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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 0-19281
THE AES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 54-1163725
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1001 N. 19th Street, Arlington, Virginia 22209
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 522-1315
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $0.01 per share New York Stock Exchange
9-3/4% Senior Subordinated Notes due 2000 None
Warrants to Purchase Common Stock, par value
$.01 per share NASDAQ
10-1/4% Senior Subordinated Notes due 2006 None
$2.6875 Term Convertible Securities, Series A New York Stock Exchange
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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The aggregate market value of Registrant's voting stock held by
non-affiliates of Registrant, at March 3, 1997, was $3,405,813,628.
The number of shares outstanding of Registrant's Common Stock, par
value $0.01 per share, at March 3, 1997, was 77,492,990.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the Annual Meeting of Stockholders of the
Registrant to be held on April 15, 1997. Certain information therein is
incorporated by reference into Part III hereof.
PART I
ITEM 1. BUSINESS
(a) General Development of Business
The AES Corporation (the "Company", "AES" and/or the
"Registrant"), is a global power company committed to supplying electricity to
customers world-wide in a socially responsible way. The Company was one of the
original entrants in the independent power market and today is one of the
world's largest independent power companies, based on net equity ownership of
generating capacity (in megawatts) in operation or under construction. AES
markets power principally from electricity generating facilities that it
develops, acquires, owns and operates.
Over the last five years, the Company has experienced
significant growth. This growth has resulted primarily from the development and
construction of new plants ("greenfield development") and also from the
acquisition of existing plants, through competitively bid privatization
initiatives outside of the United States or negotiated acquisitions. Since 1992,
the Company's total generating capacity in megawatts has grown by 426 percent,
with the total number of plants in operation increasing from eight to 26. AES
operates and owns (entirely or in part), through subsidiaries and affiliates,
power plants in seven countries with a capacity of approximately 9,600 megawatts
(including 4,000 megawatts attributable to the Ekibastuz plant in Kazakstan
which at the time of its acquisition in August 1996 was running at approximately
20 percent of its capacity). AES is also constructing eight additional power
plants and one expansion in four countries with a design capacity of
approximately 1,700 megawatts. The Company's total ownership in plants in
operation and under construction aggregates approximately 11,300 megawatts and
its net equity ownership in such plants is approximately 7,500 megawatts. In
addition, AES has numerous projects in advanced stages of development, including
seven projects with an aggregate design capacity of approximately 4,700
megawatts that have executed or been awarded power sales agreements.
OUTLOOK
The global trend of electricity market restructuring has
created significant new business opportunities for companies like AES. There is
a trend away from government-owned electricity systems toward deregulated,
competitive market structures, in both domestic and international markets. Many
countries have rewritten their laws and regulations to allow foreign investment
and private ownership of electricity generation, transmission or distribution
systems. Some countries have or are in the process of "privatizing" their
electricity systems by selling all or part of such systems to private investors.
With 18 of its projects having been acquired or having commenced commercial
operations since 1992, AES has been an active participant in both the
international privatization process and the development process. The Company is
currently pursuing over 70 projects through possible acquisitions, the expansion
of existing plants and greenfield development.
AES believes that there is significant demand for both new and
more efficiently operated electric generating capacity in many regions around
the world. In an effort to further grow and diversify the Company's portfolio of
electric generating plants, AES is pursuing, through its integrated divisions,
additional greenfield developments and acquisitions in many countries.
The Company, a corporation organized under the laws of
Delaware, was formed in 1981. The principal office of the Company is located at
1001 North 19th Street, Suite 2000, Arlington, Virginia 22209, and its telephone
number is (703) 522-1315.
(b) Financial Information About Industry Segments
The Company operates in only one industry segment: electric
power supply.
(c) Narrative Description of Business
STRATEGY
The Company's strategy in helping meet the world's need for
electricity is to participate in competitive power markets as they develop
either by greenfield development or by acquiring and operating existing
facilities or systems in these markets. The Company generally operates electric
generating facilities that utilize natural gas, coal, oil, hydro power, or
combinations thereof. In addition, the Company participates in the distribution
and retail supply businesses in certain limited instances, and will continue to
review opportunities in such markets in the future.
Other elements of the Company's strategy include:
o Supplying energy to customers at the lowest cost possible, taking into
account factors such as reliability and environmental performance;
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o Constructing or acquiring projects of a relatively large size (generally
larger than 100 megawatts);
o When available, entering into power sales contracts with electric
utilities or other customers with significant credit strength; and
o Where possible, participating in distribution and retail supply markets
that grant concessions with long-term pricing arrangements.
The Company also strives for operating excellence as a key
element of its strategy, which it believes it accomplishes by minimizing
organizational layers and maximizing company-wide participation in
decision-making. AES has attempted to create an operating environment that
results in safe, clean and reliable electricity generation. Because of this
emphasis, the Company prefers to operate all facilities which it develops or
acquires; however, there can be no assurance that the Company will have
operating control of all of its facilities.
Where possible, AES attempts to sell electricity under
long-term power sales contracts. The Company attempts to structure the revenue
provisions of such power sales contracts such that changes in the cost
components of a facility (primarily fuel costs) correspond, as effectively as
possible, to changes in the revenue components of the contract. A plant's
revenue from a power sales contract usually consists of two components, energy
payments and capacity payments. Energy payments are usually based on a plant's
net electrical output, with payment rates usually indexed to the fuel costs of
the customer or to general inflation indices. Capacity payments are based on
either a plant's net electrical output or its available capacity. Capacity
payment rates vary over the term of a power sales contract according to various
schedules. Some power sales contracts permit the utility customer to dispatch
the plant (i.e., direct the plant to deliver a reduced amount of electric
output) within certain specified parameters. AES attempts to structure the power
sales contract payments so that, even when dispatching occurs, the plant
continues to receive capacity payments (which provide substantially all of the
plant's profits, if any), while it receives reduced energy payments (which
primarily cover the variable operating, maintenance and fuel costs associated
with operating at higher or lower levels).
The Company attempts to provide fuel for its operating plants
generally under long-term supply agreements, either through contractual
arrangements with third parties or, in some instances, through acquisition of a
dependable source of fuel. The Company will generally contract with outside
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parties, often the project's fuel supplier, to provide for the removal and
disposal of waste.
As electricity markets become more competitive, it may be more
difficult for AES (and other power generation companies) to obtain long-term
power sales contracts. In markets where long-term contracts are not available,
AES will pursue methods to hedge costs and revenues to provide as much assurance
as possible of a project's profitability. In markets where long-term power sales
contracts are unavailable, AES might choose to develop or acquire a project (i)
with a partial contractual hedge, or (ii) with no contractual hedge, or AES may
choose not to participate in these markets. To the extent that AES pursues a
project with no contractual hedge, AES's diverse portfolio of projects may
provide some hedge against the increased volatility of the project's earnings
and cash flow.
The Company attempts to finance each domestic and foreign
plant primarily under loan agreements and related documents which, except as
noted below, require the loans to be repaid solely from the project's revenues
and provide that the repayment of the loans (and interest thereon) is secured
solely by the capital stock, physical assets, contracts and cash flow of that
plant subsidiary or affiliate. This type of financing is generally referred to
as "project financing." The lenders under these project financing structures
cannot look to AES or its other projects for repayment, unless such entity
explicitly agrees to undertake liability. AES has explicitly agreed to undertake
certain limited obligations and contingent liabilities, most of which by their
terms will only be effective or will be terminated upon the occurrence of future
events. These obligations and liabilities take the form of guaranties, letter of
credit reimbursement agreements, and agreements to pay, in certain
circumstances, to project lenders or other parties amounts up to the amounts of
distributions previously made by the applicable subsidiary or affiliate to AES.
To the extent AES becomes liable under guaranties and letter of credit
reimbursement agreements, distributions received by AES from other projects are
subject to the possibility of being utilized by AES to satisfy these
obligations. To the extent of these obligations, the lenders to a project
effectively have recourse to AES and to the distributions to AES from other
projects. The aggregate contractual liability of AES is, in each case, usually a
small portion of the aggregate project debt, and thus the project financing
structures are generally described herein as being "substantially non-recourse"
to AES and its other projects.
AES PLANTS IN OPERATION AND UNDER CONSTRUCTION
The table below sets forth information on the Company's plants
and projects currently in operation or under construction.
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Year of
Acquisition or
Commencement of AES Equity
Commercial Capacity Interest
Plant Fuel Operations (Megawatts) Location (%)
- ----- ---- -------------- ----------- -------- -----------
In Operation
North America
Deepwater.................. Pet Coke 1986(a) 143 Texas 100
Beaver Valley.............. Coal 1987 125 Pennsylvania 80
Placerita.................. Gas 1989 120 California 100
Thames..................... Coal 1990 181 Connecticut 100
Shady Point................ Coal 1991 320 Oklahoma 100
Barbers Point.............. Coal 1992 180 Hawaii 100
Europe
Kilroot (NIGEN)............ Coal/Oil 1992 520 United Kingdom 47
Belfast West (NIGEN)....... Coal 1992 240 United Kingdom 47
Medway..................... Gas 1995 660 United Kingdom 25
Borsod (Tiszai)............ Coal 1996 171 Hungary 63
Tisza II (Tiszai).......... Oil/Gas 1996 860 Hungary 93
Tiszapalkonya (Tiszai)..... Coal 1996 250 Hungary 93
Asia
Cili Misty Mountain........ Hydro 1994 26 China 24
Yangchun Sun Spring........ Oil 1995 15 China 12
Wuxi Tin Hill.............. Oil 1996 63 China 26
Wuhu Grassy Lake........... Coal 1996 125(b) China 12
Ekibastuz.................. Coal 1996 4,000(c) Kazakstan 70
South America
San Nicolas................ Multiple 1993 650 Argentina 69
Cabra Corral (Rio Juramento) Hydro 1995 102 Argentina 98
El Tunal (Rio Juramento)... Hydro 1995 10 Argentina 98
Ullum (San Juan)........... Hydro 1996 45 Argentina 98
Sarmiento (San Juan)....... Gas 1996 33 Argentina 98
Fontes Nova (Light)........ Hydro 1996 144 Brazil 14
Pereira Passos (Light)..... Hydro 1996 100 Brazil 14
Nilo Pecanha (Light)....... Hydro 1996 380 Brazil 14
Ilha dos Pombos (Light).... Hydro 1996 164 Brazil 14
Total in Operation 9,627
Under Construction
Lal Pir.................... Oil 1997(d) 337 Pakistan 90
PakGen..................... Oil 1997(d) 337 Pakistan 90
Jiaozuo Aluminium Power.... Coal 1997(d) 250 China 34
Chengdu Lotus City......... Gas 1997(d) 48 China 17
Wuhu Grassy Lake........... Coal 1997(d) 125(b) China 12
Aixi Heart River........... Coal 1998(d) 50 China 34
Hefei Prosperity Lake...... Oil 1998(d) 115 China 34
Barry...................... Gas 1998(d) 230 United Kingdom 100
Warrior Run................ Coal 1999(d) 180 Maryland 100
--------
Total under Construction 1,672
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(a) Plant operations commenced in 1986, but control was acquired in 1995.
(b) 125 megawatts of Wuhu Grassy Lake is currently in operation. The other half
is under construction.
(c) Due to poor historical maintenance over the ten years prior to the
Company's purchase, the facility's capacity factor is approximately 20
percent.
(d) Estimated date of commencement of commercial operations.
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NORTH AMERICA
AES currently owns and operates, through subsidiaries and
affiliates, six plants in the United States representing approximately 1,069
megawatts.
AES Barbers Point, Inc. ("AES Barbers Point") is an indirectly
owned subsidiary of AES which owns and operates a 180 megawatt coal-fired
circulating fluidized bed ("CFB") cogeneration plant located in Kapolei, Oahu,
Hawaii. AES Barbers Point sells electricity to Hawaiian Electric Company, Inc.
("HECO") under a contract with a remaining term of 26 years. Steam generated by
the plant is sold to Chevron USA Inc. ("Chevron") for use in its oil refining
operations under a steam sales agreement with a remaining term of 16 years.
HECO's purchases represented approximately 16 percent of AES's 1996 consolidated
revenues.
AES Beaver Valley is a 125 megawatt pulverized coal-fired
cogeneration facility located in Monaca, Pennsylvania which is owned by BV
Partners, a Pennsylvania partnership ("BV Partners"). AES Beaver Valley, Inc.
("AES Beaver Valley"), a subsidiary of AES, and Shepperton Leasing Company are
the sole partners in BV Partners. AES Beaver Valley, as an 80 percent owner and
managing partner, operates the plant for the partnership. West Penn Power
Company ("West Penn") purchases electricity produced by the plant under a power
sales contract with a remaining term of approximately 20 years. BV Partners
sells steam to NOVA Chemicals Inc. for use in its chemical processing activities
under a requirements contract with a remaining term of approximately five years.
AES Deepwater, Inc. ("AES Deepwater") is a subsidiary of AES
which owns a 143 megawatt petroleum coke-fired cogeneration facility located
near Houston, Texas. The facility sells electricity to Houston Lighting and
Power Company ("HL&P") under a power sales contract which expires in 1998. AES
Deepwater, under a contract which also expires in 1998, produces and delivers
process steam to an ARCO Petroleum Products Company ("ARCO Petroleum") refinery
adjacent to the cogeneration facility.
AES Placerita, Inc. ("AES Placerita") is an indirectly owned
subsidiary of AES which leases and operates a 120 megawatt combined-cycle gas
turbine cogeneration facility near Los Angeles, California. The plant sells
electricity to Southern California Edison Company under a contract with a
remaining term of approximately 17 years. AES Placerita sells steam to Hillside
Oil Partners, which is engaged in oil recovery operations, and ARCO Oil and Gas
Company.
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AES Shady Point, Inc. ("AES Shady Point") is an indirectly
owned subsidiary of AES which owns and operates a 320 megawatt coal-fired, CFB
cogeneration plant in LeFlore County, Oklahoma. The AES Shady Point facility
includes a 240-ton per day food grade, liquid CO2 plant, which utilizes in its
CO2 production processes approximately 65,000 pounds per hour of process steam
produced by the plant. AES Shady Point sells electricity to Oklahoma Gas and
Electric Company ("OG&E") under a contract with a remaining term of
approximately 11 years. OG&E's purchases represented approximately 20 percent of
AES's 1996 consolidated revenues.
AES Thames, Inc. ("AES Thames") is an indirectly owned
subsidiary of AES which owns and operates a 181 megawatt coal-fired CFB
cogeneration plant located in Montville, Connecticut. Power generated by AES
Thames is sold to Connecticut Light and Power Company ("CL&P") under a contract
with a remaining term of approximately 18 years. AES Thames also sells steam to
Stone Container Paperboard Corporation for use in its recycled paperboard plant
located adjacent to the plant. CL&P's purchases represented approximately 16
percent of AES's 1996 consolidated revenues.
EUROPE
AES currently owns and operates, through subsidiaries and
affiliates, seven plants in Europe representing approximately 2,701 megawatts.
NIGEN Limited ("NIGEN"), a joint venture company owned by a
United Kingdom ("U.K.") subsidiary of the Company and a subsidiary of Tractebel,
S.A., a Belgian utility, owns and operates two power plants in Northern Ireland:
Kilroot, a 520 megawatt dual-fired (coal and oil) power plant, and Belfast West,
a 240 megawatt coal-fired power plant. The Kilroot and Belfast West plants have
entered into power sales contracts, subject to cancellation in 14 years and four
years, respectively, with Northern Ireland Electricity, plc, a transmission and
distribution company.
Medway Power Limited ("Medway Power") is a joint venture among
AES Medway Electric Limited, an indirectly owned U. K. subsidiary of AES ("AES
Medway"), and subsidiaries of Southern Electric plc ("Southern") and SEEBOARD
plc ("SEEBOARD"), which owns a 660 megawatt combined cycle gas-fired power plant
in Southeast England on the Isle of Grain. The plant began operations in
November 1995. AES Medway Operations Limited ("AESMO"), an indirectly owned U.K.
subsidiary of AES, operates and maintains the plant.
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Medway Power sells its entire output through national
electricity pool trading arrangements (the "Pool") at prices based on the supply
of, and demand for, electricity available in the Pool. In addition, Medway Power
has entered into a contract with each of Southern and SEEBOARD, under which
Southern and SEEBOARD will pay Medway Power capacity payments based on the
plant's available capacity, and energy cost payments, based on the plant's
actual sales of electricity to the Pool, that reflect fuel costs and variable
transmission charges incurred (each a "Contract for Differences"). The basis of
the contracts is 660 megawatts. Sales of electrical output in excess of 660
megawatts are sold into the Pool, and not subject to the Contract for
Differences.
The plant began commercial operations under the terms of the
Contracts for Differences on October 1, 1996. Commercial operations were delayed
by one year due to design difficulties with the rotors of the two combustion
turbines. These rotors were rebuilt with parts of a new design in the summer of
1996 and there has not been a recurrence of the difficulties since that time.
On December 23, 1996, one of the combustion turbines shut down
with damage resulting from a problem with its combustion system. The turbine was
repaired by Medway Power at its cost and returned to service in January 1997.
Medway Power has begun arbitration proceedings against the contractor to recover
the costs of the repairs, estimated at approximately $10 million, from the
contractor under the terms of the warranty. Although no assurance can be given
that Medway Power will prevail in the arbitration, the Company believes that the
outcome of this matter will not have a material adverse effect on its
consolidated financial position.
Tiszai Eromu Rt. is an indirectly owned subsidiary of AES
which owns and operates three power plants totaling 1,281 megawatts of gross
capacity (1,115 net megawatts) and a coal mine in Hungary. The plants consist of
(i) the Tisza II facility, an 860 megawatt oil and natural gas-fired facility
that sells electricity under a contract ending in 2010, (ii) the Tiszapalkonya
facility, a 250 megawatt coal-fired facility that sells electricity under a
contract ending in 2001, and (iii) the Borsod facility, a 171 megawatt
coal-fired facility that sells electricity under a contract ending in 2001. Each
plant sells electricity to Magyar Villamos Muvek Rt. ("MVM Rt."), a Hungarian,
state-owned integrated utility, under long-term power sales contracts. These
agreements currently are being renegotiated to conform their pricing methodology
with standard international practice. Aggregate purchases by MVM Rt. under the
three power sales agreements were approximately 10 percent of the Company's
consolidated revenues in 1996. AES also has the right to develop an additional
150 megawatt coal-fired electric generating facility.
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In August 1996, AES acquired its initial 80.8 percent of
Tiszai Eromu Rt. at a cost of $110 million. In December 1996, AES, through a
subsidiary, completed the purchase of an additional 12.5 percent of Tiszai Eromu
Rt., from employee pension plans at a cost of $17 million, bringing AES's total
equity interest in Tiszai Eromu Rt. to 93.3 percent. Substantial risks
associated with these plants exist, however, including those relating to the
successful renegotiation of power sales arrangements with the Hungarian
government, plant operation and maintenance, construction difficulties in
respect of the undeveloped facility, plant refurbishment, environmental risk,
political risk, repatriation of earnings and currency inconvertibility.
ASIA
AES currently owns and operates, through subsidiaries and
affiliates, five plants in Asia representing approximately 4,229 megawatts of
generating capacity.
AES China Generating Co. Ltd. ("AES Chigen") was founded in
December 1993 by AES to develop, acquire, finance, construct, own and operate
electric power generation facilities in the People's Republic of China (the
"PRC"). Since commencing business, AES Chigen has developed eight power projects
which are currently in operation or under construction in the PRC having an
aggregate nameplate capacity of approximately 817 megawatts.
AES currently owns all of the issued and outstanding shares of
AES Chigen's Class B Common Stock, which represents approximately 48% of the
economic value of AES Chigen, and 50% of the voting power, on most matters. The
remaining shares, constituting Class A Common Stock, are publicly-held.
In November 1996, AES Chigen and AES entered into an Agreement and Plan of
Amalgamation, providing among other things for AES Chigen to become a wholly
owned subsidiary of AES (the "Amalgamation"). The Amalgamation is subject to
various conditions, including the approval of the holders of the Class A Common
Stock of AES Chigen, and there can be no assurance that the Amalgamation will be
consummated. The special class meeting of the holders of the AES Chigen Class A
Common Stock and the special general meeting of the shareholders of AES Chigen
to vote on the Amalgamation are scheduled for April 10, 1997.
AES Suntree Ltd., is an indirectly owned subsidiary of AES
which owns and operates a 4,000 (design capacity) megawatt mine-mouth,
coal-fired power facility in Kazakstan. The facility sells electricity to a
government-owned distribution company under a 35-year power sales contract. Due
to economic difficulties over the ten years prior to the Company's purchase, the
facility has experienced a reduction in performance and has operated at a
capacity factor of approximately 20 percent. AES has agreed to increase the
capacity to 63 percent over a five-year period (contingent on the purchaser's
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performance of its obligations under the power sales contract). Through December
31, 1996, approximately $35 million (excluding value added taxes) was billed
under the power sales contract for electricity, of which the purchaser paid
approximately $5 million. The Company has recorded a provision of $20 million to
reduce the carrying value of the contract receivable as of December 31, 1996 to
$10.0 million. As of December 31, 1996, the net assets of this project were $24
million, a portion of which was represented by the contract receivable referred
to above. There can be no assurance as to the ultimate collectibility of amounts
owned to AES as of December 31, 1996 or additional amounts related to future
deliveries of electricity under the power sales contract or the recoverability
of the Company's investment or additional amounts the Company may invest in the
project. Other substantial risks associated with this plant exist, including
those relating to operations and maintenance, construction, refurbishment,
political risk, repatriation of earnings and currency convertibility.
SOUTH AMERICA
AES currently owns and operates, through subsidiaries and
affiliates, and, in certain instances, together with partners, nine plants in
South America representing approximately 1,628 megawatts of generating capacity,
as well as 3,800 megawatts of transmission and distribution system.
Central Termica San Nicolas S.A. ("San Nicolas") is an
indirectly owned subsidiary of AES which owns and operates a 650 megawatt power
plant in San Nicolas, Argentina. AES owns approximately 69 percent of San
Nicolas, a subsidiary of a U.S. utility owns approximately 19 percent, and the
remaining 12 percent is owned by an employee stock ownership plan.
San Nicolas sells a total of 345 megawatts of electricity
(approximately 53 percent of the plant's output capability) under two power
sales contracts, each with a remaining term of four years. Under one of the
contracts, Empresa Social de Energia de Buenos Aires S.A. ("ESEBA"), a
distribution company controlled by the Argentine government, purchases 285
megawatts (except during the month of April of each year, when the amount
purchased is 57 megawatts). Under the other contract, EDELAP, S.A., a privatized
Argentine distribution company, purchases 60 megawatts of electricity. The plant
sells additional electricity, when profitable, into the Argentine spot market.
ESEBA's purchases accounted for approximately 11 percent of AES's 1996
consolidated revenues.
Hidroelectrica Rio Juramento S.A. ("Rio Juramento") is an
indirectly owned subsidiary of AES which leases and operates a 112 megawatt
hydroelectric station in the province of Salta, Argentina. The station consists
of
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a 102 megawatt facility with a large storage reservoir capable of inter-year
storage, and a 10 megawatt facility capable of inter-seasonal storage. Rio
Juramento has exclusive rights to operate the facility under a 30-year
concession agreement, and sells electricity in the Argentine spot market.
Hidrotermica San Juan, S.A. ("San Juan"), is an indirectly
owned subsidiary of AES and the owner and operator of two power generating
facilities totaling 78 megawatts in the province of San Juan, Argentina. The
facility includes a 45 megawatt hydroelectric power plant and a 33 megawatt gas
combustion power plant.
Light Servicos de Electricidade, S.A. ("Light") is a 3,800
megawatt Brazilian electric power generation, transmission and distribution
system serving 28 municipalities in the state of Rio de Janeiro, Brazil that is
controlled by a consortium (the "Consortium") comprised of the following parties
(with each party's respective percentage ownership, as of December 31, 1996, in
parentheses): subsidiaries or affiliates of AES (11.35 percent), Electricite de
France (11.35 percent); Houston Industries Incorporated (11.35 percent);
Companhia Siderurgica Nacional (7.25 percent); and Banco Nacional de
Desenvolvimento Economico E Social (9.14 percent). In January 1997, AES acquired
an additional 2.4 percent of the voting interest in Light, bringing its total
equity interest in Light to 13.75 percent; this acquisition did not alter the
respective voting rights, or other rights and obligations, of the parties
constituting the Consortium.
In connection with the purchase of the controlling interest by
the Consortium, the Ministry of Mines and Energy of Brazil granted a 30-year
concession to Light pursuant to the terms of a concession agreement which
obligates Light to provide electric services to all customers within its
concession, and authorizes Light to charge its customers a tariff for electric
services which consists of two components - an expense pass-through component
and an inflation-adjusted operating cost component. Beginning in 2004, the
Ministry of Mines and Energy of Brazil has the authority to review Light's costs
to determine the adjustment, if any, to the operating cost component for
subsequent five-year periods.
Light generates about 16 percent of the total electricity it
distributes through four hydroelectric complexes having an aggregate installed
generating capacity of approximately 788 megawatts. Of the remaining electricity
distributed by Light (approximately 84 percent of the total), 53 percent is
purchased from Furnas Centrais Electricas S.A., a power generation and
transmission company owned by Eletrobras, and the remaining 31 percent is
purchased from Itaipu Binacional, a power generation company owned by the
Republic of Brazil and the Republic of Paraguay.
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In December 1996, a subsidiary of AES completed a $167.5
million syndicated bank financing related to its equity ownership of Light.
Under the terms of the financing, a wholly-owned subsidiary of AES pledged the
shares of Light owned by it as collateral for the loan. The proceeds of the
financing were used to repay a portion of the debt incurred in the acquisition
of AES's interest in Light.
PROJECTS UNDER CONSTRUCTION
AES Lal Pir Limited ("AES Lal Pir") and AES Pak Gen (Private)
Company ("AES Pak Gen"), are indirectly owned project subsidiaries of AES which
are constructing two substantially identical, adjacent 337 megawatt oil-fired
facilities in Punjab Province, Pakistan. The Water and Power Development
Authority ("WAPDA") has agreed to purchase the electrical capacity and
electrical output of the facilities through two separate 30-year power sales
agreements. Certain of the obligations of WAPDA under the power sales agreements
and PSO under the fuel supply agreements are guaranteed by the Government of
Pakistan.
Financing for the AES Lal Pir project was completed in May
1995 and is comprised of (i) a Y20.25 billion ($174 million) commercial loan
provided by a syndicate of lenders, (ii) an International Finance Corporation
("IFC") loan of $40 million, and (iii) equity of $95 million. IFC will make an
equity investment in AES Lal Pir of $9.5 million. AES has supported certain of
AES Lal Pir's pre-completion obligations in an aggregate amount of up to $42
million, and certain post-completion obligations in an aggregate amount of up to
$59 million. The financing for the AES Pak Gen project was completed in January
1996, and consists of (i) a buyer's credit facility established by The Export
Import Bank of Japan of US$40 million and Y14.203 billion (US$122 million), (ii)
an IFC direct loan of US$20 million, (iii) an IFC syndicated loan of US$50
million, and (iv) equity of $95 million. IFC will make an equity investment in
AES Pak Gen of US$9.5 million. AES has committed to fund the remaining equity of
US$85.5 million. The equity commitments in each of AES Lal Pir and AES Pak Gen
were partially satisfied as of December 31, 1996. AES has supported certain of
AES Pak Gen's pre-completion obligations in an aggregate amount of up to $42
million, and certain post-completion obligations in an aggregate amount of up to
$65 million. The facilities are being built by Nichimen Corporation under two
"turn-key", lump sum price contracts, with key equipment in each case being
supplied by Mitsubishi Heavy Industries. The projects are scheduled to commence
commercial operations by the end of 1997. All yen amounts set forth in this
Report have been translated into U.S. dollar ($)
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amounts at an exchange rate of Y116/US$1.00, the noon buying rate in The City of
New York for cable transfers payable in Japanese Yen as certified for customs
purposes by the Federal Reserve Bank of New York on December 31, 1996.
Substantial risks to the successful completion of these
projects exist, including those relating to political risk, exchange rate risk,
currency inconvertibility, governmental approvals, siting, construction and
permitting, and the possible termination of the power sales contract as a result
of the failure to meet certain construction milestones. No assurance can be
given that these projects will be completed.
AES WR Limited Partnership ("AES Warrior Run"), an indirectly
owned subsidiary of AES, is currently constructing a 180 megawatt coal-fired
cogeneration facility in Allegany County, Maryland. The Potomac Edison Company
will purchase all of the electrical capacity of the facility pursuant to a
30-year dispatchable power sales contract and that the plant is scheduled to
begin commercial operation by October 1, 1999. The project obtained its
financing in September 1995 consisting of (i) commercial bank loan commitments
of $331 million, (ii) approximately $74 million of tax-exempt bonds issued by
the Maryland Energy Financing Administration and (iii) an equity commitment of
approximately $46 million. Construction services are being performed under a
lump sum, turn-key contract by a consortium consisting of Raytheon Engineers &
Constructors, Inc. and ABB/Combustion Engineering, Inc. with key equipment
supplied by ABB/Combustion Engineering. Coal will be supplied to the project
under a 20-year contract.
Substantial risks to the successful completion of this project
exist, including those relating to construction and permitting, and the possible
termination of the power sales contract as a result of a failure to meet certain
construction milestones and, as a result, no assurance can be given that this
project will be completed.
AES Barry Ltd. ("AES Barry"), an indirectly owned subsidiary
of AES, began constructing a 230 megawatt gas-fired combined cycle facility in
Barry, South Wales, United Kingdom in October 1996. Construction services are
being supplied by TBV Power Limited under a lump sum, turnkey construction
contract. The Barry facility will sell electricity into the national electricity
"spot" market in the United Kingdom and it is expected to be operational by the
second quarter of 1998. In February 1997, AES Barry raised $184 million of
non-recourse project financing, underwritten solely by The Industrial Bank of
Japan, Limited. Substantial risks to the successful completion of this project
exist, including those relating to governmental approvals, the
13
demand for and price of electricity in the United Kingdom national electricity
market, financing, construction and permitting. There can be no assurance that
this project will be completed.
POTENTIAL ACQUISITIONS/PROJECTS IN ADVANCED DEVELOPMENT
In February 1997, AES entered into a definitive agreement to
acquire the international assets (inclusive of approximately $42 million of net
monetized assets) of Destec Energy, Inc. ("Destec"), a large independent energy
producer with headquarters in Houston, Texas, for a total price to AES of $407
million, which price is subject to adjustment to reflect net cash flow between
the international assets of Destec and the rest of Destec from January 1, 1997
to the closing date. NGC Corporation ("NGC"), working in conjunction with AES,
was selected as the winning bidder in an auction for all of Destec at a total
acquisition price of $1.27 billion. AES will acquire the international assets of
Destec immediately following NGC's acquisition of Destec. Destec's international
assets to be acquired by AES include ownership interests in the following five
electric generating plants (with ownership percentages in parentheses): (i) a
110 megawatt gas-fired combined cycle plant in Kingston, Canada (50 percent),
(ii) a 405 megawatt gas-fired combined cycle plant in Terneuzen, Netherlands (50
percent), (iii) a 140 megawatt gas-fired simple cycle plant in Cornwall, England
(100 percent), (iv) a 235 megawatt oil-fired simple cycle plant in Santo
Domingo, Dominican Republic (99 percent); and (v) a 1600 megawatt coal-fired
plant in Victoria, Australia (20 percent). The acquisition by AES of Destec's
international assets also includes all of Destec's non-U.S. developmental stage
power projects, including projects in Taiwan, England, Germany, the Philippines,
Australia and Colombia. A number of risks are associated with this acquisition,
including those relating to the closing of the transaction (which is contingent
on the closing of NGC's acquisition of Destec), the receipt of government
approvals and other consents, financing, operation and maintenance, construction
and environmental risks.
In February 1997, subsidiaries of AES executed three power
purchase agreements (the "PPAs"), for an aggregate generating capacity of at
least 457 megawatts, with GPU Energy, the energy services and delivery business
of GPU, Inc., a public utility holding company. AES plans to build a 720
megawatt natural gas-fired, combined cycle facility in Pennsylvania to sell
power under the PPAs beginning in 2000 and to sell power to other potential
purchasers. Between March and July 1996, subsidiaries of AES acquired the right
to negotiate the PPAs from other independent power producers for a net aggregate
cost of approximately $28 million. GPU Energy is required to
14
reimburse AES for substantially all its initial net investment if the project
does not receive the requisite regulatory approvals and permits. This project is
subject to a number of risks, including those related to governmental approvals,
siting, permitting, financing, construction and contract compliance, and there
can be no assuance that it will be completed successfully.
In January 1997, a joint venture company led by a subsidiary
of AES was selected as the winning bidder to build, own and operate a 484
megawatt gas-fired combined cycle power plant in the city of Merida, Yucatan,
Mexico. This project is subject to a number of risks, including those related to
governmental approvals, financing, construction and contract compliance, and
there can be no assurance that it will be completed successfully.
Another subsidiary of the Company, AES Puerto Rico, L.P. ("AES
Puerto Rico"), is developing a 454 megawatt coal-fired cogeneration facility in
Guayama, Puerto Rico. The Puerto Rico Electricity Power Authority has agreed to
purchase the electrical output of the facility pursuant to a 25-year power sales
agreement. However, substantial risks to the successful completion of this
project exist, including those relating to governmental approvals, financing,
construction and permitting, and possible termination of the power sales
contract as a result of a failure to meet certain development or construction
milestones. There can be no assurance that this project will be completed.
An affiliate of the Company, San Francisco Energy Company, LP
("SFEC"), which is a joint venture between AES and Sonat Inc., is developing a
240 megawatt gas fired facility in San Francisco, California. The electrical
capacity of the facility is to be purchased by Pacific Gas & Electric ("PG&E")
under a 30-year power sales agreement, which SFEC executed in April 1994.
However, a ruling by the Federal Energy Regulatory Commission ("FERC") has
questioned the validity of the California Biennial Resource Plan Update
("BRPU"), pursuant to which SFEC was awarded its contract. The Company believes
that its contract with PG&E is valid, but the Company is currently involved in
litigation with PG&E over the validity of the contract. The Company does not
believe that the ultimate resolution of this matter will have a material adverse
effect on the Company. Substantial risks to the successful completion of this
project exist, including those relating to the contract litigation, FERC
decision, siting, financing, construction and permitting. No assurance can be
given that this project will be completed.
A project subsidiary of the Company, AES Ib Valley Corporation
("AES Ib Valley"), has been developing a 420 megawatt coal-fired facility in the
State of Orissa, India. Under the terms of an executed power sales agreement,
the Orissa State Electricity Board ("OSEB") agreed to purchase at least 85
percent of the electrical capacity of the facility pursuant to a 30-year
contract. Certain of OSEB's obligations are guaranteed by the Government of
Orissa ("GOO"). In addition, the Government of India ("GOI") agreed to guarantee
a
15
portion of GOO's obligations. In July 1995, a newly elected state government
initiated a review of the terms and conditions of AES Ib Valley's agreements
with OSEB and GOO. This review has led OSEB and GOO to seek significant
modifications to the terms of the power sales agreement. In light of this review
AES has been unable to reach financial closing on this project and has been
forced to terminate certain financing and contractual commitments relating to
the project. AES Ib Valley is currently in negotiation with GOO and OSEB and may
agree to changes, including those relating to the plant's technical
configuration, capital cost, size and the price paid for electricity.
Notwithstanding the Company's willingness to discuss modifications to the
project, the Company believes that its current agreements with GOO, OSEB and GOI
are valid, and if agreements cannot be restructured on terms acceptable to AES,
the Company intends to pursue its rights with respect to enforcement of the
existing contracts. No assurance can be given that either (i) the terms of a new
contract will be agreed to or (ii) if AES pursues its legal claims, that it will
be able to compel specific performance or recover significant damages.
In August 1996, a subsidiary of the Company won a bid to
develop, own and operate a 288 MW simple-cycle gas turbine power station in
Townsville, Queensland, Australia. The plant will burn liquefied petroleum gas
and will sell electricity to the Queensland Transmission and Supply Corporation
under a 10-year power purchase agreement. This project is subject to numerous
risks, including those relating to governmental approvals, permitting, financing
and construction of the facility. No assurance can be given that this project
will be completed successfully.
AES has dedicated significant resources to pursue the
development and acquisition of additional projects located in the United States,
Europe, Pakistan, India, Southeast Asia, Central and South America, Africa, the
Middle East and the countries comprising the former Soviet Union. Most of the
Company's current development and acquisition activities are in respect of
projects and plants outside the United States. Acquisitions of existing power
facilities or companies could be accomplished by the payment of cash, by an
exchange of project ownership interests or by the issuance of the Company's
securities. The Company expects that its involvement in connection with any such
acquisitions will be consistent with its overall strategy. In particular, the
Company would generally seek projects of a relatively large size that would
likely be operated by the Company, have long-term power sales contracts, and be
financed, to the maximum extent possible, with debt on a basis that is
substantially non-recourse to AES and its other projects. Based on the Company's
experience, it is likely that no more than a few of these projects or
16
existing plants will be developed or acquired. As of December 31, 1996,
capitalized costs for projects under development were approximately $53 million.
REGULATORY MATTERS
Electricity markets in the United States may be considered to
be more regulated than those in some other countries in which AES is operating,
or is seeking to operate, such as those in Argentina, the United Kingdom and
Australia. U.S. laws and regulations still govern to some extent wholesale
electricity transactions, the type of fuel utilized, the type of energy
produced, and power plant ownership. State regulatory commissions have
jurisdiction over retail electricity transactions. U.S. power projects also are
subject to laws and regulations controlling emissions and other substances
produced by a plant and the siting of plants. These laws and regulations
generally require that a wide variety of permits and other approvals be obtained
before the construction or operation of a power plant commences, and that the
facility operate in compliance with these permits thereafter. FERC must also
approve rates charged by certain power marketers such as those of the Company's
subsidiary, AES Power.
In the United States, so-called Qualifying Facilities ("QFs")
are relieved of compliance with extensive federal, state and local regulations
by the provisions of the Public Utility Regulatory Policies Act, as amended
("PURPA"). Each of AES's current domestic plants is a QF. Loss of QF status, if
not prevented, would subject these plants to more extensive regulations.
Furthermore, loss of QF status would permit the utility customer to alter or
terminate the power sales contract for the Deepwater plant and, in the case of
the AES Beaver Valley, AES Thames and AES Shady Point plants, would permit the
utility customer to pay the lesser of the price under the respective power sales
contract or the rates approved by FERC. The Company believes, however, that it
will usually be able to react in a manner that would avoid the loss of QF
status.
State public utility commissions ("PUCs") regulate both the
retail rates and financial performance of electric utilities. Since a wholesale
power sales contract is generally reflected in a utility's retail rates, power
sales contracts from QFs are indirectly under the regulatory purview of PUCs.
PUCs often will pre-approve contracts with prices that do not exceed so-called
"avoided costs" because such contracts often have been acquired through a
competitive or market-based process. Recognizing the competitive nature of most
acquisition processes, most PUCs will permit utilities to "pass through"
expenses associated with an independent power contract to the utility's retail
17
customers, although no assurance can be given that a PUC will not attempt to
deny the "pass through" of these expenses in the future. The Company believes
that any such attempt by a PUC would, among other things, be pre-empted by
federal law.
AES must obtain exemptions from, or become subject to
regulation by, the Securities and Exchange Commission under the Public Utility
Holding Company Act ("PUHCA") in regard to both its domestic and foreign utility
company holdings. There are a number of exemptions from PUHCA that are available
for both domestic and foreign utility company owners, including those for QFs,
Exempt Wholesale Generators and Foreign Utility Companies. AES has obtained, and
believes that it will be able to obtain and maintain in the future, appropriate
PUHCA exemptions for its utility acquisitions.
U.S. Environmental Regulations
The construction and operation of power projects are subject
to extensive environmental and land use regulation. In the United States those
regulations applicable to AES primarily involve the discharge of effluents into
the water and emissions into the air and the use of water, but can also include
wetlands preservation, endangered species, waste disposal and noise regulation.
These laws and regulations often require a lengthy and complex process of
obtaining licenses, permits and approvals from federal, state and local
agencies. If such laws and regulations are changed and AES's facilities are not
"grandfathered" (that is, made exempt by the fact that the facility pre-existed
the law) or are otherwise not excluded, extensive modifications to a project's
technologies and facilities could be required. If environmental laws or
regulations were to change in the future, there can be no assurance that AES
would be able to recover all or any increased costs from its customers or that
its business and financial condition would not be materially and adversely
affected. In addition, the Company may be required to make significant capital
or other expenditures in connection with such changes in environmental laws or
regulations. Although the Company is not aware of non-compliance with
environmental laws which would have a material adverse effect on the Company's
business or financial condition, at times the Company has been in
non-compliance, although no such instance has resulted in revocation of any
permit or license. While AES expects that environmental and land use regulations
in the United States will continue to become more stringent over time, the
Company is not aware of any currently planned changes in law that would result
in a material adverse effect on its consolidated financial position.
18
Clean Air Act. The original Clean Air Act of 1970 set
guidelines for emissions standards for major pollutants (e.g., SO2 and NOx) from
newly-built sources. In late 1990, Congress passed a set of amendments to the
Clean Air Act (the "1990 Amendments"). All of AES's domestic operating plants
perform at levels better than federal emission standards mandated for such
plants under the Clean Air Act (as amended). The 1990 Amendments attempt to
reduce acid rain precursor emissions (SO2 and NOX) from existing sources --
particularly large, older power plants that were exempted from certain
regulations under the original Clean Air Act. Because AES's facilities are
relatively new cogeneration units with low air emissions that qualify as
"existing sources" under the 1990 Amendments, they have been "grandfathered"
from certain acid rain compliance provisions of the 1990 Amendments. Other
provisions of the Clean Air Act related to the reduction of ozone precursor
emissions (VOC and NOx) have triggered "reasonably available control technology"
("RACT") requirements by various states to reduce such emissions.
The hazardous air pollutant provisions of the 1990 Amendments
presently exclude electric steam generating facilities such as AES's domestic
plants; however, the 1990 Amendments directed that the Environmental Protection
Agency ("EPA" or the "Agency") prepare a study on hazardous air pollutant
("HAP") emissions from power plants. In the fall of 1996, EPA released an
interim report on HAP emissions from power plants that tentatively concluded
that the risk of contracting cancer from exposure to HAPs (except mercury) from
most plants was very low (less than one in 1 million). EPA is developing a
separate study on mercury emissions from power plants. The draft mercury study
report is currently being reviewed by the federal Scientific Advisory Board and
it is not certain when a final report will be released. A final comprehensive
HAP report with recommendations is expected to be issued after EPA's review of
mercury emissions from power plants is complete. If it is determined that
mercury from power plants should be regulated, the use of "maximum available
control technology" ("MACT") for mercury (which is now not subject to
regulation) could be required.
In December 1996, EPA also released proposals to tighten
ambient air quality standards for ozone and small particulate matter (so-called
PM 2.5). If approved, these new standards will likely increase the number of
nonattainment regions for ozone and particulates. These proposals are scheduled
to be finalized in the summer of 1997. If new ozone and particulate matter
nonattainment areas are created, AES's plants may be faced with further emission
reduction requirements that could necessitate the installation of additional
control technology.
19
Further, the Ozone Transport Assessment Group ("OTAG"),
composed of state and local air regulatory officials from the 37 eastern-most
states, is considering additional NOx emission reduction requirements that would
go beyond current federal standards. In January 1997, EPA issued a notice of
intent to require regional reductions in ozone precursors. EPA expects to issue
its call for revisions to state implementation plans ("SIPs") in the spring of
1997. EPA's "SIP call" may implement some of the OTAG recommendations calling
for reductions in NOx emissions. If more stringent NOx standards are adopted by
EPA and/or certain states, AES could be required to install additional NOx
emission control technologies at some of its plants, and/or obtain offsets or
allocations from other emitters of these substances.
The Company does not believe that any of the potential
additional requirements discussed above, if implemented, will have a material
adverse effect on its results of operations and consolidated financial position.
Hazardous Waste Regulation. Based on a 1988 study, EPA has
decided not to regulate most coal combustion ash as a hazardous waste; however,
EPA reserved making a decision with respect to coal ash from fluidized bed
combustion (the burning of coal in the presence of limestone), which is still
being evaluated by the Agency. AES, along with other CFB owners and
manufacturers, is currently participating in a study to evaluate whether or not
CFB ash should be classified as hazardous. EPA is required to make a
determination on whether to regulate CFB ash by April 1, 1998. If EPA decides to
regulate fluidized bed coal ash as a hazardous or special waste, AES could incur
additional ash disposal costs to dispose of ash from its plants that utilize
fluidized bed boilers.
FOREIGN ENVIRONMENTAL REGULATIONS
AES now has ownership interests in operating power plants in a
variety of countries outside the United States (China, Argentina, Brazil, United
Kingdom, Hungary and Kazakstan). Each of these countries and the localities
therein have separate laws and regulations governing the siting, permitting,
ownership and power sales from AES's plants. These laws and regulations are
often quite different than those in effect in the United States--and AES's
non-U.S. businesses have been in substantial compliance with these different
laws and regulations. In addition, projects funded by the World Bank are subject
to World Bank environmental standards, which may be more stringent than local
country standards but are typically not as strict as U.S. standards. Whenever
possible, AES attempts to use advanced environmental cleanup technologies
20
(such as CFB coal technology or advanced gas turbines) in its non-U.S. power
generation projects, in order to minimize environmental impacts.
Based on current trends, AES expects that environmental and
land use regulations affecting its plants located outside the U.S. will likely
become more stringent over time. This appears to be due in part to a greater
participation by local citizenry in the monitoring and enforcement of
environmental laws, better enforcement of applicable environmental laws by the
regulatory agencies, and the adoption of more sophisticated environmental
requirements. If foreign environmental and land use regulations were to change
in the future, the Company may be required to make significant capital or other
expenditures in order to comply. There can be no assurance that AES would be
able to recover all or any increased costs from its customers or that its
business, financial condition or results of operations would not be materially
and adversely affected by future changes in foreign environmental and land use
regulations.
PROPOSED LEGISLATION
In the United States, some states (for example, California,
Illinois, Michigan, Massachusetts and Pennsylvania) have passed or are
considering new legislation that permits utility customers to choose their
electricity supplier in a competitive electricity market (so-called "retail
access" or "customer choice" laws). While such "customer choice" plans differ in
details, they usually share some important elements: (1) they allow customers to
choose their electricity suppliers by a certain date (the dates in the existing
or proposed legislation vary between 1998 and 2003); (2) they allow utilities to
recover so-called "stranded assets"--the remaining costs of uneconomic
generating or regulatory assets; and (3) they reaffirm the validity of existing
QF contracts, and make provisions to assure payment over the contract life.
In order to guarantee payment of utilities' costs and the
costs of QF contracts, some states have used or are proposing to use financial
methods to "securitize" these payments. The "securitization" process might
involve the following steps: first, the financial obligations to be
"securitized" would be legally affirmed through legislation. This legal
obligation then is used to borrow money in public debt markets to pay off the
obligation. The legal obligation allows the borrower to obtain a good credit
rating and therefore a lower interest rate. In some cases, the benefits of the
lower interest rate are passed on to retail electric customers (perhaps in the
form of a rate decrease). "Securitization" of QF contract obligations, if
applied to AES contracts in the future, would significantly reduce the risk to
AES that its power sales contracts would not be honored due to potential
financial difficulties of the utility purchaser.
21
In addition to state restructuring legislation, members of
Congress have proposed new federal legislation to encourage customer choice and
recovery of stranded assets. Some argue that federal legislation is needed to
avoid the "patchwork quilt" effect of each state acting separately to pass
restructuring legislation; others argue that each state should decide whether to
allow retail choice. In early 1997 several bills were (and others are expected
to be) submitted to Congress on electricity restructuring. While it is uncertain
whether or when federal legislation dealing with electricity restructuring might
be passed, it is the opinion of the Company that such legislation would not have
a materially adverse effect on the Company's U.S. business.
In addition to the federal restructuring legislation
proposals, a number of bills have been proposed by members of Congress to repeal
all or portions of PURPA and/or PUHCA--as separate legislation if a
comprehensive restructuring bill fails to pass. The Company believes that the
repeal of PURPA and/or PUHCA is unlikely (and inappropriate) unless it is a part
of a comprehensive restructuring bill.
In anticipation of restructuring legislation, many U.S.
utilities are seeking ways to lower their costs in order to become more
competitive. These include the costs that utilities are required to pay under QF
contracts, which the utilities may view as excessive when compared to current
market prices. Many utilities are therefore seeking ways to lower these contract
prices by renegotiating the contracts, or in some cases by litigation. While the
Company is generally open to renegotiation of existing contracts, it believes
that the aforementioned electricity market restructuring legislation will likely
reduce both the pressure to renegotiate and the need for such contract
renegotiations.
EMPLOYEES
At December 31, 1996, AES and its subsidiaries employed
approximately 5,700 people, approximately 5,500 of whom are involved in
operations or construction. Approximately 50 people are covered by a collective
bargaining agreement at the AES Beaver Valley plant. The total number of people
employed in facilities which AES operates or has an equity interest is
approximately 13,000.
(d) Financial Information About Foreign and Domestic Operations
and Export Sales
See the information contained under the caption "Geographic
Segments" in Note 11 to the Consolidated Financial Statements contained in the
22
Registrant's Current Report on Form 8-K dated March 12, 1997, which information
is incorporated herein by reference.
ITEM 1A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following is certain information concerning the present
executive officers of the Registrant.
Roger W. Sant, 65 years old, co-founded the Company with
Dennis Bakke in 1981. He has been Chairman of the Board and a director of the
Registrant since its inception, and he held the office of Chief Executive
Officer through December 31, 1993. He currently is Chairman of the Board of
Directors of AES Chigen, an affiliate of the Registrant, The Summit Foundation
and The World Wildlife Fund U.S., and serves on the Board of Directors of The
World Resources Institute, World Wide Fund for Nature and Marriott
International, Inc. He was Assistant Administrator for Energy Conservation and
the Environment of the Federal Energy Agency ("FEA") from 1974 to 1976 and the
Director of the Energy Productivity Center, an energy research organization
affiliated with The Mellon Institute at Carnegie-Mellon University, from 1977 to
1981.
Dennis W. Bakke, 51 years old, co-founded the Registrant with
Roger Sant in 1981 and has been a director of the Registrant since 1986. He has
been President of the Registrant since 1987 and Chief Executive Officer since
January 1, 1994. He currently is a director of AES Chigen. From 1987 to 1993, he
served as Chief Operating Officer of the Registrant; from 1982 to 1986, he
served as Executive Vice President of the Registrant; and from 1985 to 1986 he
also served as Treasurer of the Registrant. He served with Mr. Sant as Deputy
Assistant Administrator of the FEA from 1974 to 1976 and as Deputy Director of
the Energy Productivity Center from 1978 to 1981. He is a trustee of Geneva
College, Rivendell School and a member of the Board of Directors of MacroSonics
Corporation.
Kenneth R. Woodcock, 53 years old, has been Senior Vice
President for business development of the Registrant since 1987. From 1984 to
1987, he served as a Vice President for business development.
Thomas A. Tribone, 44 years old, has been Senior Vice
President of the Registrant since 1990, and now heads an AES division
responsible for power marketing, project development, construction and plant
operations in South and Central America. From 1987 to 1990 he served as Vice
President for project development and from 1985 to 1987 he served as project
director of the AES Shady Point plant. He currently is as a director of AES
Chigen.
23
Mark S. Fitzpatrick, 46 years old, has served as a Vice
President of the Registrant since 1987, and became Managing Director of Applied
Energy Services Electric Limited for the United Kingdom and Western Europe
operations in 1990. From 1984 to 1987, he served as a project director of the
AES Beaver Valley and AES Thames projects.
David G. McMillen, 58 years old, was named Vice President of
the Company in December 1991. He was named President of AES Shady Point in 1995
and is currently plant manager of the AES Shady Point Plant. He was President of
AES Thames from 1989 to 1995. From 1985 to 1988, he served as plant manager of
the AES Beaver Valley plant and from 1986 to 1988 he served as President of AES
Beaver Valley.
Dr. Roger F. Naill, 49 years old, has been Vice President for
planning since 1981. Prior to joining the Registrant, Dr. Naill was Director of
the Office of Analytical Services at the U.S. Department of Energy.
Barry J. Sharp, 37 years old, has been Vice President and
Chief Financial Officer since 1987. He also served as Secretary of the
Registrant until February 1996. From 1986 to 1987, he served as Director of
Finance and Administration. Mr. Sharp is a CPA.
J. Stuart Ryan, 38 years old, was appointed Vice President of
the Registrant effective January 1, 1994, and heads an AES division responsible
for project development, construction and plant operations in Asia (excluding
China), California and Hawaii. He served as general manager of a group within
AES from 1988 to 1993.
Paul T. Hanrahan, 39 years old, was appointed Vice President
of the Registrant effective January 1, 1994. He currently is President and Chief
Executive Officer of AES Chigen, where he served as Executive Vice President,
Chief Operating Officer and Secretary from December 1993 until February 1995. He
was General Manager of AES Transpower, Inc., a subsidiary of the Registrant,
from 1990 to 1993.
John Ruggirello, 46 years old, was appointed Vice President of
the Registrant effective January 1997, and heads an AES division responsible for
project development, construction and plant operations in North America
(excluding Oklahoma, Hawaii and parts of California). He served as President of
AES Beaver Valley from 1990 to 1996.
24
ITEM 2. PROPERTIES
The Registrant leases its principal office in Arlington,
Virginia. The Arlington lease expires in April 1999, and the Registrant has two
renewal options thereafter for five years each. Subsidiaries of the Registrant
also lease office space in Richmond, England; San Francisco, California; San
Juan, Puerto Rico; Hong Kong; Beijing, China; Singapore; Buenos Aires,
Argentina; New Delhi, India; Lahore, Pakistan; Brisbane, Australia; Taipei,
Taiwan; Bangkok, Thailand; Rio de Janeiro, Brazil; and Sao Paulo, Brazil, none
of which leases or leased premises is material.
The following table shows the material properties owned or
leased by the Registrant, its subsidiaries, partnerships or affiliated plants.
Except as noted, all of these properties are subject to mortgages or other liens
or encumbrances granted to the lenders providing financing for the plant or
project.
Land
Interest
Plant or Project Location Held Plant Description
- ------------------------------- ----------------------- ----------------- ------------------------------------
AES Deepwater Houston, Texas Owned1 Coke-fired cogeneration power plant
AES Beaver Valley Monaca, Pennsylvania Leased Coal-fired cogeneration power plant
AES Placerita Newhall, California Leased Natural gas-fired cogeneration
power plant
AES Thames Montville, Connecticut Leased Coal-fired cogeneration power plant
AES Shady Point LeFlore County, Owned Coal-fired cogeneration facility
Oklahoma and liquid carbon dioxide power
plant
- ----------
1 Owmership by an owner trust for the benefit of bondholders; a subsidiary of
AES is now the owner of all outstanding bonds.
25
Land
Interest
Plant or Project Location Held Plant Description
- ------------------------------- ----------------------- ----------------- ------------------------------------
AES Barbers Point Oahu, Hawaii Leased Coal-fired cogeneration power plant
Kilroot Belfast Lough, Leased Coal and oil-fired power plant
Northern Ireland
Belfast West Belfast Port, Leased Coal-fired power plant
Northern Ireland
Medway Isle of Grain, England Leased Gas-fired power plant
Borsod (Tiszai) Kazincbarcika, Hungary Owned2 Coal-fired power station and two
underground coal mines
Tisza II (Tiszai) Tiszaujvaros, Hungary Owned2 Oil and natural gas-fired power
plant
Tiszapalkonya (Tiszai) Tiszapalkonya, Hungary Owned2 Coal-fired cogeneration power plant
Cili Misty Mountain Hunan Province, Land Use Right2 Hydroelectric power plants
People's Republic of
China
Yangchun Sun Spring Guangdong Province, Land Use Right2 Diesel power plant
People's Republic of
China
- ----------
2 Not subject to mortgages, liens or encumbrances in favor of any lenders.
26
Land
Interest
Plant or Project Location Held Plant Description
- ------------------------------- ----------------------- ----------------- ------------------------------------
Wuxi Tin Hill Jiangsu Province, Land Use Right2 Oil-fired gas turbine and heat
People's Republic of recovery steam turbine power
China plants currently under
construction
Wuhu Grassy Lake Anhui Province, Land Use Right2 Coal-fired power plant
People's Republic of
China
Ekibastuz Pavlodar Region, Land Use Right2 Coal-fired power plant
Kazakstan
San Nicolas San Nicolas, Argentina Owned Power plant fueled by coal, oil,
gas or petroleum coke
Rio Juramento Salta, Argentina Leased Hydroelectric power plants
San Juan San Juan, Argentina Leased Hydroelectric power plants
AES Lal Pir and Pak Gen Punjab, Pakistan Owned Oil-fired power plants under
construction
Jiaozuo Aluminum Power Henan Province, Land Use Right2 Coal-fired power plant
People's Republic of
China
Chengdu Lotus City Sichuan Province, Land Use Right2 Natural gas-fired power plant
People's Republic of
China
27
Land
Interest
Plant or Project Location Held Plant Description
- ------------------------------- ----------------------- ----------------- ------------------------------------
Aixi Heart River Sichuan Province, Land Use Right2 Coal-fired power plant currently
People's Republic of under construction
China
- ----------
2 Not subject to mortgages, liens or encumbrances in favor of any lenders.
Hefei Prosperity Lake Anhui Province, Land Use Right2 Oil-fired cogeneration power plant
People's Republic of
China
Barry Barry, United Kingdom Leased Gas-fired power plant
AES Warrior Run Cumberland, Maryland Owned Coal-fired power plant under
construction
- ----------
2 Not subject to mortgages, liens or encumbrances in favor of any lenders.
ITEM 3. LEGAL PROCEEDINGS
In November 1996, an action was filed against AES in the Court
of Chancery of the State of Delaware in and for New Castle County, by a holder
of 750 shares of AES Chigen Class A Common Stock, individually and on behalf of
a purported class of public shareholders of the approximately 8.2 million
outstanding shares of AES Chigen Class A Common Stock. AES Chigen is not named
in the suit. An amended complaint was filed by the plaintiff on March 7, 1997.
The amended complaint seeks preliminarily and permanently to enjoin AES from
acquiring the outstanding shares of AES Chigen which it does not already own. In
addition, the amended complaint seeks unspecified damages, including attorneys'
fees and costs. In the original complaint, plaintiff's allegations state that
AES, as the controlling shareholder of AES Chigen, breached its fiduciary duties
to treat the plaintiff class with entire fairness in connection with AES's
execution of an agreement with AES Chigen to acquire the outstanding AES Chigen
Class A Common Stock at an allegedly grossly inadequate price. Plaintiff's
amended complaint supplements the prior complaint and asserts claims that, among
others things, AES breached its duty
28
of candor to the plaintiff class. On March 13, 1997, counsel for the parties
reached an agreement in principle to resolve the lawsuit, subject to court
approval and the satisfaction of certain other conditions.
In February 1993, an action was filed in the 10th Judicial
District Court, Galveston County, Texas against the Company, over 25 other
corporations (including major oil refineries and chemical companies) and
utilities, a utility district, four Texas cities, McGinnes Industrial
Maintenance Corporation, Roland McGinnes and Lawrence McGinnes, claiming
personal injuries, property, and punitive damages of $20 billion, arising from
alleged releases of hazardous and toxic substances to air, soil and water at the
McGinnes waste disposal site located in Galveston County. This matter was
consolidated with two other related cases in December 1993. The complaint sets
forth numerous causes of action, including fraudulent concealment, negligence
and strict liability, including, among other things, allegations that the
defendants sent hazardous, toxic and noxious chemicals and other waste products
to the McGinnes site for disposal. In March 1995, the Company entered into a
settlement agreement with certain plaintiffs, pursuant to which the Company paid
seven thousand dollars in return for withdrawal of their claims against the
Company. In October 1995 an amended complaint was filed in which several of the
original causes of action have been dropped. The claims for negligence, strict
liability and fraudulent concealment are still included. A number of original
defendants have also been dismissed from the case. Based on the Company's
investigation of the case to date, the Company believes it has meritorious
defenses to each and every cause of action stated in the complaint and this
action is being vigorously defended. The Company believes that the outcome of
this matter will not have a material adverse effect on its consolidated
financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
29
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information
PRICE RANGE OF COMMON STOCK
The common stock of the Company is currently traded on the New
York Stock Exchange Composite Transaction reporting system (the "NYSE") under
the symbol "AES". All stock prices from January 1, 1995 to and including October
15, 1996 were quoted on the Nasdaq National Market System ("Nasdaq") under the
symbol "AESC". The following table sets forth the high and low sale prices for
the common stock as reported by Nasdaq or the NYSE for the periods indicated.
- ------------------------ ---------------------- -----------------------
1995 High Low
- ------------------------ ---------------------- -----------------------
First Quarter $ 193/4 $ 16
Second Quarter 191/4 16
Third Quarter 215/8 181/2
Fourth Quarter 24 183/4
- ------------------------ ---------------------- -----------------------
1996 High Low
- ------------------------ ---------------------- -----------------------
First Quarter $ 251/4 $ 21
Second Quarter 295/8 221/4
Third Quarter 401/2 277/8
Fourth Quarter 501/8 391/4
- ------------------------ ---------------------- -----------------------
(b) Holders
On March 3, 1997, there were 731 record holders of
Registrant's Common Stock, par value $0.01 per share.
(c) Dividends
Under the terms of a corporate revolving loan and letters of
credit facility of $425 million entered into with a commercial bank syndicate,
the Company is currently prohibited from paying cash dividends. In addition, the
Registrant is precluded from paying cash dividends on its Common Stock under the
terms of a guaranty to the utility customer in connection with the AES Thames
project in the event certain net worth and liquidity tests of the Registrant are
not met. The Registrant has met these tests at all times since making the
guaranty.
30
The ability of the Registrant's project subsidiaries to declare and pay cash
dividends to the Registrant is subject to certain limitations in the project
loan and other documents entered into by such project subsidiaries. Such
limitations permit the payment of cash dividends out of current cash flow for
quarterly, semiannual or annual periods only at the end of such periods and only
after payment of principal and interest on project loans due at the end of such
periods, and in certain cases after providing for debt service reserves. As of
December 31, 1996, approximately $63 million was available under project loan
documents for distribution by subsidiaries to the Registrant.
31
ITEM 6. SELECTED FINANCIAL DATA
(in millions, except per share data)
- ------------------------------------------------ ------------- ------------- ------------- ------------- -------------
For the Years Ended December 31 1996 1995 1994 1993 1992
- ------------------------------------------------ ------------- ------------- ------------- ------------- -------------
Statement of Operations Data
Revenues $ 835 $ 679 $ 533 $ 519 $ 401
Operating costs and expenses 557 426 297 323 246
Operating income 278 253 236 196 155
Income before income taxes, minority
interest, and extraordinary item 193 167 145 89 66
Extraordinary item ---- ---- 2 ---- ----
Net income 125 107 100 71 56
Net income per share:
Before extraordinary item 1.62 1.41 1.30 0.98 0.80
Extraordinary item ---- ---- 0.02 ---- ----
Net income per share 1.62 1.41 1.32 0.98 0.80
Dividends per share - common stock ---- ---- ---- 0.58 0.39
- ------------------------------------------------ ------------- ------------- ------------- ------------- -------------
As of December 31 1996 1995 1994 1993 1992
- ------------------------------------------------ ------------- ------------- ------------- ------------- -------------
Balance Sheet Data
Total assets $3,622 $2,341 $1,915 $1,687 $1,552
Revolving bank loan (current) 88 50 ---- ---- ----
Project financing debt (long term) 1,558 1,098 1,019 1,075 1,146
Other notes payable (long term) 450 125 125 125 50
Stockholders' equity 721 549 401 309 177
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
See the section entitled "Discussion and Analysis of Financial
Condition and Results of Operations" contained in the Registrant's Current
Report on Form 8-K dated March 12, 1997, which discussion and analysis are
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the information contained in the consolidated financial
statements contained in the Registrant's Current Report on Form 8-K dated March
12, 1997, which information is incorporated herein by reference.
32
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See the information with respect to the ages of the
Registrant's directors in the table on page 5 and the information contained
under the caption "Election of Directors" on pages 2 through 4 inclusive, of the
Proxy Statement for the Annual Meeting of Stockholders of the Registrant to be
held on April 15, 1997, which information is incorporated herein by reference.
See also the information with respect to executive officers of the Registrant
under Item 1A of Part I hereof, which information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
See the information contained under the captions "Compensation
of Executive Officers" on pages 11 through 13 inclusive and "Compensation of
Directors" on page 6, of the Proxy Statement for the Annual Meeting of
Stockholders of the Registrant to be held on April 15, 1997, which information
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
See the information contained under the caption "Security
Ownership of Certain Beneficial Owners, Directors, and Executive Officers" on
page 5 of the Proxy Statement for the Annual Meeting of Stockholders of the
33
Registrant to be held on April 15, 1997, which information is incorporated
herein by reference.
(b) Security Ownership of Management
See the information contained under the caption "Security
Ownership of Certain Beneficial Owners, Directors, and Executive Officers" on
page 5 of the Proxy Statement for the Annual Meeting of Stockholders of the
Registrant to be held on April 15, 1997, which information is incorporated
herein by reference.
(c) Changes in Control
Not applicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits.
(1) Financial Statements (all financial statements listed
below are of the Company and its consolidated subsidiaries)
-- Report of Independent Auditors is incorporated herein by
reference to the Registrant's Current Report on Form 8-K dated March 12, 1997.
-- Consolidated Balance Sheets at December 31, 1995 and 1996
are incorporated herein by reference to the Registrant's Current Report on Form
8-K dated March 12, 1997.
-- Consolidated Statements of Operations -- For the Years
Ended December 31, 1994, 1995 and 1996 are incorporated herein by reference to
the Registrant's Current Report on Form 8-K dated March 12, 1997.
-- Consolidated Statements of Cash Flows -- For the Years
Ended December 31, 1994, 1995 and 1996 are incorporated herein by reference to
the Registrant's Current Report on Form 8-K dated March 12, 1997.
-- Notes to Consolidated Financial Statements -- For the Years
Ended December 31, 1994, 1995 and 1996 are incorporated herein by reference to
the Registrant's Current Report on Form 8-K dated March 12, 1997.
34
(2) Financial Statement Schedules
-- See Index to Financial Statement Schedules of the
Registrant and subsidiaries at page S-1 hereof, which Index is incorporated
herein by reference.
(3) Exhibits
3.1 Amended and Restated Certificate of Incorporation of The
AES Corporation is incorporated herein by reference to Exhibit 3.1 to the
Registration Statement on Form S-1 (Registration No. 33-40483).
3.2 By-Laws of The AES Corporation, as amended, are
incorporated herein by reference to Exhibit 3.2 to the Registration Statement on
Form S-4 (Registration No. 333-22513).
4.1(a) Indenture dated as of June 15, 1993 between The AES
Corporation and The Bank of New York, including the form of 9 3/4 percent Senior
Subordinated Note Due 2000, is incorporated herein by reference to Amendment No.
1 to the Registration Statement on Form S-3 (Registration No. 33-62910).
4.1(b) Form of Indenture dated as of July 1, 1996 between The
AES Corporation and The First National Bank of Chicago, as Trustee, for the
issuance from time to time of debentures, notes and other evidences of
indebtedness is incorporated herein by reference to Exhibit 4.1 to the
Registration Statement on Form S-3 (Registration No. 333-01286).
4.1(c) First Supplemental Indenture dated as of July 1, 1996
(Supplemental to Indenture dated as of July 1, 1996) between The AES Corporation
and The First National Bank of Chicago, as Trustee, including the form of 10 1/4
percent Senior Subordinated Notes Due 2006, is incorporated herein by reference
to Exhibit 4.1(c) to the Current Report on Form 8-K of the Registrant dated July
1, 1996.
10.1 Agreement for Purchased Power, dated January 10, 1983,
between AES and Houston Lighting & Power Company, as amended, is incorporated
herein by reference to Exhibit 10.1 to the Registration Statement on Form S-1
(Registration No. 33-40483).
10.2 Electric Energy Purchase Agreement, dated August 15,
1985, between BV Partners and West Penn Power Company is incorporated herein by
reference to Exhibit 10.2 to the Registration Statement on Form S-1
(Registration No. 33-40483).
35
10.3 Electricity Purchase Agreement, dated as of December
6, 1985, between The Connecticut Light and Power Company and AES Thames, Inc. is
incorporated herein by reference to Exhibit 10.4 to the Registration Statement
on Form S-1 (Registration No. 33-40483).
10.4 Amended Power Sales Agreement, dated as of December
10, 1985, between Oklahoma Gas and Electric Company and AES Shady Point, Inc. is
incorporated herein by reference to Exhibit 10.5 to the Registration Statement
on Form S-1 (Registration No. 33-40483).
10.5 Power Purchase Agreement, dated March 25, 1988,
between AES Barbers Point, Inc. and Hawaiian Electric Company, Inc., as amended,
is incorporated herein by reference to Exhibit 10.6 to the Registration
Statement on Form S-1 (Registration No. 33-40483).
10.6 Amended and Restated Coal Supply Agreement, dated
April 13, 1988, between BV Partners and United Pittsburgh Coal Sales, Inc. is
incorporated herein by reference to Exhibit 10.8 to the Registration Statement
on Form S-1 (Registration No. 33-40483).
10.7 Coal and Limestone Supply and Ash Disposal Agreement,
dated as of September 15, 1988, between LeFlore County Coal Company and AES
Shady Point, Inc., as amended, is incorporated herein by reference to Exhibit
10.9 to the Registration Statement on Form S-1 (Registration No.
33-40483).
10.8 Coal and Limestone Supply and Ash Disposal
Agreement, dated August 15, 1988, between P&K Co., Ltd. and AES Shady Point,
Inc. is incorporated herein by reference to Exhibit 10.10 to Amendment No. 3 to
the Registration Statement on Form S-1 (Registration No. 33-40483).
10.9 Coal, Limestone, Waste Disposal and Railroad
Transportation Agreement, dated as of September 18, 1986, between CSX
Transportation, Inc. and AES Thames, Inc., as amended, is incorporated herein by
reference to Exhibit 10.11 to the Registration Statement on Form S-1
(Registration No. 33-40483).
10.10 Amended and Restated Fuel Supply Agreement, dated as of
January 12, 1990, among AES Barbers Point, Inc., PT Kaltim Prima Coal and
Sprague Energy Corp., as amended, is incorporated herein by reference to Exhibit
10.12 to Amendment No. 3 to the Registration Statement on Form S-1 (Registration
No. 33-40483).
36
10.11 Inducement, Assignment and Stock Pledge Agreement,
dated as of December 27, 1983, between Applied Energy Services, Inc. and The
Connecticut Bank and Trust Company, National Association is incorporated herein
by reference to Exhibit 10.16 to the Registration Statement on Form S-1
(Registration No. 33-40483).
10.12 Amended and Restated Guarantee, dated as of November
30, 1990, by Applied Energy Services, Inc. and AES Connecticut Management, Inc.
to The Connecticut Light and Power Company is incorporated herein by reference
to Exhibit 10.17 to the Registration Statement on Form S-1 (Registration No.
33-40483).
10.13 Guarantee Agreement, dated March 25, 1988, between
Applied Energy Services Inc. and Hawaiian Electric Company, Inc., as amended, is
incorporated herein by reference to Exhibit 10.18 to the Registration Statement
on Form S-1 (Registration No. 33-40483).
10.14 Application for Letter of Credit and Reimbursement
Agreement, dated as of June 23, 1987, among AES Shady Point, Inc., Security
Pacific National Bank, Union Bank, Credit Suisse, New York Branch, The Bank of
Nova Scotia and Standard Chartered Bank is incorporated herein by reference to
Exhibit 10.20 to the Registration Statement on Form S-1 (Registration No.
33-40483).
10.15 Amended and Restated Credit Agreement, dated as of
November 30, 1990, among AES Montville, Inc., certain banks named therein and
Citibank, N.A., as agent, is incorporated herein by reference to Exhibit 10.21
to the Registration Statement on Form S-1 (Registration No. 33-40483).
10.16 Ground Lease, dated as of August 15, 1985, between
Atlantic Richfield Company and BV Partners is incorporated herein by reference
to Exhibit 10.22 to the Registration Statement on Form S-1 (Registration No.
33-40483).
10.17 Ground Lease, dated as of November 25, 1986, between
Stone Connecticut Paperboard Corporation and AES Thames, Inc., as amended, is
incorporated herein by reference to Exhibit 10.26 to the Registration Statement
on Form S-1 (Registration No. 33-40483).
10.18 Sublease, dated as of August 20, 1990, between
Hawaii Pacific Industries, Inc. and AES Barbers Point, Inc., as amended, is
incorporated herein by reference to Exhibit 10.27 to the Registration Statement
on Form S-1 (Registration No. 33-40483).
37
10.19 The AES Corporation Profit Sharing and Stock Ownership
Plan is incorporated herein by reference to Exhibit 4c1 to the Registration
Statement on Form S-8 (Registration No. 33-49262).*
10.20 The AES Corporation Incentive Stock Option Plan of 1991,
as amended, is incorporated herein by reference to Exhibit 10.30 to the Annual
Report on Form 10-K of the Registrant for the fiscal year ended December 31,
1995.*
10.21 Applied Energy Services, Inc. Incentive Stock Option
Plan of 1982 is incorporated herein by reference to Exhibit 10.31 to the
Registration Statement on Form S-1 (Registration No. 33-40483).*
10.22 Deferred Compensation Plan for Executive Officers,
as amended, is incorporated herein by reference to Exhibit 10.32 to Amendment
No. 1 to the Registration Statement on Form S-1 (Registration No. 33-40483).*
10.23 Deferred Compensation Plan for Directors, as
amended, is incorporated herein by reference to Exhibit 10.33 to Amendment No. 1
to the Registration Statement on Form S-1 (Registration No. 33-40483).*
10.24 Assumption Agreement, dated as of November 30, 1990
among AES Montville, Inc., AES Thames, Inc. and Citibank, N.A., as agent, is
incorporated herein by reference to Exhibit 10.35 to Amendment No. 1 to the
Registration Statement on Form S-1 (Registration No. 33-40483).
10.25 Credit and Reimbursement Agreement, dated as of March
20, 1990, among AES Barbers Point, Inc., certain banks named therein and
Security Pacific National Bank, as agent, is incorporated herein by reference to
Exhibit 10.36 to Amendment No. 1 to the Registration Statement on Form S-1
(Registration No. 33-40483).
10.26 Transmission Agreement, dated as of August 28, 1985,
between Duquesne Light Company and AES Beaver Valley, Inc. is incorporated
herein by reference to Exhibit 10.42 to Amendment No. 1 to the Registration
Statement on Form S-1 (Registration No. 33-40483).
10.27 The AES Corporation Stock Option Plan for Outside
Directors is incorporated herein by reference to Exhibit 10.43 to the Annual
Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1991.*
10.28 Subordinated Debt Agreement between AES Shady Point,
Inc. and The AES Corporation dated as of December 6, 1991 is incorporated
38
herein by reference to Exhibit 10.44 to the Registration Statement on Form S-1
(Registration No. 33-46011).
10.29 First Amendment to the Amended Power Sales
Agreement, dated as of December 19, 1985, between Oklahoma Gas and Electric
Company and AES Shady Point, Inc. is incorporated herein by reference to Exhibit
10.45 to the Registration Statement on Form S-1 (Registration No. 33-46011).
10.30 Amendment No. 1 dated as of July 16, 1987 to Application
for Letter of Credit and Reimbursement Agreement, dated as of June 23, 1987,
among AES Shady Point, Inc., Security Pacific National Bank, Union Bank, Credit
Suisse, New York Branch, The Bank of Nova Scotia and Standard Chartered Bank is
incorporated herein by reference to Exhibit 10.47 to the Registration Statement
on Form S-1 (Registration No. 33-46011).
10.31 Amendment No. 2 dated as of December 18, 1987 to
Application for Letter of Credit and Reimbursement Agreement, dated as of June
23, 1987, among AES Shady Point, Inc., Security Pacific National Bank, Union
Bank, Credit Suisse, New York Branch, The Bank of Nova Scotia and Standard
Chartered Bank is incorporated herein by reference to Exhibit 10.48 to the
Registration Statement on Form S-1 (Registration No. 33-46011).
10.32 Amendment No. 3 dated as of June 3, 1988 to Application
for Letter of Credit and Reimbursement Agreement, dated as of June 23, 1987,
among AES Shady Point, Inc., Security Pacific National Bank, Union Bank, Credit
Suisse, New York Branch, The Bank of Nova Scotia and Standard Chartered Bank is
incorporated herein by reference to Exhibit 10.49 to the Registration Statement
on Form S-1 (Registration No. 33-46011).
10.33 Amendment No. 4 dated as of July 1, 1991 to Application
for Letter of Credit and Reimbursement Agreement, dated as of June 23, 1987,
among AES Shady Point, Inc., Security Pacific National Bank, Union Bank, Credit
Suisse, New York Branch, The Bank of Nova Scotia and Standard Chartered Bank is
incorporated herein by reference to Exhibit 10.50 to the Registration Statement
on Form S-1 (Registration No. 33-46011).
10.34 Amendment No. 5 dated as of December 6, 1991 to
Application for Letter of Credit and Reimbursement Agreement, dated as of June
23, 1987, among AES Shady Point, Inc., Security Pacific National Bank, Union
Bank, Credit Suisse, New York Branch, The Bank of Nova Scotia and Standard
Chartered Bank is incorporated herein by reference to Exhibit 10.51 to the
Registration Statement on Form S-1 (Registration No. 33-46011).
39
10.35 Agreement for the sale and purchase of the whole of the
issued share capital of Kilroot Power Limited, Belfast West Power Limited and
Cloghan Point (Holdings) Limited dated March 6, 1992 between The Department of
Economic Development, Nigen Limited, The AES Corporation and Powerfin S.A., is
incorporated herein by reference to Exhibit 10.54 to the Annual Report on Form
10-K of the Registrant for the fiscal year ended December 31, 1992.
10.36 Variation Agreement dated May 31, 1992 between Cloghan
Limited, The Department of Economic Development, Nigen Limited, The AES
Corporation and Powerfin S.A., is incorporated herein by reference to Exhibit
10.55 to the Annual Report on Form 10-K of the Registrant for the fiscal year
ended December 31, 1992.
10.37 Lease of Belfast West Power Station dated April 1, 1992
between Northern Ireland Electricity plc and Belfast West Power Limited, is
incorporated herein by reference to Exhibit 10.56 to the Annual Report on Form
10-K of the Registrant for the fiscal year ended December 31, 1992.
10.38 Lease of Kilroot Power Station dated April 1, 1992
between Northern Ireland Electricity plc and Kilroot Power Limited, is
incorporated herein by reference to Exhibit 10.57 to the Annual Report on Form
10-K of the Registrant for the fiscal year ended December 31, 1992.
10.39 Facility Agreement dated May 31, 1992 between Nigen
Limited, Barclays Bank PLC and National Westminster Bank Plc as Lead Arrangers,
ABN AMRO Bank N.V., Banque Indosuez, Barclays Bank PLC, The Industrial Bank of
Japan, Limited and National Westminster Bank Plc as arrangers, Generale Bank
S.A./NV as sponsor relationship bank, Barclays Bank PLC as agent, Ulster Bank
Limited and the financial institutions named in the first schedule thereto, is
incorporated herein by reference to Exhibit 10.58 to the Annual Report on Form
10-K of the Registrant for the fiscal year ended December 31, 1992.
10.40 Coal and Oil Supply Contract for Kilroot Power Station
dated May 31, 1992 between Powerfin S.A., Tractebel S.A. and Kilroot Power
Limited, is incorporated herein by reference to Exhibit 10.59 to the Annual
Report on Form 10-K of the Registrant for the fiscal year ended December 31,
1992.
10.41 Coal Supply Contract for Belfast West Power Station
dated May 31, 1992 between Powerfin S.A., Tractebel S.A. and Belfast West Power
Limited, is incorporated herein by reference to Exhibit 10.60 to the Annual
Report on Form 10-K of the Registrant for the fiscal year ended December 31,
1992.
40
10.42 Agreement in Respect of Kilroot Power Station Generating
Unit GT1 dated April 1, 1992 between Kilroot Power Limited and Northern Ireland
Electricity plc., is incorporated herein by reference to Exhibit 10.61 to the
Annual Report on Form 10-K of the Registrant for the fiscal year ended December
31, 1992.
10.43 Schedule identifying a substantially identical agreement
to the Agreement constituting Exhibit 10.42 hereto entered into between Kilroot
Power Limited and Northern Ireland Electricity plc., is incorporated herein by
reference to Exhibit 10.61(a) to the Annual Report on Form 10-K of the
Registrant for the fiscal year ended December 31, 1992.
10.44 Agreement in Respect of Kilroot Power Station Generating
Unit No. 1 dated April 1, 1992 between Kilroot Power Limited and Northern
Ireland Electricity plc., is incorporated herein by reference to Exhibit 10.62
to the Annual Report on Form 10-K of the Registrant for the fiscal year ended
December 31, 1992.
10.45 Schedule identifying a substantially identical agreement
to the Agreement constituting Exhibit 10.44 hereto entered into between Kilroot
Power Limited and Northern Ireland Electricity plc., is incorporated herein by
reference to Exhibit 10.62(a) to the Annual Report on Form 10-K of the
Registrant for the fiscal year ended December 31, 1992.
10.46 Agreement in Respect of Belfast West Power Station
Generating Unit No. 1 dated April 1, 1992 between Belfast West Power Limited and
Northern Ireland Electricity plc., is incorporated herein by reference to
Exhibit 10.63 to the Annual Report on Form 10-K of the Registrant for the fiscal
year ended December 31, 1992.
10.47 Schedule identifying substantially identical agreements
to the Agreement constituting Exhibit 10.46 hereto entered into between Belfast
West Power Limited and Northern Ireland Electricity plc., is incorporated herein
by reference to Exhibit 10.63(a) to the Annual Report on Form 10-K of the
Registrant for the fiscal year ended December 31, 1992.
10.48 $425,000,000 Credit Agreement dated as of May 20, 1996
among The AES Corporation, the Banks listed therein, Barclays Bank PLC, Morgan
Guaranty Trust Company of New York and Union Bank of California, N.A., as
Fronting Banks, and Morgan Guaranty Trust Company of New York, as Agent is
incorporated herein by reference to Exhibit 10.61 to the Company's Current
Report on Form 8-K dated June 10, 1996.
41
10.49 Shareholders' Agreement dated as of May 27, 1996 among
AES Coral Reef, Inc., Companhia Siderurgica Nacional, EDF International S.A.,
Houston Industries Energy - Cayman, Inc. (the "Shareholders") and BNDES
Participacoes S.A. is incorporated herein by reference to Exhibit 10.67 to the
Company's Current Report on Form 8-K dated June 10, 1996.
10.50 Addendum to Shareholders Agreement dated as of May 30,
1996 among the Shareholders and InvestLight - Clube de Investimento dos
Empregados da Light is incorporated herein by reference to Exhibit 10.68 to the
Company's Current Report on Form 8-K dated June 10, 1996.
10.51 The AES Corporation Supplemental Retirement Plan is
incorporated herein by reference to Exhibit 10.64 to the Annual Report on Form
10-K of the Registrant for the year ended December 31, 1994.*
10.52 Sponsors' Support Agreement dated as of May 16, 1995
among AES Transpower, Inc. and The AES Corporation as Sponsors; AES Lal Pir
Limited as the Borrower; the International Finance Corporation and The Bank of
Tokyo, Ltd. as Facility Agents, is incorporated herein by reference to Exhibit
10.30 to the Annual Report on Form 10-K of the Registrant for the fiscal year
ended December 31, 1995.
10.53 Sponsors' Support Agreement dated as of January 5, 1996
among The AES Corporation as Sponsor; AES Pakistan Holdings and AES Pak Gen
Holdings, Inc. as Sponsors and Shareholders; AES Pak Gen (Private) Company as
Borrower; the International Finance Corporation and The Bank of Tokyo, Ltd. as
Facility Agents, is incorporated herein by reference to Exhibit 10.30 to the
Annual Report on Form 10-K of the Registrant for the fiscal year ended December
31, 1995.
10.54 Asset Purchase Agreement dated as of February 17, 1997
by and between NGC Corporation and The AES Corporation.
42
11 Statement of computation of earnings per share is
incorporated herein by reference to Exhibit 11 to the Company's Current Report
on Form 8-K dated March 12, 1997.
12 Statement of computation of ratio of earnings to fixed
charges is incorporated herein by reference to Exhibit 12 to the Company's
Current Report on Form 8-K dated March 12, 1997.
21 Significant subsidiaries of The AES Corporation.
23 Consent of Independent Auditors, Deloitte & Touche LLP.
24 Powers of Attorney.
27 Financial Data Schedule (Article 5) is incorporated
herein by reference to Exhibit 27 to the Company's Current Report on Form 8-K
dated March 12, 1997.
99 Current Report on Form 8-K of the Registrant dated
March 12, 1997.
* indicates that exhibit is a compensatory plan or arrangement.
(b) Reports on Form 8-K
Registrant filed a Current Report on Form 8-K dated November
13, 1996 in respect of Registrant's press release dated November 12, 1996
announcing that Registrant had entered into an agreement to acquire all the
outstanding shares of the Class A Common Stock of AES Chigen.
43
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 28, 1997
THE AES CORPORATION
(Company)
By: /s/ Dennis W. Bakke
-------------------------
Name: Dennis W. Bakke
Title: President
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Company and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Roger W. Sant *
- ---------------------------------------- Chairman of the Board March 28, 1997
(Roger W. Sant)
/s/ Dennis W. Bakke
- ---------------------------------------- President, Chief Executive March 28, 1997
(Dennis W. Bakke) Officer (principal executive
officer) and Director
/s/ Vicki-Ann Assevero *
- ---------------------------------------- March 28, 1997
(Vicki-Ann Assevero) Director
/s/ Alice F. Emerson *
- ---------------------------------------- March 28, 1997
(Dr. Alice F. Emerson) Director
/s/ Robert F. Hemphill, Jr. *
- ---------------------------------------- March 28, 1997
(Robert F. Hemphill, Jr.) Director
/s/ Frank Jungers *
- ---------------------------------------- March 28, 1997
(Frank Jungers) Director
44
SIGNATURE TITLE DATE
/s/ Henry R. Linden *
- ---------------------------------------- March 28, 1997
(Dr. Henry R. Linden) Director
- ---------------------------------------- March , 1997
(John H. McArthur) Director
/s/ Russell E. Train *
- ---------------------------------------- March 28, 1997
(Russell E. Train) Director
/s/ Thomas I. Unterberg *
- ---------------------------------------- March 28, 1997
(Thomas I. Unterberg) Director
/s/ Robert H. Waterman, Jr. *
- ---------------------------------------- March 28, 1997
(Robert H. Waterman, Jr.) Director
/s/ Barry J. Sharp
- ---------------------------------------- Vice President and Chief March 28, 1997
(Barry J. Sharp) Financial Officer (principal
financial and accounting officer)
*By: /s/ William R. Luraschi
-------------------------
Attorney-in-fact
45
THE AES CORPORATION AND SUBSIDIARIES
- ------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
INDEPENDENT
S- 2 Independent Auditors' Report
S- 3 Schedule I - Condensed Financial Information of Registrant
S- 8 Schedule II - Valuation and Qualifying Accounts
Schedules other than those listed above are omitted as the
information is either not applicable, not required, or has been furnished in the
financial statements or notes thereto incorporated by reference in Item 8
hereof.
S-1
INDEPENDENT AUDITORS' REPORT
To the Stockholders of The AES Corporation:
We have audited the consolidated financial statements of The AES Corporation as
of December 31, 1996 and 1995, and for each of the three years in the period
ended December 31, 1996, and have issued our report thereon dated January 30,
1997, except for Note 13, as to which the date is February 18, 1997; such
consolidated financial statements and report are included in your Current Report
on Form 8-K dated March 12, 1997 and are incorporated herein by reference. Our
audits also included the consolidated financial statement schedules of The AES
Corporation, listed in the index to the consolidated financial statement
schedules on page S-1. These consolidated financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such consolidated financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
Washington, D.C.
January 30, 1997
S-2
THE AES CORPORATION SCHEDULE I
--------------------------------------------- ------------------------------------------
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
UNCONSOLIDATED BALANCE SHEETS
(in millions)
ASSETS December 31
- ------------------------------------------------------- -------------------------------
1995 1996
Current Assets:
Cash and cash equivalents $ 2 $ 5
Accounts receivable 2 2
Accounts and notes receivable from subsidiaries
64 89
Prepaid expenses and other 11 2
- ------------------------------------------------------- --------------- ---------------
Total current assets 79 98
Investment in subsidiaries (on the equity method) 556 893
Office Equipment:
Cost 4 5
Accumulated depreciation (3) (4)
- ------------------------------------------------------- --------------- ---------------
Office equipment, net 1 1
Other Assets:
Deferred costs (Less accumulated amortization:
1995, $3, 1996, $9) 6 16
Project Development costs 40 53
Investment in affiliate -- --
Deferred income taxes 8 20
Notes receivable from subsidiaries 40 156
Escrow deposits and other assets 9 56
- ------------------------------------------------------- --------------- ---------------
Total other assets 103 301
- ------------------------------------------------------- --------------- ---------------
TOTAL $739 $1,293
- ------------------------------------------------------- --------------- ---------------
See notes to Schedule I
S-3
THE AES CORPORATION SCHEDULE I
- ------------------------------------------------ ---------------------------------------
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
UNCONSOLIDATED BALANCE SHEETS
(in millions)
LIABILITIES AND STOCKHOLDERS' EQUITY December 31
----------------------------------------------------------- --------------------------
1995 1996
Current Liabilities:
Accounts payable $ 3 $ 2
Accrued liabilities 9 29
Other notes payable 50 88
------------------------------------------------------- -------------- ---------------
Total current liabilities 62 119
Long-term Liabilities:
Other notes payable 125 450
Other long-term liabilities 3 3
------------------------------------------------------- -------------- ---------------
Total long-term liabilities 128 453
Stockholders' Equity:
Preferred stock -- --
Common stock 1 1
Additional paid-in capital 293 360
Retained earnings 271 396
Treasury Stock (6) (3)
Cumulative translation adjustment (10) (33)
------------------------------------------------------- -------------- ---------------
Total stockholders' equity 549 721
------------------------------------------------------- -------------- ---------------
TOTAL $739 $1,293
------------------------------------------------------- -------------- ---------------
See notes to Schedule I
S-4
THE AES CORPORATION SCHEDULE I
- ------------------------------------------------------ ------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF UNCONSOLIDATED OPERATIONS
(in millions)
For the Years Ended December 31
- -------------------------------------------------------------- ----------------------------------------------------
1994 1995 1996
Revenues $ 47 $ 58 $ 59
Equity in earnings of subsidiaries 106 108 142
- -------------------------------------------------------------- ---------------- ----------------- -----------------
Total revenues 153 166 201
Operating Costs and Expenses:
Cost of sales and services 30 47 46
Selling, general and administrative expenses 24 19 30
- -------------------------------------------------------------- ---------------- ----------------- -----------------
Total operating costs and expenses 54 66 76
- -------------------------------------------------------------- ---------------- ----------------- -----------------
Operating Income 99 100 125
Interest Income/(Expense) 7 7 (15)
- -------------------------------------------------------------- ---------------- ----------------- -----------------
Income before income taxes and extraordinary item 106 107 110
Income Tax Expense (Benefit) 4 -- (15)
- -------------------------------------------------------------- ---------------- ----------------- -----------------
Net income before extraordinary item 102 107 125
Extraordinary item - loss on extinguishment of debt (less
applicable income taxes of $1) 2 -- --
- -------------------------------------------------------------- ---------------- ----------------- -----------------
- -------------------------------------------------------------- ---------------- ----------------- -----------------
Net Income $100 $107 $125
- -------------------------------------------------------------- ---------------- ----------------- -----------------
See notes to Schedule I
S-5
THE AES CORPORATION SCHEDULE I
- ----------------------------------------------------------- ---------------------------------------------------------
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF UNCONSOLIDATED CASH FLOWS
(in millions)
For the Years Ended December 31,
- -------------------------------------------------------------------------- ------------------------------------------
1994 1995 1996
Net cash provided by operating activities $ 1 $ 1 17
Investing Activities
Issuance of notes receivable (1) 2 (19)
Acquisitions -- (130) (148)
Dividends from subsidiaries 62 88 130
Additions to office equipment (1) -- --
Project development costs, net (17) (34) (16)
Investment in subsidiaries (6) (32) (322)
Escrow deposits and other 3 (4) (47)
- -------------------------------------------------------------------------- ------------ ------------ ----------------
Net cash provided by (used in) investing activities 40 (110) (422)
Financing Activities
Net borrowings under the revolver -- 50 163
Proceeds from other notes payable -- -- 243
Principal payments on other notes payable -- -- --
Proceeds from issuance of common stock 1 1 2
Purchased treasury stock -- (6) --
Dividends paid -- -- --
Other -- -- --
- -------------------------------------------------------------------------- ------------ ------------ ----------------
Net cash provided by financing activities 1 45 408
Increase/(decrease) in cash and cash equivalents 42 (64) 3
Cash and cash equivalents, beginning 24 66 2
- -------------------------------------------------------------------------- ------------ ------------ ----------------
Cash and cash equivalents, ending $ 66 $ 2 $ 5
- -------------------------------------------------------------------------- ------------ ------------ ----------------
See notes to Schedule I
S-6
THE AES CORPORATION SCHEDULE I
- ----------------------------------------------------------- --------------------
NOTES TO SCHEDULE I
1. APPLICATION OF SIGNIFICANT ACCOUNTING PRINCIPLES
Accounting for Subsidiaries -- The AES Corporation has
accounted for the earnings of its subsidiaries on the equity method in the
unconsolidated condensed financial information.
Revenues -- Construction management fees earned by the parent
from its consolidated subsidiaries are eliminated.
Income Taxes -- Effective January 1, 1995, The AES Corporation
and other affiliated companies (the "group") changed its method of allocating
income taxes and no longer allocates tax benefits available from other members
of the group when calculating its tax balances. This more accurately depicts the
tax assets and liabilities of The AES Corporation and its subsidiaries on a
"stand alone" basis. The Company joins in filing a consolidated U.S. income tax
return with the group. This allows the Company to combine its separate Company
income or loss with the income or loss of the group. The unconsolidated income
tax expense or benefit computed for the Company in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, reflects
the tax assets and liabilities of the Company on a stand alone basis and the
effect of filing a consolidated U.S. income tax return with the group. The
effect of this change on the unconsolidated balance sheet was to decrease the
deferred tax liability at the parent company level by approximately $81 million
and decrease the accounts and notes receivable from subsidiaries by the same
amount at January 1, 1995. The resulting deferred tax asset recorded on the
unconsolidated balance sheet represents tax payments due from affiliates under
tax sharing agreements.
Accounts and Notes Receivable from Subsidiaries -- Such
amounts have been shown in current or long-term assets based on terms in
agreements with subsidiaries, but payment is dependent upon meeting conditions
precedent in the subsidiary loan agreements. The non-current portion of this
balance includes a loan to AES Tiszai of $99 million.
2. SCHEDULE OF MATURITIES
Long-term debt of $125.0 million at December 31, 1995
consisted of senior subordinated of $75.0 payable in 2000 and $50.0 million
convertible subordinated debentures which were converted into 1.9 million shares
of common stock of the Company at a conversion price of $26.16 per share. The
long-term debt of $450 million at December 31, 1996 consisted of $75 million of
senior subordinated notes due 2000, $250 million of senior subordinated notes
due 2006, and the corporate revolving bank loan of $125 million.
S-7
THE AES CORPORATION SCHEDULE II
- ----------------------------------------------------------- ------------------------------------------------------------
VALUATION AND QUALIFYING ACCOUNTS
(in millions)
Balance at Charged to Balance at
Beginning of Costs and End of
Description Period Expenses Period
- ----------------------------------------------------- -------------- ---------------- -------------
Allowance for contract receivables
Year ended December 31, 1996 $ -- $ 20 $ 20
Amortization of deferred costs
Year ended December 31, 1994 $ 23 $ 3 $ 26
Year ended December 31, 1995 26 5 31
Year ended December 31, 1996 31 5 36
S-8
Exhibit Index
Exhibit Sequentially
Number Document Numbered Page
- ------ -------- -------------
10.54 Asset Purchase Agreement dated as of February 17,
1997 by and between NGC Corporation and The AES
Corporation.
21 Significant subsidiaries of The AES Corporation.
23 Consent of Independent Auditors, Deloitte & Touche
LLP.
24 Power of Attorney.
99 Current Report on Form 8-K of the Registrant dated
March 12, 1997.