
Company Limited dated February 9, 1995
between Sichuan Fuling Banxi Colliery and
AES Tian Fu Power Company Limited is
incorporated herein by reference to Exhibit
10.17 to the Annual Report on Form 10-K of
the Company for the fiscal year ended
November 30, 1994.
10.10 Joint Venture Contract to Establish
Xiangci-AES Hydro Power Company Ltd. dated
July 21, 1994 between China Hunan Cili Power
Company and the Company is incorporated
herein by reference to Exhibit 10.19 to the
Annual Report on Form 10-K of the Company
for the fiscal year ended November 30, 1994.
10.11 Power Purchase Contract dated as of July 21,
1994 between China Hunan Cili Electric Power
Company and Xiangci-AES Hydro Power Company
Ltd. (effectiveness certified on September
9, 1994) is incorporated herein by reference
to Exhibit 10.20 to the Annual Report on
Form 10-K of the Company for the fiscal year
ended November 30, 1994.
10.12 Shareholders' Agreement to establish
AES-GITIC Power Development Company Limited,
a Bermuda limited liability company, dated
November 10, 1994 between the Company and
Guangdong International Trust and Investment
Corporation Hong Kong (Holdings) Limited is
incorporated herein by reference to Exhibit
10.21 to the Annual Report on Form 10-K of
the Company for the fiscal year ended
November 30, 1994.
10.13 Amendment to Article 15.03 of the
Shareholders' Agreement to establish
AES-GITIC Power Development Company Limited,
a Bermuda limited liability company, between
the Company and Guangdong International
Trust and Investment Corporation Hong Kong
(Holdings) Limited.
10.14 Cooperative Joint Venture Contract for the
establishment of Yangchun Fuyang Diesel
Engine Power Company Ltd. dated December 4,
1994 among Yangchun Municipal Power Supply
Company, Shenzhen Futian Gas Turbine Power
Company Ltd. and ABC Yangchun Company
Limited is incorporated herein by reference
to Exhibit 10.22 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
February 28, 1995.
10.15 Chengbao (Responsibility) Management
Contract for Yangchun Fuyang Diesel Engine
Power Company Ltd. dated December 31, 1994
between Yangchun Fuyang Diesel Engine Power
Company Ltd. and Yangchun Municipal Power
Supply Company and Supplemental Contract
dated March 6, 1995 are incorporated herein
by reference to Exhibit 10.23 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended February 28, 1995.
10.16 Power Purchase Contract dated May 24, 1995
between Wuxi County Sandianban and
Wuxi-AES-CAREC Gas Turbine Power Company
Limited is incorporated herein by reference
to Exhibit 10.24 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
May 31, 1995.
10.17 Cooperative Joint Venture Contract for the
establishment of Wuxi-AES-Zhonghang Power
Company Ltd. dated May 4, 1995 among Wuxi
Power Industry Company, China National
Aero-engine Corporation and the Company is
incorporated herein by reference to Exhibit
10.25 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31,
1995.
10.18 Cooperative Joint Venture Contract for the
establishment of Wuxi-AES-CAREC Gas Turbine
Power Company Ltd. dated May 4, 1995 among
Wuxi Power Industry Company, China National
Aero-engine Corporation and the Company is
incorporated herein by reference to Exhibit
10.26 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31,
1995.
10.19 Loan Contract dated May 24, 1995 between
AES-Chigen Company (L) Ltd. and
Wuxi-AES-Zhonghang Power Company Ltd. is
incorporated herein by reference to Exhibit
10.27 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31,
1995.
10.20 Loan Contract dated May 24, 1995 between
AES-Chigen Company (L) Ltd. and
Wuxi-AES-CAREC Gas Turbine Power Company
Ltd. is incorporated herein by reference to
Exhibit 10.28 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
May 31, 1995.
10.21* Power Purchase Contract dated December 11,
1995 among Power Supply Company of the
Fuling Prefecture of Sichuan Province,
Sichuan Fuling Grid Management Department
and Sichuan Fuling Aixi Power Company
Limited is incorporated herein by reference
to Exhibit 10.21 to the Annual Report on
Form 10-K of the Company for the fiscal year
ended November 30, 1995.
10.22 Addendum Number One of Cooperative Joint
Venture Contract to Establish Sichuan Fuling
Aixi Power Company Limited dated July 11,
1995 between Sichuan Fuling Banxi Colliery
and AES Tian Fu Power Company Limited is
incorporated herein by reference to Exhibit
10.22 to the Annual Report on Form 10-K of
the Company for the fiscal year ended
November 30, 1995.
10.23 Addendum Number Two of Cooperative Joint
Venture Contract to Establish Sichuan Fuling
Aixi Power Company Limited dated August 29,
1995 between Sichuan Fuling Banxi Colliery
and AES Tian Fu Power Company Limited is
incorporated herein by reference to Exhibit
10.23 to the Annual Report on Form 10-K of
the Company for the fiscal year ended
November 30, 1995.
10.24* Construction and Term Loan Agreement dated
December 21, 1995 between AES Tian Fu Power
Company (L) Ltd. and Sichuan Fuling Aixi
Power Generating Company Limited is
incorporated herein by reference to Exhibit
10.24 to the Annual Report on Form 10-K of
the Company for the fiscal year ended
November 30, 1995.
10.25 Cooperative Joint Venture Contract to
Establish Jiaozuo Wan Fang Power Company
Limited dated January 21, 1996 between
Jiaozuo Aluminum Mill and Jiaozuo Power
Partners, L.P. is incorporated herein by
reference to Exhibit 10.25 to the Annual
Report on Form 10-K of the Company for the
fiscal year ended November 30, 1995.
10.26* Cooperative Joint Venture Contract to
Establish Jiaozuo Wan Fang Power Company
Limited dated March 27, 1996 between Jiaozuo
Power Partners, L.P. and Jiaozuo Aluminum
Mill is incorporated herein by reference to
Exhibit 10.26 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
May 31, 1996.
10.27* Shareholder Loan Contract dated April 26,
1996 between Jiaozuo Wan Fang Power Company
Limited and Jiaozuo Aluminum Mill is
incorporated herein by reference to Exhibit
10.27 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31,
1996.
10.28* Shareholder Loan Contract dated April 26,
1996 between Jiaozuo Wan Fang Power Company
Limited and AES China Power Holding Co. (L),
Ltd. is incorporated herein by reference to
Exhibit 10.28 to Amendment No. 1 on Form
10-Q/A to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31,
1996.
10.29* Power Purchase and Sale Contract dated April
26, 1996 between Jiaozuo Wan Fang Power
Company Limited and Jiaozuo Aluminum Mill is
incorporated herein by reference to Exhibit
10.29 to Amendment No. 1 on Form 10-Q/A to
the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 1996.
10.30* Power Purchase and Sale Contract dated April
25, 1996 between Jiaozuo Wan Fang Power
Company Limited and Henan Electric Power
Corporation is incorporated herein by
reference to Exhibit 10.30 to Amendment No.
1 on Form 10-Q/A to the Company's Quarterly
Report on Form 10-Q for the quarter ended
May 31, 1996.
10.31 Assignment and Assumption Contract dated
April 26, 1996 between Jiaozuo Wan Fang
Power Company Limited and Jiaozuo Aluminum
Mill is incorporated herein by reference to
Exhibit 10.31 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
May 31, 1996.
10.32 Equity Joint Venture Contract dated February
12, 1996 among China Power International
Holdings Limited, AES China Holding Company
(L) Ltd., Anhui Liyuan Electric Power
Development Company and Wuhu Energy
Development Company is incorporated herein
by reference to Exhibit 10.32 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended August 31, 1996.
10.33* Operation & Offtake Contract dated July 5,
1996 between Wuhu Shaoda Electric Power
Development Company Limited and Anhui
Provincial Electric Power Corporation is
incorporated herein by reference to Exhibit
10.33 to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 31,
1996.
10.34 Undertaking and Subordination Deed dated
June 26, 1996 among AES China Holding
Company (L) Limited, Anhui Liyuan Electric
Power Development Company Limited, China
Power International Holding Limited, Wuhu
Energy Development Company, Wuhu Shaoda
Electric Power Development Company Limited
and CCIC Finance Limited is incorporated
herein by reference to Exhibit 10.34 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended August 31, 1996.
10.35 Junior Subordination Agreement among China
Power International Holding Limited, AES
China Holding Company (L) Limited, Anhui
Liyuan Electric Power Development Company
Limited, Wuhu Energy Development Company and
Wuhu Shaoda Electric Power Development
Company Limited is incorporated herein by
reference to Exhibit 10.35 to the Company's
Quarterly Report on Form 10-Q for the
quarter ended August 31, 1996.
10.36 Subordinated Insurance Assignment between
Wuhu Shaoda Electric Power Development
Company Limited and AES China Holdings
Company (L) Limited is incorporated herein
by reference to Exhibit 10.36 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended August 31, 1996.
10.37 Subordinated Borrower Charge Over Accounts
between Wuhu Shaoda Electric Power
Development Company Limited and AES China
Holdings Company (L) Limited is incorporated
herein by reference to Exhibit 10.37 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended August 31, 1996.
10.38 Subordinated Project Contracts Assignment
between Wuhu Shaoda Electric Power
Development Company Limited and AES China
Holdings Company (L) Limited is incorporated
herein by reference to Exhibit 10.38 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended August 31, 1996.
10.39 Subordinated Mortgage Contract between Wuhu
Shaoda Electric Power Development Company
Limited and AES China Holdings Company (L)
Limited is incorporated herein by reference
to Exhibit 10.39 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
August 31, 1996.
10.40* Cooperative Joint Venture Contract dated
March 18, 1996 by and among Anhui Liyuan
Electric Plower Development Company Ltd.,
Hefei Municipal Construction and Investment
Company and AES Anhui Power Company Ltd.
establishing Anhui Liyuan-AES Power Company
Ltd.
10.41* AES Loan Contract by and between Anhui
Liyuan-AES Power Company Limited and AES
Chigen Company (L), Ltd.
10.42* Cooperative Joint Venture Contract dated
March 18, 1996 by and among Anhui Liyuan
Electric Power Development Company Ltd.,
Hefei Municipal Construction and Investment
Company and AES Anhui Power Company Ltd.
establishing Hefei Zhongli Energy Company
Ltd.
10.43* AES Loan Contract by and between Hefei
Zhongli Energy Company Limited and AES
Chigen Company (L), Ltd.
10.44* Operation and Offtake Contract between
Anhui Provincial Electric Power Corporation,
Anhui Liyuan-AES Power Company Ltd. and
Hefei Zhongli Energy Company Ltd.
10.45* Cooperative Joint Venture Contract by and
among Chengdu Huaxi Electric Power (Group)
Shareholding Company Ltd., China National
Aero-engine Corporation and the Company.
10.46* Support Contract dated as of August 12,
1996 between AES Tian Fu Power Company (L)
Ltd. and Chengdu AES KAIHUA Gas Turbine
Power Co., Ltd.
10.47* Power Purchase Contract between Chengdu
Huaxi Electric Power (Group) Shareholding
Company Ltd. and Chengdu AES KAIHUA Gas
Turbine Power Co., Ltd.
10.48* Agreement of Amendment to the Cooperative
Joint Venture Contract and Articles of
Association of Chengdu AES KAIHUA Gas
Turbine Power Co., Ltd.
11.1 Statement of computation of earnings per
share.
21.1 List of Subsidiaries of the Company.
23.1 Independent Auditors' Consent.
25.1 Power of Attorney.
27.1 Financial Data Schedule.
99.1 Statement Re: Computation of Fixed Charge
Coverage Ratio
* The Company has requested confidential treatment for certain information
identified in this exhibit.
(b) Reports on Form 8-K.
No reports on Forms 8-K have been filed during the last quarter of
the Company's fiscal year ended November 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
AES CHINA GENERATING CO. LTD.
(Registrant)
Date: March 24, 1997 /s/ Jeffery A. Safford
-----------------------------
Jeffery A. Safford
Vice President
Chief Financial Officer and
Secretary
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS OF
AES CHINA GENERATING CO. LTD.
We have audited the accompanying consolidated balance sheets of AES
China Generating Co. Ltd. and subsidiaries as of November 30, 1996 and 1995, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the two years in the period ended November 30, 1996 and
for the period from December 7, 1993 (inception) to November 30, 1994. Our
audits also included the financial statement schedule listed at Item 14(a)(2).
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits 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 financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of AES China Generating Co.
Ltd. and subsidiaries as of November 30, 1996 and 1995, and the results of their
operations and cash flows for each of the two years in the period ended November
30, 1996 and for the period from December 7, 1993 (inception) to November 30,
1994 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
DELOITTE TOUCHE TOHMATSU
Hong Kong
January 31, 1997
F-1
<PAGE>
<TABLE>
<CAPTION>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
<S> <C> <C> <C>
Fiscal Period
Ended November 30,
-----------------------------------------------------
1996 1995 1994
------------ ------------- -------------
(in thousands, except per share amounts)
Revenues:
Electricity sales................................ $8,812 $702 $38
Construction delay fee........................... 400 680 --
------------ ------------- -------------
Total revenues........................... 9,212 1,382 38
Operating costs and expenses:
Costs of sales................................... 5,360 635 68
Development, selling, general and
administrative expenses.......................... 3,507 9,259 6,927
------------ ------------- -------------
Total operating costs and expenses....... 8,867 9,894 6,995
------------ ------------- -------------
Operating income/(loss)............................ 345 (8,512) (6,957)
Other income/(expense):
Interest income.................................. 6,360 10,529 6,589
Interest expense................................. (1,120) -- --
Equity in earnings of affiliates................ 663 206 --
Amalgamation cost ............................... (1,444) -- --
------------ ------------- -------------
Income/(loss) before income taxes and
minority interest................................ 4,804 2,223 (368)
Income taxes..................................... 387 -- --
Minority interest................................ 277 85 3
------------ ------------- -------------
Net income/(loss).................................. $4,140 $2,138 $(371)
------------
============= =============
Net income/(loss) per share........................ $ 0.26 $0.12 $(0.03)
============ ============= =============
Weighted average number of shares.................. 15,670 17,391 14,817
============ ============= =============
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
As of November 30,
----------------------------------------
1996 1995
---------------- ----------------
(in thousands)
ASSETS
Current Assets:
Cash and cash equivalents............................ $56,200 $125,684
Investments-- held-to-maturity....................... 8,995 41,609
Investments-- available-for-sale..................... -- 2,995
Accounts receivable from related parties............. 6,809 463
Interest receivable.................................. 286 293
Inventory............................................ 765 31
Prepaid expenses and other current assets............ 874 422
---------------- ----------------
Total current assets......................... 73,929 171,497
Property, Plant and Equipment:
Electric generating facilities...................... 64,185 6,468
Equipment, furniture and leasehold improvements...... 2,646 1,233
Accumulated depreciation and amortization............ (3,143) (665)
Construction in progress............................. 98,912 39,555
---------------- ----------------
Total property, plant and equipment, net..... 162,600 46,591
Other Assets:
Project development costs............................ 3,352 1,083
Investments in and advances to affiliates............ 33,202 2,566
Note receivable...................................... 6,626 7,500
Deposits and other assets............................ 989 634
---------------- ----------------
Total other assets........................... 44,169 11,783
================ ================
TOTAL........................................ $280,698 $229,871
================ ================
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
As of November 30,
-------------------------------------
1996 1995
--------------- --------------
(in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable-- The AES Corporation........................ $1,185 $214
Accounts payable.............................................. 2,199 537
Payable for repurchase of shares.............................. -- 10,011
Payable for investment purchase............................... -- 2,995
Accrued liabilities........................................... 2,618 1,430
Accrued liabilities for construction.......................... 4,259 --
Loans from minority shareholders-- current portion............ 1,365 351
Notes payable................................................. 2,861 1,000
--------------- --------------
Total current liabilities............................. 14,487 16,538
Long-Term Liabilities:
Deferred income taxes......................................... 387 --
Loans from minority shareholders.............................. 34,933 6,666
--------------- --------------
Total long-term liabilities........................... 35,320 6,666
Minority Interest............................................... 40,536 19,082
Commitments and Contingencies
Shareholders' Equity:
Class A common stock -- par value $0.01 per share, (50,000,000
shares authorized; 1996 -- 8,134,100 shares issued and
outstanding after deducting retirement of treasury stock;
1995-- 10,216,000 shares issued) ............................. 81 102
Class B common stock-- par value $0.01 per share, (50,000,000
shares authorized; 7,500,000 shares issued and outstanding)... 75 75
Additional paid-in capital.................................... 183,980 201,762
Retained earnings............................................. 5,907 1,767
Cumulative translation adjustment............................. 312 250
Treasury stock, at cost, (1,912,600 shares at
November 30, 1995)............................................ -- (16,371)
--------------- --------------
Total shareholders' equity............................ 190,355 187,585
=============== ==============
TOTAL................................................. $280,698 $229,871
=============== ==============
See notes to consolidated financial statements.
</TABLE>
F-4
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Class A Class B
Common Stock Common Stock
-------------------------- -----------------------------
Shares Amount Shares Amount
------------ ----------- ------------- ------------
(in thousands, except share amounts)
Balance December 7, 1993................. -- $ -- -- $ --
Issuance of Class B common stock......... -- -- 7,500,000 75
Issuance of Class A common stock......... 10,216,000 102 -- --
Foreign currency translation............. -- -- -- --
Net loss for the period.................. -- -- -- --
------------ ----------- ------------- ------------
Balance November 30, 1994................ 10,216,000 102 7,500,000 75
Purchase of treasury stock............... -- -- -- --
Foreign currency translation............. -- -- -- --
Net income for the year.................. -- -- -- --
------------ ----------- ------------- ------------
Balance November 30, 1995................ 10,216,000 102 7,500,000 75
Purchase of treasury stock............... -- -- -- --
Retirement of treasury stock ............ (2,081,900) (21) -- --
Foreign currency translation ............ -- -- -- --
Net income for the year ................. -- -- -- --
============ =========== ============= ============
Balance November 30, 1996 ............... 8,134,100 $ 81 7,500,000 $ 75
============ =========== ============= ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Continued)
<S> <C> <C> <C> <C> <C>
Retained
Additional Earnings/ Cumulative
Paid-In (Accumulated Translation Treasury Stock Shareholders'
Capital Deficit) Adjustment Shares Amount Equity
------------- ---------------- -------------- ------------- ------------- ---------------
(in thousands, except share amounts)
$ -- $ -- $ -- -- $ -- $ --
49,925 -- -- -- -- 50,000
151,837 -- -- -- -- 151,939
-- -- 16 -- -- 16
-- (371) -- -- -- (371)
------------- ---------------- -------------- ------------- ------------- ---------------
201,762 (371) 16 -- -- 201,584
-- -- -- (1,912,600) (16,371) (16,371)
-- -- 234 -- -- 234
-- 2,138 -- -- -- 2,138
------------- ---------------- -------------- ------------- ------------- ---------------
201,762 1,767 250 (1,912,600) (16,371) 187,585
-- -- -- (169,300) (1,432) (1,432)
(17,782) -- -- 2,081,900 17,803 --
-- -- 62 -- -- 62
-- 4,140 -- -- -- 4,140
============= ================ ============== ============= ============= ===============
$ 183,980 $ 5,907 $ 312 -- $ -- $ 190,355
============= ================ ============== ============= ============= ===============
See notes to consolidated financial statements.
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
Fiscal Period Ended November 30,
--------------------------------------------------------
1996 1995 1994
--------------- --------------- --------------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)......................................... $ 4,140 $ 2,138 $ (371)
Adjustments to reconcile net income/(loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization........................... 2,071 476 107
Provision for deferred taxes............................ 387 -- --
Minority interest....................................... 277 85 3
Equity in earnings of affiliates........................ (663) (206) --
Dividend from affiliate................................. 626 -- --
Decrease in provision for project development costs..... (2,298) -- --
Amortization of discount/premium on investments-net..... (2,038) (3,543) --
Changes in assets and liabilities:
Accounts receivable from related parties.............. (6,346) (422) (41)
Interest receivable................................... 7 683 (976)
Inventory, prepaid expenses and other current assets.. (1,186) (55) (398)
Accrued interest income from affiliates............... (333) -- --
Deposits.............................................. 28 (82) (309)
Accounts payable and accrued expenses................. 3,821 114 2,067
--------------- --------------- --------------
Net cash (used in) / provided by operating
activities......................................... (1,507) (812) 82
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock................ -- -- 201,939
Contributions and loans from minority shareholders........ 8,497 13,535 --
Repayment of loans from minority shareholders............. (270) -- --
Proceeds from notes payable............................... 2,861 1,000 --
Repayment of notes payable................................ (1,000) -- --
Repurchase of Class A common stock........................ (11,443) (6,360) --
--------------- --------------- --------------
Net cash (used in) / provided by financing
activities......................................... (1,355) 8,175 201,939
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and construction in progress........ (69,205) (29,544) (3,274)
Purchase of investments................................... -- -- (195,943)
Purchase of investments-held-to-maturity.................. (29,176) (154,630) --
Purchase of investments-available-for-sale................ (16,797) (14,557) --
Proceeds from sales/maturity of investments............... -- -- 93,369
Proceeds from the maturity of investments-held-to-maturity 63,656 219,086 --
Proceeds from the sales of investments-available-for-sale. 16,969 14,609 --
Investments in and advances to affiliates................. (22,990) (2,360) --
Recoupment of investment in affiliate..................... 216 -- --
Project development costs and other assets................ (2,669) (2,269) (687)
Investment in note receivable............................. (6,626) (7,500) --
--------------- --------------- --------------
Net cash (used in) / provided by investing
activities......................................... (66,622) 22,835 (106,535)
(Decrease ) /increase in cash and cash equivalents. (69,484) 30,198 95,486
CASH AND CASH EQUIVALENTS,
Beginning of year/period................................ 125,684 95,486 --
---------------- --------------- --------------
End of year/period...................................... $ 56,200 $ 125,684 $ 95,486
=============== =============== ==============
</TABLE>
F-7
<PAGE>
Supplemental disclosure:
In April 1996, the Company's joint venture partner in Jiaozuo Wan Fang
contributed capital and shareholder loans of $38.4 million in the form of land
use rights, construction-in-progress, equipment and receivables, net of accounts
payable.
In 1995, the Company's joint venture partners in Wuxi-AES-CAREC and
Wuxi-AES-Zhonghang contributed capital in the form of work-in-progress and
equipment of $5.3 million. At November 30, 1995, the Company had recorded the
purchase of investments and the purchase of treasury stock for $3.0 million and
$10.0 million, respectively. Payments for such purchases were made subsequent to
year-end.
In 1994, the Company's joint venture partner in Xiangci-AES contributed
capital in the form of work-in-progress and equipment of $7.2 million.
See notes to consolidated financial statements.
F-8
<PAGE>
AES CHINA GENERATING CO. LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AES China Generating Co. Ltd. ("AES Chigen" or the "Company"), a
Bermuda company, was incorporated on December 7, 1993, to develop, acquire,
finance, construct, own and manage electric power generation facilities in the
People's Republic of China (the "PRC"). The Company is an effectively controlled
affiliate of The AES Corporation ("AES"). As of November 30, 1996, AES owned
approximately 48% of the outstanding common stock of the Company. AES Chigen was
a development stage company in 1994.
As detailed in note 12, an Amended and Restated Agreement and Plan of
Amalgamation, dated as of November 12, 1996 has been signed which, if approved
by the Class A shareholders of the Company and subject to the satisfaction of
certain conditions, would result in AES owning the entire outstanding common
stock of the Company.
Fiscal Periods -- Statements of operations and cash flows are presented
for the period from December 7, 1993 (inception), to November 30, 1994 and for
the years ended November 30, 1995 and 1996.
Accounting Principles -- The Company has prepared its financial
statements on the basis of United States generally accepted accounting
principles.
Principles of Consolidation -- The consolidated financial statements of
the Company include the accounts of AES Chigen and its subsidiaries. Investments
in 50% or less owned affiliates over which the Company exercises significant
influence, but not control, are accounted for by the equity method. Intercompany
transactions and balances have been eliminated. In the second quarter of 1996, a
subsidiary of the Company acquired a controlling interest in Jiaozuo Wan Fang
Power Company Limited ("Jiaozuo Wan Fang") for cash which approximated the fair
value of net tangible assets acquired. The acquisition was accounted for as a
purchase.
The Company's joint venture partners in certain 50% or less owned
affiliates have guaranteed a minimum return on the Company's investment. The
Company recognizes such guaranteed return in excess of its equity in the
earnings of the affiliates to the extent it believes it is probable that the
guaranteed return will be realized.
Cash and Cash Equivalents -- The Company considers cash on hand,
deposits in banks, certificates of deposit and short-term marketable securities
with an original maturity of three months or less to be cash and cash
equivalents. Cash and cash equivalents consists mainly of short-term commercial
paper and US Treasury bills.
Investments -- Debt and equity securities which the Company has both
the positive intent and ability to hold to maturity are classified as
held-to-maturity and carried at amortized cost. Debt and equity securities which
might be sold prior to maturity are classified as available-for-sale and carried
at approximate fair value. Material unrealized gains and losses, if any, related
to available-for-sale investments, net of applicable taxes, are reflected in a
separate component of shareholders' equity. The Company determines the
appropriate classification of securities at the time of purchase and evaluates
such classification as of each balance sheet date. Transactions in investment
securities are accounted for on the trade date.
F-9
<PAGE>
Inventory -- Inventory, valued at lower of cost (principally weighted
average method) or market value, consists of spare parts, materials and fuel
supplies used for the production of electricity.
Property, Plant and Equipment -- Property, plant and equipment is
stated at cost including the cost of improvements. Depreciation, after
consideration of salvage value, is computed using the straight-line method over
the estimated composite lives of the assets, which range from 3 to 25 years.
Maintenance and repairs are charged to expense as incurred.
Construction in Progress -- Construction progress payments, engineering
costs, insurance costs, wages, interest and other costs relating to construction
in progress are capitalized. Construction in progress balances are transferred
to electric generating facilities when the related assets or group of assets are
ready for their intended use. Capitalized interest during construction was $3.2
million in 1996 and $0.3 million in 1995.
Revenue Recognition -- Revenues from the sale of electricity are
recorded based upon output delivered and capacity provided at rates as specified
under contract terms. Most of the Company's power plants rely primarily on one
power sales contract with a single customer for the majority of its revenues.
Two customers accounted for 87% and 13% of electricity sales revenues in 1996,
one customer accounted for 100% of electricity sales revenues in 1995 and 1994.
The failure of any customer to fulfill its contractual obligations could have a
substantial negative impact on AES Chigen's revenues. However, the Company does
not anticipate non-performance by the customers under these contracts. Fees for
construction delay paid by Cili Power Company, the contractor of Xiangci-AES
Hydro Power Company Ltd. ("Xiangci-AES"), to compensate the Company for lost
generation in respect of an expansion facility, are recognized as revenue when
earned.
Project Development Costs -- Project development costs generally
represent costs incurred after achieving certain project related milestones
prior to the acquisition of generating assets or the start of physical
construction. These costs represent amounts incurred for professional services,
salaries, permits, options and other related costs. These costs are transferred
to construction in progress during the construction phase and to electric
generating facilities after commencement of operations.
Income Taxes -- Income taxes are provided based on an asset and
liability approach for financial accounting and reporting of income taxes.
Deferred income tax liabilities or benefits are recorded to reflect the tax
consequences in future years of differences between the tax basis of assets and
liabilities and the financial reporting amounts at each year end. A valuation
allowance is recognized if it is more likely than not that some portion of, or
all of, a deferred tax asset will not be realized.
Net Income/(Loss) Per Share -- Net income/(loss) per share is based on
the weighted average number of shares of common stock and common stock
equivalents outstanding. Common stock equivalents result from dilutive stock
options and pension arrangements. The effect of dilutive stock options on net
income/(loss) per share is computed using the treasury stock method. The
weighted average number of shares used in computing net income/(loss) per share
was 15.7 million, 17.4 million and 14.8 million for 1996, 1995 and 1994. Primary
and fully diluted earnings per share are approximately the same.
Stock Options -- Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation" has been issued and will be
adopted by the Company in the year ended November 30, 1997. The statement
includes an optional new method for recognizing compensation expense for
employee stock options. The Company is continuing to evaluate whether or not it
will change to the new recognition method and, as a result, the Company has not
yet determined the effect of adopting SFAS No. 123.
Foreign Currency Translation -- The Company's financial reports are
prepared using the United States dollar as the reporting currency. For
subsidiaries whose functional currency is deemed to be other than the United
F-10
<PAGE>
States dollar, asset and liability accounts are translated at period-end rates
of exchange and revenue and expenses are translated at average exchange rates
prevailing during the year. Translation adjustments are included as a separate
component of shareholders' equity. The functional currency of all the Company's
current subsidiaries and affiliates is the Renminbi Yuan, the lawful currency of
the PRC ("Renminbi").
Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires the use of
estimates. Actual results could differ from those estimates.
Reclassifications -- Certain reclassifications have been made to prior
period amounts to conform with the 1996 presentation.
2. INVESTMENTS
At November 30, 1996 and 1995, the Company's investments were
classified as either held-to-maturity or available-for-sale. The amortized cost
and estimated fair value of the investments at November 30, 1996 and 1995
classified as held-to-maturity and available-for-sale were approximately the
same. All investments in debt securities had maturity dates within one year from
the balance sheet date. The short-term investments were invested as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
As of
November 30,
-----------------------------
1996 1995
------------ ------------
(in thousands)
Held-to-maturity
US Treasury and government agency securities....... $1,000 $32,617
Foreign certificates of deposit.................... -- 3,000
Commercial paper-discounted........................ 7,995 --
Floating rate notes................................ -- 5,992
============ ============
$8,995 $41,609
============ ============
Available-for-sale
US Treasury and government agency securities....... $-- $ 2,995
============ ============
</TABLE>
3. INVESTMENTS IN AND ADVANCES TO AFFILIATES
As of November 30, 1996 and 1995, the Company's investments in
and advances to affiliates included a 25% ownership interest in Yangchun
Fuyang Diesel Power Co. Ltd. ("Yangchun Fuyang").
As of November 30, 1996, the Company's investments in and advances to
affiliates also included a 25% ownership interest in, and loan to, Wuhu Shaoda
Electric Power Development Company Ltd. ("Wuhu Shaoda") as well as a 35%
ownership interest in, and loan to, Chengdu AES-Kaihua Gas Turbine Power Co.
Ltd. ("Chengdu AES-Kaihua").
F-11
<PAGE>
Summarized financial information for equity method affiliates on a
combined 100% basis is as follows (in thousands):
1996
------
Sales............................................ $ 5,950
Operating income................................. 2,226
Net income/(loss)................................ (407)
Current assets................................... 21,083
Non current assets............................... 124,904
Current liabilities.............................. 17,903
Non current liabilities.......................... 78,448
Stockholders' equity............................. 49,637
4. NOTE RECEIVABLE
As of November 30, 1996, Jiaozuo Wan Fang had provided loans in the
aggregate amount of $6.6 million through Zhongyuan Trust and Investment Company
to Henan Electric Power Corporation for the construction of interconnection and
transmission facilities. The loans are unsecured and bear interest at 15.3% per
annum. Interest on the loans is payable in arrears beginning in 1997 and the
principal is payable in 2004.
In August 1995, the Company provided a non-interest bearing loan in the
amount of $7.5 million to China Power International Holding Limited to develop
and invest in Wuhu Shaoda with a condition that the loan would convert to a
minority equity investment in the project upon obtaining approvals from the PRC
government. In August 1996, the loan successfully converted to a minority equity
investment in the project.
5. LOANS FROM MINORITY SHAREHOLDERS
As of November 30, 1996 and 1995, loans from minority shareholders
included debt provided by the Company's joint venture partners, Wuxi Power
Industry Company ("Wuxi Power") and China National Aero-Engine Corporation
("CAREC") to Wuxi-AES-CAREC Gas Turbine Power Co. Ltd. ("Wuxi-AES-CAREC") and
Wuxi-AES-Zhonghang Power Co. Ltd., ("Wuxi-AES-Zhonghang"). The loans are secured
by the land use rights and all assets of the joint venture companies and bear
interest at 13% per annum through the end of 1995 and 15% per annum thereafter.
Principal and interest are repayable in 20 semi-annual installments beginning
July 1, 1996.
As of November 30, 1996, loans from minority shareholders also included
a loan in the amount of $25.7 million from Jiaozuo Aluminum Mill to Jiaozuo Wan
Fang. The loan is unsecured and bears interest at 15.3% per annum and a service
fee to the lender of 3% per annum. The loan is divided into two tranches in
equal amounts. Interest on the first tranche of the loan is payable quarterly in
arrears following commercial operation of unit one. Interest on the second
tranche of the loan is payable quarterly in arrears following commercial
operation of unit two. Principal of the first tranche is repayable in 27
quarterly installments beginning January 1, 1998 and the principal of the second
tranche is payable in 25 quarterly installments beginning July 1, 1998.
F-12
<PAGE>
Scheduled maturities of loans from minority shareholders as of November
30, 1996 are as follows:
As of November 30,
1996
-------------------------
(in thousands)
1997.................................. $ 1,365
1998................................... 4,845
1999................................... 5,120
2000................................... 5,120
2001................................... 5,120
Thereafter............................. 14,728
=========================
$ 36,298
=========================
6. NOTES PAYABLE
At November 30, 1996, short-term bank loans totaling $0.4 million to
Xiangci-AES were outstanding. The loans are secured by the buildings of the
joint venture, bear interest from 10.7% to 14.5% per annum and are repayable
within one year. In addition, a short-term bank loan of $1.5 million to Anhui
Liyuan-AES Power Company Ltd. ("Anhui Liyuan-AES") was outstanding. The note is
unsecured, bears interest at the prevailing lending rates in the PRC which
ranged from 6.8125% to 7.49% per annum and is repayable within one year.
At November 30, 1995, notes payable consisted primarily of a short-term
bank loan to Wuxi-AES-CAREC. The note is guaranteed by Wuxi County Power Fuel
Company. In 1996, the short-term bank loan was renewed for another year with
interest at 12.1% per annum.
7. COMMITMENTS AND CONTINGENCIES
Subsidiaries of the Company entered into various long-term contracts
for the purchase of fuel subject to termination only in certain limited
circumstances. These contracts have remaining terms of 14 years to 27 years.
As of November 30, 1996, Xiangci-AES has approximately a $1.0 million
cash reserve to complete construction of the expansion facility. Upon completion
of the facility, any portion of this amount not utilized will be paid by
Xiangci-AES to Cili Power Company, as contractor.
In April 1996, Wuhu Shaoda entered into a $65.0 million term loan
facility ("the Term Loan") with a syndicate of lenders to finance the
construction of the power plant. The Company has guaranteed to the lenders of
the Term Loan certain obligations of its wholly owned subsidiary under the joint
venture contract, including an obligation to fund an $18.0 million subordinated
loan and certain other liabilities which, in the aggregate, do not exceed $6.0
million.
Wuhu Shaoda had entered into a lease contract with Wuhu Energy
Development Company, one of the PRC partners in the joint venture, for land use
rights of the site over its entire term of operations at an annual lease fee of
$0.2 million. As of November 30, 1996, total commitment under the land use
rights lease contract amounted to $5.3 million.
F-13
<PAGE>
Since the commencement of operations, the Company has entered into
commitments to invest a total of approximately $259.6 million in the form of
equity contributions and loans to its joint ventures. As of November 30, 1996,
the total outstanding commitment to its joint ventures was $116.8 million.
The Company has initialed or signed several joint venture contracts
which become effective under Chinese law following receipt of certain government
approvals. These joint venture contracts are also subject to the satisfaction or
waiver of certain conditions precedent specified in the joint venture contracts.
Until the appropriate governmental approvals have been obtained and all
conditions precedent have been satisfied or waived, the Company regards the
initialing or signing of a joint venture contract as being a preliminary step in
the development of an electric power generation project and therefore does not
recognize amounts under these joint venture contracts as commitments.
8. SHAREHOLDERS' EQUITY
Class A Common Stock
On March 2, 1994, the Company issued 10,000,000 shares of Class A
common stock in a public offering. On April 4, 1994, the underwriters for the
offering exercised a portion of the over-allotment option granted to them in
connection with the initial public offering and the Company sold an additional
216,000 shares of Class A common stock. In connection with the offering, the
Company registered its Class A common stock with the United States Securities
and Exchange Commission and its shares were approved for quotation on the
National Association of Securities Dealers Automated Quotation National Market
System. The net proceeds of the offering amounted to $151.9 million.
The holders of AES Chigen's Class A common stock are entitled, voting
as a class, to elect one-half of the Board of Directors of the Company. However,
the voting rights of certain holders, if any, of 20% or more of the Class A
shares will be restricted in accordance with the Company's Bye-laws.
The holders of Class A common stock had a one-time right to require the
Company to repurchase their respective Class A shares if by February 23, 1997
the Company had not invested or entered into binding commitments to invest at
least $50.0 million in one or more electric power generation projects in the PRC
on which construction had commenced. The Company has entered into such
commitments and therefore the Class A shareholders no longer have the right to
require repurchase. As a result, the Class A common stock has been reclassified
into shareholders' equity.
Class B Common Stock
On December 29, 1993, AES, pursuant to a Stock Purchase and
Shareholder's Agreement (the "Stock Purchase Agreement") between AES and the
Company, purchased 7,500,000 shares of Class B common stock.
The net proceeds of the sale amounted to $50.0 million.
The holders of Class B common stock are entitled, voting as a class, to
elect one-half of the Board of Directors of the Company. As of November 30,
1996, 1995 and 1994, there were 7,500,000 shares of Class B common stock
outstanding, all of which were owned by AES.
Under the Stock Purchase Agreement, AES agreed that it would not
transfer any Class B shares before February 23, 1996. AES also agreed not to
dispose of more than 3,750,000 Class B shares plus 50% of any Class B shares
acquired subsequent to AES's initial purchase of Class B common stock (excluding
certain shares issued upon reinvestment by AES of performance fees received by
it under the Services Agreement (see Note 9) between the Company and AES) until
the earlier of the tenth anniversary of the effective date of the offering and
the termination of the Services Agreement. Upon the sale or transfer by AES of
any Class B common stock, such shares convert to Class A common stock. Upon the
sale or transfer by AES in one or more transactions of more than approximately
50% of the Class B common stock acquired by AES, the Class B common stock will
convert into Class A common stock and the right of AES to elect one-half of the
Board of Directors of the Company will terminate.
F-14
<PAGE>
The Stock Purchase Agreement also provides AES with a preemptive right to
purchase additional Class B common stock in the event the Company issues
additional Class A common stock. AES also has agreed not to acquire any Class A
common stock until such time as all of the shares of Class B common stock have
been converted to shares of Class A common stock.
Treasury Stock
On April 4, 1995, the Company announced a plan to repurchase up to an
additional 2,042,000 shares of its Class A common stock. Prior to the
announcement of the plan, the Company had purchased 168,000 shares of Class A
common stock through unsolicited block transactions. As of November 30, 1995,
the Company had repurchased a total of 1,912,600 shares of its Class A common
stock. During the year ended November 30, 1996, the Company repurchased a
further 169,300 shares of Class A common stock. The aggregate repurchase of
shares approximates 20% of the shares of Class A common stock issued and were
acquired at an average price of $8.55 per share. As of November 30, 1996, the
Company had retired all the shares of treasury stock.
Transfer of Funds from Subsidiaries and Affiliates
Nearly all of the monetary assets of the Company's subsidiaries and 50%
or less owned affiliates are denominated in Renminbi. The conversion of Renminbi
into US dollars and the remittance of US dollars abroad require PRC government
approvals. At November 30, 1996, the Company's share of the net assets of its
subsidiaries in the PRC amounted to $98.8 million. In addition, the ability of
Wuhu Shaoda to pay dividends to the Company is subject to certain restrictions
under the terms of a bank facility which has been entered into by the joint
venture. No dividend distributions by the joint venture are permitted if certain
debt service coverage ratios are not met.
Stock Options
In 1994, the Company adopted the AES China Generating Co. Ltd.
Incentive Stock Option Plan (the "Plan"). In March 1995, the Company's
shareholders approved an increase in the total number of shares available for
issuance upon exercise of options granted to employees from 875,000 to 2,000,000
shares of Class B common stock and an increase in the maximum number of shares
issuable upon exercise of options that can be granted to an individual from
250,000 to 500,000 shares of Class B common stock. At November 30, 1996, there
were 589,440 shares reserved for future grants under the Plan. A summary of
stock option activity for the years ended November 30, 1995 and 1996 and for the
period from December 7, 1993 (inception) through November 30, 1994 is as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended
November 30, Period Ended
--------------------------------- November 30,
1996 1995 1994
-------------- --------------- -----------------
(in shares)
Outstanding at beginning of year/period......... 1,451,059 752,500 --
Exercised during the year/period................ -- -- --
Forfeited during the year/period................ (290,388) -- --
Granted during the year/period (from $8.50
to $16.00) .................................. 247,889 698,559 752,500
-------------- --------------- -----------------
Outstanding -- end of year/period (from $8.50
to $16.00)................................... 1,408,560 1,451,059 752,500
============== =============== =================
Eligible for exercise-- end of year/period...... 379,112 150,500 --
============== =============== =================
</TABLE>
F-15
<PAGE>
All options granted under the Plan have an exercise price equal to 100%
of the market price of the Class A common stock at the date the option was
granted. For the options granted in 1994 and 1995, options granted expire in ten
years from the date of grant and generally become eligible for exercise in
installments of 20% at the end of each of the first five years following the
grant date. Certain options granted during 1995 become eligible for exercise in
installments of 20% at the end of one year following the date of grant with an
additional 20% of the shares vesting on the later of each of the second, third,
fourth and fifth anniversaries of the date of grant or the date the market price
reaches, for a sixty-day consecutive period, a price per share of $15.00,
$20.00, $25.00 and $30.00, respectively. A majority of options granted in 1996
become eligible for exercise over a two year period.
9. RELATED PARTIES
AES Chigen has entered into a Project Services Agreement with AES (the
"Services Agreement") whereby AES will exclusively provide development,
construction management and operations services to the Company. The Services
Agreement has an initial term of five years commencing December 1993 with three
five-year renewal terms. Management fees under the Services Agreement totaled
$0.3 million, $0.1 million and $0.4 million for the years ended November 30,
1996 and 1995 and for the period ended November 30, 1994, respectively. The
Services Agreement provides that for the first five years that the agreement is
in effect AES will invest the after-tax proceeds of certain performance fees in
additional shares of Class B common stock.
The Company has entered into a Non-Competition and Non-Disclosure
Agreement with AES which provides that AES will not compete with the Company in
China to develop, acquire, construct, own, or operate electric power generation
facilities for a period of ten years beginning December 1993, or for the period
ending three years after the Services Agreement is terminated, whichever is
longer. The Company has agreed not to compete with AES in the remaining parts of
Asia with respect to electric power generation activities.
Pursuant to the service agreement between Wuxi-AES Zhonghang and
Wuxi-AES-CAREC, and the construction service agreement between Wuxi-AES-CAREC,
CAREC and Wuxi Power Industry Company ("Wuxi Power"), CAREC and Wuxi Power are
responsible for the construction of the combined cycle plant on a cost-plus
basis. The amounts paid to CAREC and Wuxi Power for construction during 1996 and
1995 were approximately $0.7 million and $0.2 million, respectively.
As of November 30, 1996, accounts receivable from related parties
consisted primarily of amounts due from Cili Power Company, for sale of
electricity and for the payment of construction delay fees, amount due from the
Xishan City Electricity Management Office, an associated company of the joint
venture partner in Wuxi-AES-CAREC, for sale of electricity and a short-term loan
to a Chinese partner in Wuxi-AES-CAREC bearing interest at 12.1% per annum.
As of November 30, 1995, accounts receivable from related parties
represented amounts due from Cili Power Company, a joint venture partner in
Xiangci-AES, for sale of electricity.
10. INCOME TAXES
The Company's PRC joint ventures are entitled to a two-year tax
exemption from state and local income taxes commencing from the first profitable
year of operations, after taking into account any losses brought forward from
prior years, followed by a 50% reduction in tax rates for the next three years
("tax holidays"). No PRC income tax was incurred during 1996, 1995 and 1994 as
the joint ventures were either within the exemption period of the tax holidays
or had not yet commenced commercial operations.
As of November 30, 1996, a deferred tax liability amounting to
approximately $0.4 million was provided for, mainly for timing differences
arising from deferred expenses and accelerated depreciation of property, plant
and equipment under the PRC tax rules.
F-16
<PAGE>
As of November 30, 1994 and 1995, there were no material temporary
differences between recognition of transactions for tax reporting purposes and
financial reporting purposes, therefore, no provision for deferred tax was
recorded.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of financial instruments, including cash and cash
equivalents, investments, note receivable and payables for repurchase of shares
and investment purchases, were equal to their approximate fair values as of
November 30, 1996 and 1995 because of the relatively short maturities of these
investments. As of November 30, 1996 and 1995, the carrying value of loans from
minority shareholders and the note payable approximated fair value determined by
the estimated discount rate a prospective seller would pay to a credit-worthy
third party to assume the obligation.
12. SUBSEQUENT EVENTS
The Company and AES have entered into an Amended and Restated Agreement
and Plan of Amalgamation, dated as of November 12, 1996, pursuant to which a
wholly owned subsidiary of AES would amalgamate (the "Amalgamation") with the
Company and each share of the Company's Class A common stock outstanding prior
to the Amalgamation will thereafter represent the right to receive shares of AES
common stock. The Agreement and Plan of Amalgamation is subject to various
conditions, including the approval of the holders of the Class A common Stock of
the Company. In the Amalgamation, all outstanding options to acquire Class B
common Stock in the Company under the Company's Incentive Stock Option Plan
would be converted into options to acquire shares of AES common stock.
On December 19, 1996 the Company completed a $180.0 million public
offering of its notes and received net proceeds of approximately $173.9 million.
The notes mature on December 15, 2006 and bear interest at the rate of 10 1/8%
per annum. Interest is payable on June 15 and December 15 of each year,
commencing on June 15, 1997. The notes rank at least pari passu in right of
payment with all existing and future senior unsecured indebtedness of the
Company. The holders of the notes have a claim to amounts on deposit in certain
collateral accounts that is prior to the claims of other creditors of the
Company. The notes contain certain restrictions on the payment of dividends,
redemption of equity interests and the making of certain investments, among
other things.
F-17
<PAGE>
SCHEDULE I
AES CHINA GENERATING CO. LTD.
CONDENSED FINANCIAL INFORMATION
STATEMENTS OF UNCONSOLIDATED OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal Period
Ended November 30,
-----------------------------------------------------
1996 1995 1994
------------ ------------- -------------
Revenues $ 400 $ 680 $ --
Equity in earnings of subsidiaries 3,724 465 5
------------ ------------- -------------
Total revenues 4,124 1,145 5
------------ ------------- -------------
Operating costs and expenses:
Costs of sales and services 557 524 37
Selling, general and administrative expenses 3,463 8,616 6,927
------------ ------------- -------------
Total operating costs and expenses 4,020 9,140 6,964
------------ ------------- -------------
Operating Income/ (loss) 104 (7,995) (6,959)
Amalgamation cost (1,444) -- --
Interest income, net 5,480 10,133 6,588
------------ ------------- -------------
Income/(loss) before taxes 4,140 2,138 (371)
Income Taxes -- -- --
============ ============= =============
Net income/(loss) $ 4,140 $ 2,138 $ (371)
============ ============= =============
</TABLE>
See notes to Schedule 1
S-1
<PAGE>
AES CHINA GENERATING CO. LTD.
CONDENSED FINANCIAL INFORMATION
UNCONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
As of November 30,
----------------------------------------
1996 1995
---------------- ----------------
ASSETS
Current Assets:
Cash and cash equivalents $ 26,190 $ 109,713
Investments-- held-to-maturity 8,995 41,609
Investments-- available-for-sale -- 2,995
Accounts receivable from related parties 1,231 320
Prepaid expenses and other current assets 630 978
---------------- ----------------
Total current assets 37,046 155,615
Investment in subsidiaries (on the equity method) 153,024 37,240
Office Equipment:
Cost 1,220 1,003
Accumulated depreciation (653) (355)
---------------- ----------------
Total property, plant and equipment, net 567 648
Other Assets:
Project development costs 3,352 1,083
Note receivable -- 7,500
Deposits and other assets 972 633
---------------- ----------------
Total other assets 4,324 9,216
---------------- ----------------
TOTAL $ 194,961 $ 202,719
================ ================
</TABLE>
See notes to Schedule 1
S-2
<PAGE>
AES CHINA GENERATING CO. LTD.
CONDENSED FINANCIAL INFORMATION
UNCONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
As of November 30,
-------------------------------------
1996 1995
--------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable-- The AES Corporation $ 1,185 $ 214
Accounts payable 1,114 193
Payable for repurchase of shares -- 10,011
Payable for investment purchase -- 2,995
Accrued liabilities 2,307 1,721
--------------- --------------
Total current liabilities 4,606 15,134
Shareholders' Equity:
Class A common stock 81 102
Class B common stock 75 75
Additional paid-in capital 183,980 201,762
Retained earnings 5,907 1,767
Treasury stock, at cost -- (16,371)
Cumulative translation adjustment 312 250
--------------- --------------
Total shareholders' equity 190,355 187,585
--------------- --------------
TOTAL $ 194,961 $ 202,719
- --------------------------------------------------------------------------------------------------------
</TABLE>
See notes to Schedule 1
S-3
<PAGE>
AES CHINA GENERATING CO. LTD.
CONDENSED FINANCIAL INFORMATION
UNCONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal Period Ended November 30,
--------------------------------------------------------
1996 1995 1994
--------------- --------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash (used in) / provided by operating (40) (1,370) 335
activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock -- -- 201,939
Repurchase of Class A common stock (11,443) (6,360) --
--------------- --------------- --------------
Net cash (used in) / provided by financing (11,443) (6,360) 201,939
activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and construction in progress (224) (445) (544)
Purchase of investments -- -- (195,943)
(29,176) (154,630) --
Purchase of investments-held-to-maturity
Purchase of investments-available-for-sale (16,797) (14,557) --
Proceeds from sales/maturity of investments -- -- 93,369
Proceeds from the maturity of investments-held-to-maturity 63,656 219,086 --
Proceeds from sales of investments-available-for-sale 16,969 14,609 --
Investments in and advances to subsidiaries (104,714) (28,453) (7,500)
Recoupment of investment in subsidiaries 871 -- --
Project development costs and other assets (2,625) (1,327) (996)
Investment in note receivable -- (7,500) --
--------------- --------------- --------------
Net cash (used in) / provided by investing (72,040) 26,783 (111,614)
activities
--------------- --------------- --------------
(Decrease ) / increase in cash and cash equivalents (83,523) 19,053 90,660
CASH AND CASH EQUIVALENTS,
Beginning of year/period 109,713 90,660 --
--------------- --------------- --------------
End of year/period $ 26,190 $ 109,713 $ 90,660
</TABLE>
See notes to Schedule 1
S-4
<PAGE>
AES CHINA GENERATING CO. LTD
NOTES TO SCHEDULE I
1. APPLICATION OF SIGNIFICANT ACCOUNTING PRINCIPLES
Accounting for Subsidiaries - AES China Generating Co. Ltd.
has accounted for the earnings of its subsidiaries on the equity method in the
unconsolidated condensed financial information.
Revenues - Construction and operation management fees earned
by the parent from its consolidated subsidiaries are eliminated.
S-5
<PAGE>
EXHIBIT INDEX
Exhibit Sequentially
Number Document Numbered Page
- ------- -------- -------------
23.1 Independent Auditors' Consent.
27.1 Financial Data Schedule.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-97030 of AES China Generating Co. Ltd. Incentive Stock Option
Plan on Form S-8 dated September 18, 1995 of our report dated January 31, 1997
appearing in this Annual Report on Form 10-K/A of AES China Generating Co.
Ltd. for the year ended November 30, 1996.
DELOITTE TOUCHE TOHMATSU
Hong Kong
March 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED
NOVEMBER 30, 1996 AND THE CONSOLIDATED BALANCE SHEET AS OF NOVEMBER 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<CASH> 56,200
<SECURITIES> 8,995
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 765
<CURRENT-ASSETS> 73,929
<PP&E> 165,743
<DEPRECIATION> 3,143
<TOTAL-ASSETS> 280,698
<CURRENT-LIABILITIES> 14,487
<BONDS> 34,933
0
0
<COMMON> 156
<OTHER-SE> 190,199
<TOTAL-LIABILITY-AND-EQUITY> 280,698
<SALES> 8,812
<TOTAL-REVENUES> 9,212
<CGS> 5,360
<TOTAL-COSTS> 5,360
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,120
<INCOME-PRETAX> 4,804
<INCOME-TAX> 387
<INCOME-CONTINUING> 4,140
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,140
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
