0000950136-01-501421.txt : 20011009
0000950136-01-501421.hdr.sgml : 20011009
ACCESSION NUMBER: 0000950136-01-501421
CONFORMED SUBMISSION TYPE: SC TO-T
PUBLIC DOCUMENT COUNT: 6
FILED AS OF DATE: 20010925
GROUP MEMBERS: AES COMUNICACIONES DE VENEZUELA, C.A.
GROUP MEMBERS: AES CORRPORATION
GROUP MEMBERS: CORPORACION EDC, C.A.
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: AES CORPORATION
CENTRAL INDEX KEY: 0000874761
STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991]
IRS NUMBER: 541163725
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: SC TO-T
BUSINESS ADDRESS:
STREET 1: 1001 N 19TH ST
STREET 2: STE 2000
CITY: ARLINGTON
STATE: VA
ZIP: 22209
BUSINESS PHONE: 7035221315
SUBJECT COMPANY:
COMPANY DATA:
COMPANY CONFORMED NAME: NATIONAL TELEPHONE CO OF VENEZUELA
CENTRAL INDEX KEY: 0001025862
STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813]
IRS NUMBER: 000000000
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: SC TO-T
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-47557
FILM NUMBER: 1744284
BUSINESS ADDRESS:
STREET 1: EDIFICIO CANT PRIMER PISO
STREET 2: AVENIDA LIBERTADOR
CITY: CARACAS VENEZUELA
STATE: X5
BUSINESS PHONE: 5825006800
MAIL ADDRESS:
STREET 1: MILBANK TWEED HADLEY & MCCLOY
STREET 2: 1 CHASE MANHATTAN PLAZA
CITY: NEW YORK
STATE: NY
ZIP: 10005
SC TO-T
1
file001.txt
SCHEDULE TO-T
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------
SCHEDULE TO
(RULE 14D-100)
TENDER OFFER STATEMENT UNDER SECTION
14(D)(1) OR 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
-------------
COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA (CANTV)
-------------------------------------------------------------------------------
(NAME OF SUBJECT COMPANY (ISSUER))
NATIONAL TELEPHONE COMPANY OF VENEZUELA (CANTV)
-------------------------------------------------------------------------------
(TRANSLATION OF NAME OF ISSUER INTO ENGLISH)
AES COMUNICANIONES DE VENEZUELA, C.A.
A COMPANY JOINTLY OWNED BY
THE AES CORPORATION
AND
CORPORACION EDC, C.A.
-------------------------------------------------------------------------------
(NAME OF FILING PERSONS (OFFERORS))
CLASS D SHARES OF COMMON STOCK,
NOMINAL VALUE BS.36.90182224915 PER SHARE
-------------------------------------------------------------------------------
(TITLE OF CLASS OF SECURITIES)
P3055Q103
-------------------------------------------------------------------------------
(CUSIP NUMBER)
BARRY J. SHARP, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER,
THE AES CORPORATION, 1001 NORTH 19TH ARLINGTON STREET, VIRGINIA 22209
TEL: (703) 522-1315
COPY TO:
MICHAEL E. GIZANG, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
FOUR TIMES SQUARE, NEW YORK, NY 10036
TEL: (212) 735-2704
-------------------------------------------------------------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
CALCULATION OF FILING FEE
-------------------------------------------------------------------------------
TRANSACTION VALUATION* AMOUNT OF FILING FEE
$12,979,759 (1) $2,595.95(2)
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
(1) The transaction value is calculated by multiplying the amount of
Shares being sought by the offeror which are estimated to be owned by U.S.
persons, being 3,785,763, by the offer price per Share, $3.4285714.
(2) The amount of filing fee is calculated by multiplying the
transaction valuation, $12,979,759, by 0.0002 pursuant to Rule 0-11(d) under the
Exchange Act of 1934, as amended.
[ ] Check the box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: N/A Filing Party: N/A
------------- -----------
Form or Registration No.: N/A Date Filed: N/A
------------- -----------
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
[X] third party tender offer subject to Rule 14d-1.
[ ] issuer tender offer subject to 13e-4.
[ ] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the results
of the tender offer: [ ]
2
THE INFORMATION IN THE VENEZUELAN OFFER TO PURCHASE, INCLUDING THE ANNEXES
THERETO, AND THE RELATED SHARE LETTER OF TRANSMITTAL IS INCORPORATED HEREIN BY
REFERENCE IN RESPONSE TO ITEMS 1-11 OF SCHEDULE TO.
ITEM 4. TERMS OF THE TRANSACTION
(a)(1)(x), (xi) Not Applicable.
(a)(2) Not Applicable.
ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The Purchaser currently does not have any alternative financing
arrangements or plans to those set forth in the Venezuelan Offer to Purchase.
ITEM 10. FINANCIAL STATEMENTS
(a) Not Applicable.
(b) Not Applicable.
ITEM 12. MATERIALS TO BE FILED AS EXHIBITS
(a)(1)A. Venezuelan Offer to Purchase dated September 25, 2001, as
translated into English
B. Summary Term Sheet to the Venezuelan Offer to Purchase dated
September 25, 2001
C. Share Letter of Transmittal
D. Text of press release announcing the intention to commence
the U.S. and Venezuelan offers, dated August 29, 2001
(incorporated by reference to Schedule TO filed on
August 30, 2001)
E. Summary Advertisement as published in The New York Times on
September 25, 2001
F. Text of press release announcing commencement of U.S. and
Venezuelan offers, dated September 25, 2001
(a)(2)-(5) Not applicable
(b) None
(d) Association Agreement, dated as of August 1, 1991, as
amended, among GTE Corporation, T.I. Telefonica de Espana,
S.A., AT&T International Inc., C.A. La Electricidad de
Caracas, S.A.I.C.A.-S.A.C.A. and Consorcio
3
Inversionista Mercantil Cima, C.A., S.A.C.A., S.A.I.C.A.
(incorporated by reference to Schedule 13D filed by AES on
July 3, 2001)
(g)-(h) None
4
SIGNATURE
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
Date: September 25, 2001 AES Comunicaciones de Venezuela, C.A.
/s/ Paul Hanrahan
---------------------------
Name: Paul Hanrahan
Title: Director
Date: September 25, 2001 The AES Corporation
/s/ Paul Hanrahan
----------------------------
Name: Paul Hanrahan
Title: Senior Vice President
Date: September 25, 2001 Corporacion EDC, C.A.
/s/ Paul Hanrahan
-----------------------------
Name: Paul Hanrahan
Title: Director
5
EX-99.(A)(1)(A)
3
file002.txt
VENEZUELAN OFFER TO PURCHASE
Exhibit (a)(1)(A)
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
AES Corporacion EDC
VENEZUELAN OFFER TO PURCHASE
TENDER OFFER TO TAKE CONTROL
(the "VENEZUELAN OFFER")
FOR 199,968,608 OUTSTANDING SHARES OF
COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA (CANTV)
("CANTV" or "TARGET COMPANY")
at
US$3.4285714 per Share
by
AES COMUNICACIONES DE VENEZUELA, C.A.
("PURCHASER"),
a company jointly owned indirectly
by
THE AES CORPORATION ("AES")
and
CORPORACION EDC, C.A. ("CEDC")
--------------------------------------------------------------------------------
CANTV SHAREHOLDERS WILL HAVE UNTIL 6:00 P.M., CARACAS TIME (5:00 P.M. NEW
YORK CITY TIME), ON MONDAY, OCTOBER 29, 2001 (THE "EXPIRATION DATE") TO ACCEPT
THE VENEZUELAN OFFER.
The purchase of shares of CANTV ("SHARES") pursuant to the Venezuelan
Offer will be made through the Caracas Stock Exchange. Consequently, the
purchase price received under the Venezuelan Offer will be subject to the 1%
proportional income tax rate provided for in Article 77 of the Venezuelan
Income Tax Law, which will be withheld by the Caracas Stock Exchange.
Payment for Shares under the Venezuelan Offer will be made in United
States Dollars (US$) or, at the option of the tendering holders of Shares that
indicated so in the Share Letter of Transmittal, in Bolivars at the exchange
rate described in this Venezuelan Offer to Purchase. The offer price of
US$3.4285714 per share is equivalent to approximately Bs. 2,547.43 assuming an
exchange rate of Bs. 743 per US$ (this calculation is made for the sole purpose
of complying with the provisions of Article 95 of the Venezuela Central Bank
Law).
Concurrently with the Venezuelan Offer, Purchaser is making an offer in
the United States (the "U.S. OFFER" and, together with the Venezuelan Offer,
the "OFFERS") to purchase 28,566,944 outstanding American Depositary Shares of
CANTV ("ADSS"), representing 199,968,608 Class D Shares, at US$24.00 per ADS
(the same offer price under the Venezuelan Offer taking into account the number
of Class D Shares represented by ADSs) in accordance with the securities laws
and regulations of the United States. Each ADS represents seven (7) Class D
Shares. The offer price of US$24.00 per ADS is equivalent to approximately Bs.
17,832.00 assuming an exchange rate of Bs. 743 per US$ (this calculation is
made for the sole purpose of complying with the provisions of Article 95 of the
Venezuela Central Bank Law).
The purpose of the Venezuelan Offer is to purchase a number of outstanding
Shares (free of liens, security assignments, privileges, preferential rights,
and other encumbrances or interests that may
adversely affect the full use, enjoyment and disposition thereof) which,
together with the Class D Shares represented by ADSs purchased pursuant to the
U.S. Offer, represent 43.19% of the outstanding capital stock of CANTV. As of
the date hereof, AES beneficially owns (through subsidiaries, including
Inversiones Inextel, C.A., a wholly owned subsidiary of CEDC) 64,000,524 Class
D Shares and 1,000 ADSs, representing in the aggregate approximately 6.9% of
the outstanding capital stock of CANTV. In addition, Inversiones Inextel owns
136 shares of VenWorld Telecom C.A. ("VENWORLD"), which Inversiones Inextel has
requested that VenWorld convert into 476 Class D Shares.
If valid tenders of Shares are received in the Venezuelan Offer exceeding
199,968,608 Shares and more than 28,566,944 ADSs are validly tendered in the
U.S. Offer, proration rules will apply in the Venezuelan Offer and in the U.S.
Offer. If proration applies in the Venezuelan Offer, Purchaser will purchase
from each tendering holder of Shares in the Venezuelan Offer a number of Shares
equal to the number of Shares validly tendered by such holder multiplied by a
fraction, the numerator of which is 199,968,608 and the denominator of which is
the number of Shares validly tendered in the Venezuelan Offer to the Receiving
Agent; provided, however, that proration will not apply with respect to holders
that have validly tendered the only one Share they own.
The number of Shares available for tender in the Venezuelan Offer is
subject to fluctuation, on a daily basis, based on deposits and withdrawals of
Class D Shares with and from the depositary of the ADSs, The Bank of New York
(the "DEPOSITARY OF ADSS"). Pursuant to the Amended and Restated Deposit
Agreement (the "DEPOSIT AGREEMENT"), dated September 10, 2000 among CANTV, the
Depositary of ADSs and holders from time to time of American Depositary
Receipts ("ADRS"), upon a deposit of Class D Shares, the number of outstanding
Class D Shares is decreased; upon a withdrawal of Class D Shares, the number of
outstanding Class D Shares is increased. Proration in the Venezuelan Offer may
be adversely affected to the extent that Class D Shares are withdrawn from the
Depositary of ADSs and are tendered in the Venezuelan Offer. Similarly,
proration in the U.S. Offer may be adversely affected to the extent that
additional Class D Shares are deposited with the Depositary of ADSs and ADSs
issued upon such deposits are tendered in the U.S. Offer.
CANTV's outstanding share capital consists of 926,037,385 Shares divided
into four classes (A, B, C and D) with a par value of Bs.36.90182224915 each.
The Venezuelan Offer is open to all holders of Shares. Tenders of ADSs are
not being accepted in the Venezuelan Offer, but are being accepted in the U.S.
Offer. Holders of ADSs may withdraw the Class D Shares underlying such ADSs
from the Depositary of ADSs. The Class D Shares may then be tendered pursuant
to the Venezuelan Offer.
TO PARTICIPATE IN THE VENEZUELAN OFFER, HOLDERS OF CLASS C SHARES MUST
PREVIOUSLY OFFER THEIR CLASS C SHARES IN THE "INTERNAL MARKET" TO COMPLY WITH
THE PREFERENTIAL RIGHT PROCEDURE CONTEMPLATED IN THE BYLAWS OF CANTV.
PURCHASER HAS ESTABLISHED A SPECIAL PROCEDURE TO FACILITATE THE
PARTICIPATION OF THOSE HOLDERS OF CLASS C SHARES WHO HAVE NOT YET COMPLETED THE
PROCEDURE TO OFFER THEIR CLASS C SHARES IN THE "INTERNAL MARKET" AND/OR HAVE
NOT MADE PAYMENT FOR THEIR CLASS C SHARES UNDER THE LABOR PARTICIPATION PLAN
AND HAVE NOT LIFTED THE PLEDGE ON THEIR CLASS C SHARES. PLEASE CONTACT PROMPTLY
THE COORDINATOR OF THE VENEZUELAN OFFER OR THE AGENT APPOINTED BY PURCHASER TO
FACILITATE THE PARTICIPATION OF HOLDERS OF CLASS C SHARES IN THE VENEZUELAN
OFFER ("THE FACILITATING AGENT FOR THE CLASS C SHARES") FOR ASSISTANCE IN
CONNECTION WITH THIS SPECIAL PROCEDURE. THE FACILITATING AGENT FOR THE CLASS C
SHARES WILL COMPLETE ON BEHALF OF SUCH HOLDERS OF CLASS C SHARES THE STEPS TO
TENDER IN THE VENEZUELAN OFFER ON OR BEFORE THE EXPIRATION DATE.
THIS DOCUMENT (INCLUDING ALL ITS ANNEXES) CONTAINS IMPORTANT INFORMATION
THAT SHOULD BE READ BY YOU IN FULL BEFORE ANY DECISION IS MADE IN CONNECTION
WITH THE VENEZUELAN OFFER.
COMISION NACIONAL DE VALORES CERTIFICATION:
"THIS IS A TENDER OFFER STATEMENT RELATING TO A TENDER OFFER TO TAKE
CONTROL OF CANTV. THE COMISION NACIONAL DE VALORES DE VENEZUELA CERTIFIES THAT
THE PROVISIONS OF THE CAPITAL MARKETS LAW AND THE PUBLIC TENDER OFFER RULES ON
THE ACQUISITION, EXCHANGE AND TAKEOVER OF COMPANIES THAT MAKE PUBLIC OFFERINGS
OF SHARES AND OTHER RIGHTS THEREON HAVE BEEN COMPLIED WITH. THE COMISION
NACIONAL DE VALORES DE VENEZUELA DOES NOT CERTIFY THE QUALITY OF THE BUSINESS
TRANSACTIONS HEREIN PROPOSED. ADVERTISEMENT AUTHORIZED BY THE COMISION NACIONAL
DE VALORES DE VENEZUELA."
The dissemination of this document was authorized by Comision Nacional de
Valores de Venezuela Resolution 205-2001 dated September 21, 2001.
THE COORDINATOR OF THE VENEZUELAN OFFER IS:
[ACTI VALORES LOGO]
SOCIEDAD DE CORRETAJE
THE RECEIVING AGENT, TRUSTEE OF THE CLASS C SHARES AND PAYING AGENT OF THE
VENEZUELAN OFFER IS:
[UNIBANCA LOGO]
THE FACILITATING AGENT FOR THE CLASS C SHARES IS:
[GRAPHIC OMITTED] INVERUNION S.A.
CASA DE BOLSA
THE LEGAL ADVISOR OF THE VENEZUELAN OFFER IS:
D'EMPAIRE REYNA BERMuDEZ & ASOCIADOS
THE FINANCIAL ADVISORS FOR THE VENEZUELAN OFFER ARE:
[JP MORGAN LOGO]
[CREDIT SUISSE FIRST BOSTON LOGO]
[BANK OF AMERICA SECURITIES]
September 25, 2001
INDEX
PAGE
----
1. STATEMENT SUMMARY.............................................................. 1
2. GENERAL AND FINANCIAL INFORMATION REGARDING PURCHASER.......................... 8
3. INFORMATION ON THE PURPOSE OF THE VENEZUELAN OFFER............................. 12
4. INFORMATION ON PURCHASER'S OWNERSHIP OF SHARES................................. 18
5. INFORMATION ON RELATIONSHIPS BETWEEN PURCHASER AND THE TARGET COMPANY, ITS
SHAREHOLDERS AND OFFICERS...................................................... 18
6. SPECIFIC OFFER CONDITIONS...................................................... 19
7. THE OFFER AND CONTENTS OF CERTAIN SPECIAL LAWS................................. 28
ANNEX A: AUDITED FINANCIAL STATEMENTS OF PURCHASER, AES AND ITS SUBSIDIARIES
AND CEDC AND ITS SUBSIDIARIES..........................................A-1
ANNEX B: SPECIAL REPORT ON PURCHASER'S INTENTIONS...............................B-1
ANNEX C: JOINT GUARANTEE GRANTED BY THE AES CORPORATION.........................C-1
ANNEX D: SHARE LETTER OF TRANSMITTAL............................................D-1
ANNEX E: ITEMS TO BE ATTACHED TO THE POWER OF ATTORNEY AND TENDER FORM..........E-1
ANNEX F: SPECIAL INSTRUCTIONS FOR THE PARTICIPATION OF HOLDERS OF CLASS C
SHARES IN THE VENEZUELAN OFFER.........................................F-1
ANNEX G: INFORMATION SUPPLEMENT.................................................G-1
1. STATEMENT SUMMARY
SUMMARY OF THE VENEZUELAN OFFER TO PURCHASE
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
AES Corporacion EDC
TENDER OFFER TO TAKE CONTROL
(the "VENEZUELAN OFFER")
for 199,968,608 outstanding shares ("SHARES") of
COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA (CANTV)
("CANTV" or "TARGET COMPANY")
at
US$3.4285714 per Share
by
AES COMUNICACIONES DE VENEZUELA, C.A.
("PURCHASER"),
a company jointly owned indirectly
by
THE AES CORPORATION ("AES")
and
CORPORACION EDC, C.A. ("CEDC")
CANTV SHAREHOLDERS WILL HAVE UNTIL 6:00 P.M., CARACAS TIME (5:00 P.M. NEW
YORK CITY TIME), ON MONDAY, OCTOBER 29, 2001 (THE "EXPIRATION DATE") TO ACCEPT
THE VENEZUELAN OFFER.
PURCHASER
AES Comunicaciones de Venezuela, C.A., formerly Inversiones D72410, C.A.,
is a corporation (compania anonima) incorporated and domiciled in the City of
Caracas and registered at the Seventh Commercial Registry of the Judicial
Circumscription of the Capital District and State of Miranda on April 20, 2001
under No. 31, Volume 180-A-VII.
Approximately two-thirds of Purchaser's capital stock is indirectly owned
by AES. The remaining capital stock of Purchaser is owned indirectly by CEDC.
AES is a corporation incorporated under the laws of the State of Delaware,
United States of America. AES is a global power company committed to serving
the world's needs for electricity in a socially responsible way. AES
participates primarily in two related lines of business: electricity generation
and distribution. AES operates and owns (entirely or in part) electric power
plants in South America, Europe and Asia, and distribution companies in the
United States, Venezuela, Argentina, Brazil, El Salvador, Dominican Republic
and The Republic of Georgia. AES is using its distribution infrastructure and
knowledge of various markets to develop the ability to provide wholesale and/or
retail telecommunications services. AES continually considers business
development opportunities, including acquisition opportunities through the
world. AES's revenues during 2000 were approximately US$7.58 billion and total
assets were approximately US$33 billion as of December 31, 2000. Shares of AES
trade on the New York Stock Exchange under the symbol "AES."
1
AES is the majority owner in and controls several telecom businesses in
Latin America. These include companies that own 25,000 km of fiber providing
carrier and retail services for voice and data in Brazil and Bolivia. AES also
has other telecom investments in Latin America offering value added services
such as web hosting.
CEDC is a Venezuelan company in which AES indirectly holds 87% of the
outstanding ordinary shares. CEDC's shares are traded on the Caracas Stock
Exchange together with the shares of C.A. La Electricidad de Caracas ("EDC")
under the symbol "EDC." CEDC is a holding company for non- Venezuelan
investments and for Venezuelan investments other than in regulated electricity
activities. CEDC holds interests in companies dedicated to the production and
distribution of electricity, telecommunications and distribution of natural
gas.
THE TARGET COMPANY
Compania Anonima Nacional Telefonos de Venezuela (CANTV) is a corporation
incorporated and domiciled in the City of Caracas, originally registered at the
Commercial Registry maintained by the District Court of Commercial Matters of
the Capital District on June 20, 1930, under No. 2, Volume 387.
THE U.S. OFFER
Concurrently with the Venezuelan Offer, Purchaser is making an offer in
the United States (the "U.S. OFFER" and, together with the Venezuelan Offer,
the "OFFERS") to purchase 28,566,944 outstanding American Depositary Shares of
CANTV ("ADSS"), representing 199,968,608 outstanding Class D Shares, at
US$24.00 per ADS in cash (the same offer price under the Venezuelan Offer
taking into account the number of Class D Shares represented by ADSs) in
accordance with the securities laws and regulations of the United States. Class
D Shares are the only class of Shares underlying the ADSs. Each ADS represents
seven (7) Class D Shares.
PURPOSE OF THE VENEZUELAN OFFER
The Venezuelan Offer is a Tender Offer to Take Control governed by the
"Public Tender Offer Rules on the Acquisition, Exchange and Takeover of
Companies that make Public Offerings of Shares and Other Interests Thereon"
adopted by the Comision Nacional de Valores de Venezuela (the "CNV") and
published on September 19, 2000 in the Republic of Venezuela Official Gazette
(No. 37.039) (the "CNV TENDER OFFER REGULATIONS").
OFFEREES OF THE VENEZUELAN OFFER
The Venezuelan Offer is open to all holders of Shares. Tenders of ADSs are
not being accepted in the Venezuelan Offer, but are being accepted in the U.S.
Offer. Holders of ADSs may withdraw the Class D Shares underlying such ADSs
from The Bank of New York, depositary of the ADSs (the "DEPOSITARY OF ADSS").
The Class D Shares may then be tendered pursuant to the Venezuelan Offer.
ANNOUNCEMENT DATE OF THE VENEZUELAN OFFER
August 29, 2001 (the "ANNOUNCEMENT DATE OF THE VENEZUELAN OFFER").
COMMENCEMENT DATE OF THE VENEZUELAN OFFER
September 25, 2001 (the "COMMENCEMENT DATE OF THE VENEZUELAN OFFER").
EXPIRATION DATE
Holders of Shares will have until 6:00 p.m., Caracas time (5:00 p.m. New
York City time), on Monday, October 29, 2001 (the "EXPIRATION DATE") to accept
the Venezuelan Offer. The Expiration Date may be postponed, provided prior
authorization for such postponement is given by the CNV.
2
SETTLEMENT DATE
The settlement date will be the date on which the Coordinator of the
Venezuelan Offer purchases the Shares tendered, pursuant to the Venezuelan
Offer, after applying the proration rules described below, at a special session
of the Caracas Stock Exchange (the "SETTLEMENT DATE"), as required by the CNV
Tender Offer Regulations.
VENEZUELAN OFFER PRICE
US$3.4285714 per Share outstanding. The offer price of US$3.4285714 is
equivalent to approximately Bs. 2,547.43 assuming an exchange rate of Bs. 743
per US$ (this calculation is made for the sole purpose of complying with the
provisions of Article 95 of the Venezuela Central Bank Law).
The purchase of Shares will be made in accordance with the provisions of
the CNV Tender Offer Regulations through the Caracas Stock Exchange.
Consequently, the purchase price for the Shares payable under the Venezuelan
Offer will, except as otherwise described herein, be subject to the 1%
proportional income tax provided for in Article 77 of the Venezuelan Income Tax
Law. The tax will be withheld by the Caracas Stock Exchange.
PAYMENT OF THE PURCHASE PRICE
The Paying Agent of the Venezuelan Offer will, for the account of
Purchaser, pay the purchase price with respect to the Shares purchased to each
holder of Shares who has validly tendered into the Venezuelan Offer and that
have been duly transferred to Purchaser, no later than five trading days after
the Settlement Date, in accordance with the procedures set forth in the
regulations of the CNV and the Caracas Stock Exchange. Payment shall be made in
checks which shall be made available to holders of Shares from the fifth
Venezuelan stock exchange trading day following the Settlement Date (or through
deposit in an account as described in the Share Letter of Transmittal). Payment
shall be deemed effectively made when the checks are made available to holders
of Shares, or if applicable, when the deposit is effected.
The amounts payable to the holders of Shares under the Venezuelan Offer
with respect to the Shares accepted for payment in the Venezuelan Offer shall
be rounded up to the nearest U.S. dollar or Bolivar cent.
Under the Venezuelan Offer, payment for the Shares will be made in U.S.
dollars or, at the option of the tendering holders of Shares that indicated so
in the Share Letter of Transmittal, in Bolivars. Purchaser will seek to reach
an agreement with the Central Bank of Venezuela to acquire Bolivars in a
special exchange transaction at a pre-established exchange rate. If an
agreement is reached at an acceptable exchange rate and on such other terms and
conditions acceptable to Purchaser, tendering holders of Shares who have
elected to receive payment in Bolivars will receive the purchase price for
Shares in Bolivars, based on the exchange rate obtained from the Venezuelan
Central Bank. Holders of Shares will not bear the costs or expenses incurred by
Purchaser.
If Purchaser does not reach an agreement with the Venezuelan Central Bank
as described above, holders of Shares who have elected to receive the purchase
price in Bolivars in the Share Letter of Transmittal, will receive the purchase
price in Bolivars at an exchange rate equal to the average of the exchange
rates at which Purchaser has obtained the amount of Bolivars necessary to pay
the aggregate purchase price in Bolivars to all tendering holders of Shares who
elected payment in Bolivars, which will be published on the fifth business day
following the Settlement Date of the Venezuelan Offer.
SHARES SUBJECT TO THE VENEZUELAN OFFER
The purpose of the Venezuelan Offer is to purchase a number of outstanding
Shares (free of liens, security assignments, privileges, preferential rights,
and other encumbrances or interests that may adversely affect the full use,
enjoyment and disposition thereof) which, together with the Class D Shares
represented by ADSs purchased pursuant to the U.S. Offer, represent 43.19% of
the outstanding capital stock of CANTV. As of the date hereof, AES beneficially
owns (through subsidiaries, including
3
Inversiones Inextel, C.A., a wholly owned subsidiary of CEDC) 64,000,524 Class
D Shares and 1,000 ADSs, representing in the aggregate approximately 6.9% of
the outstanding capital stock of CANTV. In addition, Inversiones Inextel owns
136 shares of VenWorld Telecom C.A. ("VENWORLD"), which Inversiones Inextel has
requested VenWorld to convert into 476 Class D Shares.
CANTV's outstanding share capital consists of 926,037,385 shares divided
into four classes (A, B, C and D) with a par value of Bs.36.90182224915 each.
PRORATION
If valid tenders of Shares are received in the Venezuelan Offer exceeding
199,968,608 Shares and more than 28,566,944 ADSs are validly tendered in the
U.S. Offer, proration rules will apply in the Venezuelan Offer and in the U.S.
Offer. If proration applies in the Venezuelan Offer, Purchaser will purchase
from each tendering holder of Shares in the Venezuelan Offer a number of Shares
equal to the number of Shares validly tendered by such holder multiplied by a
fraction, the numerator of which is 199,968,608 and the denominator of which is
the number of Shares validly tendered in the Venezuelan Offer to the Receiving
Agent; provided, however, that proration will not apply with respect to holders
that have validly tendered the only one Share they own, in accordance with the
CNV Tender Offer Regulations.
The number of Shares available for tender in the Venezuelan Offer is
subject to fluctuation, on a daily basis, based on deposits and withdrawals of
Class D Shares with and from the Depositary of ADSs. Pursuant to the Amended
and Restated Deposit Agreement (the "DEPOSIT AGREEMENT") dated September 10,
2000 among CANTV, the Depositary of ADSs and the holders from time to time of
American Depositary Receipts representing ADSs, upon a deposit of Class D
Shares, the number of outstanding Class D Shares is decreased; upon a
withdrawal of Class D Shares, the number of outstanding Class D Shares is
increased. Proration in the Venezuelan Offer may be adversely affected to the
extent that Class D Shares are withdrawn from the Depositary of ADSs and are
tendered in the Venezuelan Offer. Similarly, proration in the U.S. Offer may be
adversely affected to the extent that additional Class D Shares are deposited
with the Depositary of ADSs and ADSs issued upon such deposits are tendered in
the U.S. Offer.
GUARANTEE FOR THE SELLING HOLDERS OF SHARES
Prior to the Commencement Date, AES, the ultimate parent of Purchaser,
became the "joint guarantor" of the full amount of the purchase price to be
paid for the Shares and ADSs purchased pursuant to the Offers upon the terms
and conditions set forth in this Venezuelan Offer to Purchase and the U.S.
Offer to Purchase, being US$1,371,213,306.29 or, solely for the purpose of
complying with Article 95 of the Venezuela Central Bank Law,
1,018,811,486,573.47 Bolivars at the exchange rate of 743 Bolivars per U.S.
dollar. Based on the financial statements of AES audited by Deloitte & Touche,
AES's shareholders equity as of December 31, 2000 was US$5.54 billion and AES's
total assets as of December 31, 2000 were approximately US$33 billion.
COORDINATOR OF THE VENEZUELAN OFFER
Activalores Sociedad de Corretaje, S.A., a company (compania anonima)
domiciled in Caracas and duly authorized by the CNV to do business as
securities brokerage firm.
THE RECEIVING AGENT, TRUSTEE OF THE CLASS C SHARES AND PAYING AGENT OF THE
VENEZUELAN OFFER
Unibanca, Banco Universal, C.A.
THE FACILITATING AGENT FOR THE CLASS C SHARES
Inverunion S.A. Casa de Bolsa
THE FINANCIAL ADVISORS FOR THE VENEZUELAN OFFER
J.P. Morgan Securities Inc.
Credit Suisse First Boston Corporation
Banc of America Securities LLC
4
THE LEGAL ADVISOR FOR THE VENEZUELAN OFFER
d'Empaire Reyna Bermudez Abogados
ACCEPTANCE OF THE VENEZUELAN OFFER
On or before the Expiration Date, holders of Shares must undertake the
following actions in order to tender into the Venezuelan Offer:
(i) Complete and sign the Share Letter of Transmittal.
(ii) Submit the Share Letter of Transmittal and any other required
documents at the places indicated by the Coordinator or the
Receiving Agent, indicating the currency of payment.
(iii) If the holders of Shares have share certificates for the
tendered Shares, the holders of Shares must deliver such
certificates together with the Share Letter of Transmittal.
The Shares tendered will be deposited or transferred to the Caja
Venezolana de Valores de Venezuela sub-account held by the selling holder of
Shares specially opened by the Coordinator of the Venezuelan Offer.
Shares deemed as treasury shares or reciprocal interests under the terms
of the Capital Markets Law and the rules passed by the CNV shall not be
accepted in the Venezuelan Offer.
TO PARTICIPATE IN THE VENEZUELAN OFFER, THE HOLDERS OF CLASS C SHARES MUST
PREVIOUSLY OFFER THEIR CLASS C SHARES IN THE "INTERNAL MARKET" TO COMPLY WITH
THE PREFERENTIAL RIGHT PROCEDURE CONTEMPLATED IN THE BYLAWS OF CANTV.
PURCHASER HAS ESTABLISHED A SPECIAL PROCEDURE TO FACILITATE THE
PARTICIPATION OF THOSE HOLDERS OF CLASS C SHARES WHO HAVE NOT YET COMPLETED THE
PROCEDURE TO OFFER THEIR CLASS C SHARES IN THE "INTERNAL MARKET" AND/OR HAVE
NOT MADE PAYMENT FOR THEIR CLASS C SHARES UNDER THE LABOR PARTICIPATION PLAN
AND HAVE NOT LIFTED THE PLEDGE ON THEIR CLASS C SHARES. PLEASE CONTACT PROMPTLY
THE COORDINATOR OF THE VENEZUELAN OFFER OR THE AGENT APPOINTED BY PURCHASER TO
FACILITATE THE PARTICIPATION OF HOLDERS OF CLASS C SHARES IN THE VENEZUELAN
OFFER ("THE FACILITATING AGENT FOR THE CLASS C SHARES") FOR ASSISTANCE IN
CONNECTION WITH THIS SPECIAL PROCEDURE. THE FACILITATING AGENT OF THE CLASS C
SHARES WILL COMPLETE ON BEHALF OF SUCH HOLDERS OF CLASS C SHARES THE STEPS TO
TENDER IN THE VENEZUELAN OFFER ON OR BEFORE THE EXPIRATION DATE.
The transfer of Class A, Class B and Class C Shares to Purchaser under the
Venezuelan Offer will cause such transferred Shares to be automatically
converted into Class D Shares.
WITHDRAWAL OF TENDERED SHARES FROM THE VENEZUELAN OFFER
Purchaser waives its right provided in Article 18 of the CNV Tender Offer
Regulations for the benefit of all holders of Shares. Article 18 of the CNV
Tender Offer Regulations prohibits the withdrawal of securities tendered
pursuant to a tender offer except in the case of a competitive offer or bid.
As a result of such waiver by Purchaser, Shares tendered pursuant to the
Venezuelan Offer may be withdrawn by the tendering holders on or before the
Expiration Date, even in the absence of a competitive offer or bid, provided
that the notice of withdrawal is received by the Receiving Agent at the offices
designated by it, on or before the Expiration Date.
Acceptance of the Venezuelan Offer shall become irrevocable as of the
Expiration Date, except in the event that the Venezuelan Offer is extended in
accordance with the terms thereof.
SPECIAL PROCEDURE FOR THE TENDER IN THE VENEZUELAN OFFER AND WITHDRAWAL OF THE
TENDER BY THE HOLDERS OF CLASS C SHARES
See Annex F to this Venezuelan Offer to Purchase for Special Instructions
for the participation of holders of Class C Shares in the Venezuelan Offer.
5
WITHDRAWAL OF THE VENEZUELAN OFFER BY PURCHASER; RESERVATION BY PURCHASER OF
THE RIGHT TO DEEM THE VENEZUELAN OFFER FAILED
The Venezuelan Offer may be withdrawn by Purchaser before the Expiration
Date in the event of the occurrence of any of the events describe in this
Venezuelan Offer to Purchase, upon the prior confirmation by the CNV.
PARTICULARLY, AS DESCRIBED IN SECTIONS 6 AND 7 OF THIS VENEZUELAN OFFER TO
PURCHASE, THE CONSUMMATION OF THE VENEZUELAN OFFER IS SUBJECT TO THE PRIOR
OPINION OF THE VENEZUELAN NATIONAL TELECOMMUNICATIONS COMMISSION ("CONATEL")
AND THE SUPERINTENDENCY FOR THE PROMOTION AND PROTECTION OF FREE COMPETITION
("PROCOMPETENCIA"), AS WELL AS TO THE AUTHORIZATION OF THE MERGER DESCRIBED IN
THIS VENEZUELAN OFFER TO PURCHASE.
If (i) the Coordinator fails to receive valid tenders of Shares that allow
Purchaser to purchase a number of Shares (free and clear of any liens, security
assignments, preferential rights, privileges and other encumbrances or
interests that may adversely affect the full use, enjoyment and disposition of
such Shares) that, together with the Class D Shares represented by ADSs to be
purchased pursuant the U.S. Offer, constitute at least 43.19% of the
outstanding shares of capital stock of CANTV, or (ii) fewer than 199,968,608
Shares are validly tendered in the Venezuelan Offer, or (iii) fewer than
28,566,944 ADSs are validly tendered in the U.S. Offer, or (iv) an event takes
place thereby giving Purchaser the right to withdraw the Venezuelan Offer, then
Purchaser reserves the right to:
(i) extend the initial term of the Venezuelan Offer, within the
limits contemplated in the CNV Tender Offer Regulations, subject
to prior authorization from the CNV;
(ii) increase the number of Shares sought in the Venezuelan Offer and
decrease the number of ADSs sought in the U.S. Offer, and if
applicable, extend the term of the Offers, provided that the
aggregate number of Shares and ADSs sought in the Offers shall
always represent at least 43.19% of the outstanding capital stock
of CANTV, in accordance with Article 16 of the CNV Tender Offer
Regulations, upon the prior authorization of the CNV;
(iii) increase the number of ADSs sought in the U.S. Offer and
decrease the number of Shares sought in the Venezuelan Offer, and
if applicable, extend the term of the Offers, provided that (i)
the aggregate number of Shares and ADSs sought in the Offers
shall always represent at least 43.19% of the outstanding capital
stock of CANTV, and (ii) the adjusted number of Shares sought in
the Venezuelan Offer will not be lower than the number of Shares
validly tendered in the Venezuelan Offer and not withdrawn, in
accordance with Article 16 of the CNV Tender Offer Regulations,
upon the prior authorization of the CNV;
(iv) deem the Venezuelan Offer failed and withdraw the Venezuelan
Offer, in accordance with this Venezuelan Offer to Purchase; or
(v) not deem the Venezuelan Offer failed and purchase the Shares
pursuant to the Venezuelan Offer, provided that the Shares
purchased represent at least a number of Shares which, together
with the Class D Shares represented by ADSs purchased pursuant to
the U.S. Offer, represent at least 32.39% of the outstanding
capital stock of CANTV.
For assistance in connection with the Venezuelan Offer and additional
copies of the Venezuelan Offer to Purchase, you may contact the Coordinator or
the Receiving Agent at the address and phone numbers below.
THIS TENDER OFFER STATEMENT (INCLUDING ITS ANNEXES) CONTAINS IMPORTANT
INFORMATION THAT SHOULD BE READ BY YOU IN FULL BEFORE ANY DECISION IS MADE IN
CONNECTION WITH THE VENEZUELAN OFFER.
6
COMISION NACIONAL DE VALORES CERTIFICATION:
"THIS IS A STATEMENT SUMMARY RELATING TO A TENDER OFFER. THE COMISION NACIONAL
DE VALORES DE VENEZUELA CERTIFIES THAT THE PROVISIONS OF THE CAPITAL MARKETS
LAW AND THE PUBLIC TENDER OFFER RULES ON THE ACQUISITION, EXCHANGE AND TAKEOVER
OF COMPANIES THAT MAKE PUBLIC OFFERINGS OF SHARES AND OTHER RIGHTS THEREON HAVE
BEEN COMPLIED WITH. THE COMISION NACIONAL DE VALORES DE VENEZUELA DOES NOT
CERTIFY THE QUALITY OF THE BUSINESS TRANSACTIONS HEREIN PROPOSED. ADVERTISEMENT
AUTHORIZED BY THE COMISION NACIONAL DE VALORES DE VENEZUELA."
The publication of this Statement Summary was authorized by Comision
Nacional de Valores de Venezuela Resolution 205--2001 dated September 21, 2001.
THE COORDINATOR OF THE VENEZUELAN OFFER IS:
[ACTI VALORES LOGO]
SOCIEDAD DE CORRETAJE
Calle Los Chaguaramos
Centro Gerencial Mohedano PH-A
La Castellana
Caracas, Venezuela
Tel: (0212)201-7511
www.activalores.com
consult@activalores.com
THE RECEIVING AGENT, TRUSTEE OF THE CLASS C SHARES AND PAYING AGENT OF THE
VENEZUELAN OFFER IS:
[UNIBANCA LOGO]
Avenida Universidad, Esquina El Chorro
Torre Unibanca
Caracas, Venezuela
Tel: (0212)-501-7942
Fax: (0212)-501-8485
THE FACILITATING AGENT FOR THE CLASS C SHARES IS:
[GRAPHIC OMITTED] INVERUNION S.A.
CASA DE BOLSA
Avenida Universidad, Esquina El Chorro
Torre Unibanca
Caracas, Venezuela
Tel: (0212)-501-7942
Fax: (0212)-501-8485
THE LEGAL ADVISOR OF THE VENEZUELAN OFFER IS:
D'EMPAIRE REYNA BERMuDEZ ABOGADOS
Edificio Bancaracas, P.H.
Plaza La Castellana
Caracas 1060, Venezuela
Tel: (0212)264-6244
Fax: (0212)264-7543
drba@drbalegal.com
THE FINANCIAL ADVISORS FOR THE VENEZUELAN OFFER ARE:
[JP MORGAN LOGO]
[CREDIT SUISSE FIRST BOSTON LOGO]
[BANK OF AMERICA SECURITIES]
September 25, 2001
7
2. GENERAL AND FINANCIAL INFORMATION REGARDING PURCHASER
A. IDENTIFICATION OF THE RELATED OR ASSOCIATED PERSON OR PERSONS MAKING THE
OFFER AND OF THE COLLATERAL OFFERORS
(1) PURCHASER
The person making the Venezuelan Offer is AES Comunicaciones de
Venezuela, C.A. (formerly known as Inversiones D72410, C.A.), a
corporation (compania anonima) incorporated and domiciled in Caracas and
registered at the Seventh Commercial Registry of the Judicial
Circumscription of the Capital District and State of Miranda on April
20, 2001 under No. 31, Volume 180-A-VII ("PURCHASER").
None of the Related Persons or Associated Persons of Purchaser, as
defined under the CNV Tender Offer Regulations, intends to acquire
Shares or ADSs under the Offers.
(2) COLLATERAL OFFERORS
THE AES CORPORATION
The AES Corporation is a corporation organized under the laws of the
State of Delaware, United States of America ("AES" or "PARENT"). AES
indirectly holds approximately two-thirds of Purchaser's capital stock.
AES has no intention of acquiring Shares or ADSs under the Offers.
CORPORACIoN EDC, C.A.
Corporacion EDC, C.A. is a corporation (compania anonima) incorporated
and domiciled in Caracas and registered at the Second Commercial
Registry of the Judicial Circumscription of the Capital District and
State of Miranda on July 3, 1996 under No. 50, Volume 325-A-Sgdo
("CEDC"). CEDC indirectly holds approximately one-third of Purchaser's
capital stock. CEDC has no intention of acquiring Shares or ADSs under
the Offers.
TELCOM 2, B.V.
TelCom 2, B.V. is a company incorporated under the laws of the
Netherlands ("TELCOM 2"). TelCom 2 is the direct owner of 100% of the
capital stock of Purchaser. AES indirectly holds approximately
two-thirds of TelCom 2's capital stock and CEDC indirectly holds
approximately one-third of TelCom 2's capital stock. If the Offers are
consummated, Purchaser will transfer the Shares and ADSs purchased
pursuant to the Offers to TelCom 2, as described in Section 3.c of this
Venezuelan Offer to Purchase.
J.P. MORGAN SECURITIES INC.
J.P. Morgan Securities Inc. is a financial institution incorporated
under the laws of the State of Delaware, United States of America ("JP
MORGAN"). JP Morgan is financial advisor to AES and Purchaser in
connection with the Offers. JP Morgan has no intention of purchasing
Shares or ADSs pursuant to the Offers.
CREDIT SUISSE FIRST BOSTON CORPORATION
Credit Suisse First Boston Corporation is a financial institution
incorporated under the laws of the State of Delaware, United States of
America ("CSFB"). CSFB is financial advisor to AES and Purchaser in
connection with the Offers. CSFB has no intention of purchasing Shares
or ADSs pursuant to the Offers.
BANC OF AMERICA SECURITIES LLC
Banc of America Securities LLC is a financial institution organized
under the laws of the State of Delaware, United States of America
("BOFA"). BofA is financial advisor to AES and Purchaser in connection
with the Offers. BofA has no intention of purchasing Shares or ADSs
pursuant to the Offers.
8
B. CORPORATE NATIONALITY
Purchaser is a Venezuelan corporation incorporated in Venezuela and domiciled
in the City of Caracas.
C. COMPANY TYPE (PURSUANT TO DECISION NO. 291 OF THE CARTAGENA AGREEMENT)
Purchaser is an "empresa extranjera" (foreign enterprise) under Decision 291.
D. CORPORATE PURPOSE AND BUSINESS
The purpose of Purchaser is to purchase and sell shares, securities, bonds,
real estate and personal assets, perform economic and financial studies,
render financial assistance services and, in general, to engage in any other
lawful act or activity. Purchaser was formed for the purpose of acquiring
Shares and ADSs pursuant to the Offers. To date, Purchaser has only been
engaged in activities related to the Offers.
E. COMPANY EXPERIENCE IN THE ACTIVITIES OF THE TARGET COMPANY
AES is the majority owner of and controls several telecom businesses in Latin
America. These include companies that own 25,000 km of fiber providing
carrier and retail services for voice and data in Brazil and Bolivia. AES
also has other telecom investments in Latin America offering value added
services such as web hosting.
F. DESCRIPTION AND FEATURES OF THE GROUP OF COMPANIES TO WHICH PURCHASER
BELONGS
Purchaser is a company jointly owned indirectly by AES and CEDC. AES is a
global power company committed to serving the world's needs for electricity
and other services in a socially responsible way. AES participates primarily
in two related lines of business: electricity generation and distribution.
AES's electricity generation business is characterized by sales from its
power plants to nonaffiliated wholesale customers (generally electric
utilities, regional electric companies, electricity marketers and traders or
wholesale commodity markets known as "power pools") for further resale to end
users. AES's distribution business is characterized by sales of electricity
directly to end users such as commercial, industrial, governmental and
residential customers.
In its generation business, AES now controls a diverse portfolio of electric
power plants with a total capacity (as of December 31, 2000) of 42,133
megawatts (MW) distributed throughout North America, South America, Europe
and Asia.
AES has majority ownership in three distribution companies in Argentina and
individual distribution companies in the United States, Brazil, El Salvador,
Venezuela, Dominican Republic, and The Republic of Georgia. AES also has
assumed management control of a heat and electricity distribution business in
Kazakhstan. In addition, AES has less than majority ownership in three
additional distribution companies in Brazil. These distribution companies
serve a total of over 18 million customers with annual sales exceeding
126,000 gigawatt hours. AES also serves retail customers in those states of
the United States that have introduced a competitive market for the sale of
electricity.
AES continually considers business development opportunities, including
significant acquisition opportunities throughout the world. AES has been
actively involved in the acquisition and operation of electricity assets in
countries that are restructuring and deregulating the electricity industry.
AES's revenues during 2000 were approximately US$7.58 billion and total
assets were approximately US$33 billion as of December 31, 2000. Shares of
AES trade on the New York Stock Exchange under the symbol "AES." AES has its
principal executive offices at 1001 North 19th Street, Arlington, Virginia,
22209 (telephone no.: 001-703-522-1315).
9
CEDC is a Venezuelan company in which AES indirectly holds 87% of the
outstanding ordinary shares. CEDC's shares are traded on the Caracas Stock
Exchange together with the shares of C.A. La Electricidad de Caracas ("EDC")
under the symbol "EDC." CEDC is a holding company for non-Venezuelan
investments and for Venezuelan investments other than in regulated
electricity activities. CEDC holds interests in companies dedicated to the
production and distribution of electricity, telecommunications and
distribution of natural gas.
Other investments which CEDC holds include interests in electric utilities
located in El Salvador and Venezuela and a 60% interest in Phoenix
Internacional, C.A., a company that provides services to the Venezuelan oil
industry. CEDC also holds an interest in S.A. Venezolana Domestica de Gas,
which is engaged in the distribution of natural gas for domestic use in
southeastern Caracas. DOMEGAS has over 27,800 customers.
CEDC's principal executive offices are located at Edificio La Electricidad de
Caracas, Av. Vollmer, Urbanizacion San Bernardino (telephone no.:
011-58-212-502-2111).
G. IDENTIFICATION AND CURRICULA VITAE OF PURCHASER'S DIRECTORS
The members and curricula vitae of the Board of Directors of Purchaser are
summarized as follows:
PAUL HANRAHAN. Director of Purchaser since August 2001. Director of CEDC
since 2000. Executive Vice President of AES since January 2001 and, prior to
that, Senior Vice President of AES since 1997. He was appointed Vice
President of AES effective January 1994. Since May 1, 1998, Mr. Hanrahan has
been Managing Director of AES Americas, a business group within AES
responsible for all of AES's activities in South America. From February 1995
until 1998 he was 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.
JEFFERY A. SAFFORD. Director of Purchaser since August 2001. Vice President
and Chief Financial Officer of AES Americas, a business group within AES
responsible for all of AES's activities in South America. From April 1994
until Mr. Safford's appointment to such offices in September 1998, he served
as Vice President and Chief Financial Officer and Secretary of AES China
Generating Co. Ltd. and performed the function of principal accounting
officer. He is a certified public accountant.
JULIAN JOSE NEBREDA MARQUEZ. Director of Purchaser since August 2001. Legal
Counsel and Secretary of the Board of Directors of CEDC and EDC since 2000.
Mr. Nebreda joined EDC's Legal Department in 1999. He is Member of the Board
of Directors of the Caracas Chamber of Commerce and CERDECO and he is also an
Alternate Director of Caja de Valores de Venezuela. Between 1993 and 1999 Mr.
Nebreda was Counsel to the Executive Director for Panama and Venezuela at the
Inter-American Development Bank in Washington D.C.
The members and curricula vitae of the Board of Directors of AES are
summarized as follows:
DENNIS W. BAKKE. Co-founder of AES with Roger Sant in 1981 and director of
AES since 1986. He has been President of AES since 1987 and Chief Executive
Officer since January 1994. He is a trustee of Rivendell School and a member
of the Board of Directors of Macrosonix Corporation in Richmond, Virginia.
ALICE F. EMERSON. Director of AES since 1993. She is a Senior Advisor at The
Andrew W. Mellon Foundation. She is a member of the Boards of Directors of
the World Resources Institute, the FleetBoston Financial Corporation,
Champion International Corporation, Eastman Kodak Company, Salzburg Seminar,
and the MGH Institute of Health Professions.
ROBERT F. HEMPHILL JR. Director of AES since June 1996. He served as
Executive Vice President of AES from 1982 to June 1996. He currently is the
Managing Director of Toucan Capital Corporation (an international venture
capital firm). He also serves on the Boards of the National Museum of
American History and the Pacific International Center for High Technology
Research, and is a member of the Advisory Board of Venture House, an internet
investment company.
10
FRANK JUNGERS. Director of AES since 1983. He has been consultant to various
companies since before 1994. Mr. Jungers is the retired Chairman of the Board
and Chief Executive Officer of the Arabian American Oil Company. He currently
serves on the Boards of Directors of Thermo Electron Corporation, Esco
Corporation and Statia Terminals. He is also Chairman of the Advisory Board
of Common Sense Partners, L.P. He is also Trustee of the Board of Trustees of
the American University in Cairo and serves as a Trustee to the High Desert
Museum and Oregon Health Sciences University Foundation.
PHILIP LADER. Director of AES since 2001. Mr. Lader served as U.S. Ambassador
to the United Kingdom of Great Britain and Northern Ireland from 1997 to
January 2001 and has also served in several senior White House and
Cabinet-level posts. Prior to entering government service, Ambassador Lader
was President of Sea Pines Company, Executive Vice President of the late Sir
James Goldsmith's U.S. holding company and president of universities in South
Carolina and Australia. Founder of Renaissance Weekends, Ambassador Lader
currently serves as Chairman of WPP plc, the world's largest advertising and
communications services company and a senior advisor to Morgan Stanley
International.
JOHN H. MCARTHUR. Director of AES since January 1997. He is the retired Dean
of the Harvard Business School, and has been a private business consultant
and active investor in various companies since before 1994. He serves as
Senior Advisor to the President of the World Bank Group. He is also a member
of the Boards of Directors of BCE Inc., Cabot Corporation, the Columbia/HCA
Healthcare Corporation, Glaxo Wellcome plc, Rohm & Haas Corporation, Springs
Industries, Inc., and KOC Holdings, A.S. Istanbul. He also serves in various
capacities with non-profit health, government, and education organizations in
America, Canada, Europe and Asia.
HAZEL R. O'LEARY. Director of AES since April 1997. Mrs. O'Leary was the
seventh Secretary of the United States Department of Energy from 1993 to
1997. She is consultant and an attorney to a diverse group of domestic and
international energy and sustainable development firms. She also serves on
the Board of the Kaiser Group International and UAL, Corporation, the parent
company of United Airlines. In addition, Mrs. O'Leary serves on the
non-profit Boards of Morehouse College, the Andrew Young Center of
International Development, the World Wildlife Fund and the Keystone Center.
ROGER W. SANT. Co-founder of AES with Dennis Bakke in 1981. He has been
Chairman of the Board and a director of AES since its inception, and he held
the office of Chief Executive Officer through December 31, 1993. He currently
is Chairman of the Boards of Directors of The Summit Foundation and The World
Wildlife Fund U.S., and serves on the Boards of Directors of The World
Resources Institute, the World Wide Fund for Nature and Marriott
International, Inc.
THOMAS I. UNTERBERG. Director of AES since 1984. He has been a Managing
Director of C.E. Unterberg, Towbin (an investment banking firm) since 1989.
He currently serves on the Boards of Directors of Electronics for Imaging,
Inc., Systems and Computer Technology Corporation, ECCS, Inc., Centrax
Corporation, Inc. and Club One, LLC. During 1999, Unterberg Harris, an
affiliate of C.E. Unterberg, Towbin, the investment banking firm in which Mr.
Unterberg is a Managing Director, acted as a co-managing underwriter for a
financial offering of AES which included the October 7, 1999 offering of 14
million shares of Common Stock, par value $0.01 per share.
ROBERT H. WATERMAN, JR. Director of AES since 1985. He is the founder and has
been the Chief Executive Officer of The Waterman Group, Inc. (a business
consulting firm) since 1985. His business includes research and writing,
consulting and venture management. He currently is Chairman of the Board of
University ProNet, Inc. and serves on the boards of several non-profit
organizations including the World Wildlife Fund and the Restless Legs
Syndrome Foundation.
The members and curricula vitae of the Board of Directors of CEDC are
summarized as follows:
DENNIS W. BAKKE. Director of CEDC since 2000. Co-founder of AES with Roger
Sant in 1981 and director of AES since 1986. He has been President of AES
since 1987 and Chief Executive Officer since January 1994. He is a trustee of
Rivendell School and a member of the Board of Directors of Macrosonix
Corporation in Richmond, Virginia.
11
RICHARD A. BULGER. Director of CEDC since 2000. Vice President of AES since
January 2001. He has served as the President of EDC and CEDC since June 2000.
Prior to his appointment he served as President of AES Sul from October 1998
to June 2000. Mr. Bulger joined AES in December of 1997 and before he was a
director with Price Waterhouse LLP. Mr. Bulger is a certified public
accountant. Mr. Bulger also serves as a director with CANTV since January
2001.
MICHEL GOGUIKIAN. Director of CEDC since 2000. Mr. Goguikian has been
Executive President of Banco de Venezuela Grupo Central Santander Hispano (a
Venezuelan bank) since 1997. Mr. Goguikian joined Grupo Santander Central
Hispano in 1992 as Managing Director for Santander Investments. Before then,
Mr. Goguikian worked for Citibank for 12 years as International Executive.
PAUL HANRAHAN. Director of CEDC since 2000. Executive Vice President of AES
since January 2001 and, prior to that, Senior Vice President of AES since
1997. He was appointed Vice President of AES effective January 1994. Since
May 1, 1998, Mr. Hanrahan has been Managing Director of AES Americas, a
business group within AES responsible for all of AES's activities in South
America. From February 1995 until 1998 he was President and Chief Executive
Officer of AES Ghigen, where he served as Executive Vice President, Chief
Operating Officer and Secretary from December 1993 until February 1995.
LORENZO MENDOZA. Director of CEDC since 2000. Mr. Mendoza has been a
Principal Director of Cerveceria Polar, C.A. since 1993. Member of the
Executive Committee of Cerveceria Polar, C.A. since 1990. CEO of Empresas
Polar since 1999. Principal Director of the Board of Banco Provincial, S.A.
Banco Universal since 1997. Principal Director of the Board of Directors of
Snack America Latina since 1998. Mr. Mendoza owns 42,066 Shares, which
represent less than 0.1% of the total number of outstanding shares of capital
stock of CANTV.
CIRA ROMERO. Director of CEDC since 2000. President of Estrategias
Empresariales (a consulting firm) since 1987. Ms. Romero is a member of the
Board of Directors of the Caracas Chamber of Commerce and the Instituto de
Estudios Superiores de Administracion (IESA).
J. STUART RYAN. Director of CEDC since 2000. Executive Vice President of AES
since Febru ary 2000, was Senior Vice President until February 2000 and is
Managing Director of the AES Pacific group which is responsible for AES's
business in the western United States. Between 1994 and 1998, Mr. Ryan led
the AES Transpower group responsible for AES's activities in Asia (excluding
China). From 1994 through 1997, he served as Vice President of AES.
ROGER W. SANT. Director of CEDC since 2000. Co-founder of AES with Dennis
Bakke in 1981. He has been Chairman of the Board and a director of AES since
its inception, and he held the office of Chief Executive Officer through
December 31, 1993. He currently is Chairman of the Boards of Directors of The
Summit Foundation and The World Wildlife Fund U.S., and serves on the Boards
of Directors of The World Resources Institute, the World Wide Fund for Nature
and Marriott International, Inc.
GUSTAVO JULIO VOLLMER. Director of CEDC. President of Corporacion Palmar,
S.A. since 1984. Mr. Vollmer is Director of Banco Mercantil Servicios
Financieros, Banco Mercantil, C.A. y Siderurgica de Venezuela S.A. He is also
a member of the Advisory Council of the New York Stock Exchange for Latin
America.
H. AUDITED FINANCIAL STATEMENTS OF PURCHASER, AES AND CEDC FOR THE PAST THREE
(3) FISCAL YEARS.
The audited financial statements of Purchaser as of April 20, 2001, the
audited consolidated financial statements of AES and its subsidiaries as of
December 31, 2000, 1999 and 1998, and the audited consolidated financial
statements of CEDC and its subsidiaries as of December 31, 2000, 1999 and
1998 are made a part of this document and attached hereto as ANNEX A.
3. INFORMATION ON THE PURPOSE OF THE VENEZUELAN OFFER
A. PURCHASER MUST DISCLOSE WHETHER THE PURPOSE OF THE PURCHASE IS TO ACQUIRE
CONTROL OR A "PARTICIPATION DEEMED SIGNIFICANT" (WITHIN THE MEANING OF THE
VENEZUELAN TENDER OFFER REGULATIONS). IN CASE OF A TAKEOVER IT MUST COMPLY
WITH ANY ADDITIONAL REQUIREMENT RELATED TO THIS KIND OF OFFER.
12
The Venezuelan Offer is a Tender Offer to Take Control, governed by the "The
Public Tender Offer Rules on the Acquisition, Exchange and Takeover of
Companies that Make Public Offerings of Shares and Other Rights thereon,"
passed by the CNV and published in the Bolivarian Republic of Venezuela
Official Gazette No 37.039, of September 19, 2000 (the "CNV TENDER OFFER
REGULATIONS").
In Article 3 of the CNV Tender Offer Regulations, the term Tender Offer to
Take Control is defined as the procedure through which ". . . the offeror
intends to purchase the shares, securities and rights of the target company,
of those mentioned in article 4, regardless of the consideration offered and
notwithstanding the type or nature of the agreement, and whose result is
purchaser acquiring or attaining a controlling majority which it does not
have in a corporation, that makes public offer of its shares and the
resulting change of control, or the offeror increases its interests in the
share capital by a participation deemed significant (within the meaning of
the regulations)."
Consequently, the purpose of the Offers is for Purchaser to acquire control
of CANTV. For such purpose, Purchaser has prepared a Special Report on its
Intentions, according to the provisions of the CNV Tender Offer Regulations,
which is enclosed hereto as ANNEX B.
THE SPECIAL REPORT ON PURCHASER'S INTENTIONS CONTAINS MATERIAL INFORMATION
THAT MUST BE FULLY READ BEFORE MAKING ANY DECISION CONCERNING THE VENEZUELAN
OFFER.
B. ACCURATE DESCRIPTION OF PURCHASER'S INTENTIONS WITH REGARD TO THE CORPORATION
WHOSE SECURITIES IT INTENDS TO PURCHASE, CONCERNING OPERATIONAL, FINANCIAL
AND CORPORATE POLICIES, AND THE LISTING OF THE CORPORATE SECURITIES.
In connection with the Offers, Purchaser has reviewed, and will continue to
review, on the basis of available information relating to CANTV, various
possible business strategies that Purchaser might consider in the event that
Purchaser acquires control of CANTV through the purchase of Shares and ADSs
pursuant to the Offers.
If and to the extent that Purchaser acquires control of CANTV pursuant to the
Offers, AES intends to conduct a detailed review of CANTV and its assets,
corporate structure, dividend policy, capitalization, operations, properties,
future and expansion plans, policies, management and personnel and, subject
to applicable law, to consider and determine what, if any, changes would be
desirable in light of the circumstances which then exist.
CORPORATE POLICIES. Purchaser intends, as soon as practicable after
consummation of the Offers, to seek majority representation on CANTV's board
of directors. According to Venezuelan law and CANTV's Bylaws, Purchaser
believes that if Purchaser and its Related Persons own a majority of the
capital stock of CANTV, Purchaser and its Related Persons would have the
power to cause the existing board of directors of CANTV to call a special
meeting of shareholders at which Purchaser would intend to elect designees of
Purchaser as a majority of the CANTV board of directors.
Purchaser intends that its designees to the board of directors of CANTV would
be employees of AES or its subsidiaries (including CEDC). However, depending
on the number of directors Purchaser has the right to elect, Purchaser
believes that other members could include current members of the board of
directors of CANTV and other individuals not affiliated with AES. Under
Venezuelan law and regulations, a shareholder or group of minority
shareholders holding 20% or more of the outstanding shares of capital stock
of CANTV is entitled to elect a number of members of the board of directors
of CANTV that is proportional to the share holdings of such shareholders or
group of shareholders (excluding for purposes of such calculation the
directors appointed by holders of Class B and Class C Shares).
Pursuant to Venezuelan law and CANTV's Bylaws, subject to the matters
reserved to CANTV shareholders discussed below, CANTV's board of directors is
empowered to manage the business and affairs of CANTV. Among other things,
CANTV's board of directors has the power to call shareholders' meetings,
propose dividend policies and authorize actions regarding the assets of
CANTV, all subject to the limitations contemplated in CANTV's Bylaws.
13
Under Venezuelan law, if Purchaser and its Related Persons beneficially own
more than a majority of the Shares, including Class D Shares represented by
ADSs, Purchaser and its Related Persons would be able to make certain
fundamental changes regarding CANTV by themselves. More specifically, CANTV's
bylaws provide that, if Purchaser and its Related Persons beneficially own a
majority of the Shares, Purchaser and its Related Persons would in general be
able to adopt decisions relating to most corporate matters except the
following, for which the favorable vote of the holders of a majority of the
Class B Shares (Shares held by the Venezuelan government) is required: (i)
the dissolution of CANTV, (ii) a merger with another company, (iii) any other
extraordinary transaction involving CANTV; (iv) restoration of or decrease in
capital; (v) the authorization of the transfer of all or substantially all of
CANTV's assets and (vi) the amendment of certain provisions of the CANTV
Bylaws.
DIVIDENDS. Following the successful completion of the Offers, Purchaser
intends to cause CANTV to distribute to all shareholders of CANTV cash
currently held by CANTV determined to be in excess of CANTV's current or
anticipated needs. Based on its review to date of publicly available
information with respect to CANTV, Purchaser believes CANTV is in a position
to distribute additional dividends to its shareholders. Purchaser believes
that any such dividends would benefit all shareholders of CANTV without
adversely affecting CANTV's operations or investment requirements.
The actual amounts to be distributed to shareholders of CANTV will be
determined by, among other things, applicable legal requirements, the
results of Purchaser's review of CANTV described above, the financial
condition of CANTV, the availability of sufficient retained earnings and
funds to effect such distributions and requirements under loan and other
agreements to which CANTV is a party which restrict CANTV's ability to pay
dividends. Based upon its review to date of the loan and other agreements
to which CANTV is a party which are publicly available, Purchaser believes
CANTV is in a position to distribute additional dividends without any third
party consents. To the extent Purchaser determines that third party
consents under such agreements are required, the Purchaser intends to seek
any such consents. However, Purchaser believes that certain of CANTV's debt
instruments would, in the future, restrict the payment of dividends by
CANTV. Purchaser intends to cause CANTV to seek to obtain consents from the
lenders and/or refinance such indebtedness which could prevent the payment
of such dividends. At this time, Purchaser is unable to determine the
actual amounts that may be in excess of CANTV's current or future needs and
that could be distributed or the timing thereof and would not expect to be
in a position to make any determination with respect thereto until the
completion of Purchaser's review described above.
FINANCIAL POLICIES. If the Offers are successfully completed, Purchaser
believes that changes could be made to the existing capital structure of
CANTV, including refinancing and the incurrence of additional debt, which
could permit the payment of additional dividends to shareholders and optimize
CANTV's capital structure, all subject to CANTV's Bylaws and the Commercial
Code. Subject to the matters set forth in this Venezuelan Offer to Purchase,
Purchaser intends to effect such matters.
OPERATIONAL POLICIES. If the Offers are successfully completed, Purchaser
intends to manage CANTV in a manner consistent with AES's corporate values of
social responsibility, fun, fairness and integrity and in a manner consistent
with other AES owned and operated businesses and facilities. Among other
things, Purchaser intends to seek to increase the value of CANTV for its
shareholders and enhance the quality of service in order to benefit
shareholders, customers and the communities they serve.
LISTING OF THE SHARES ON THE CARACAS STOCK EXCHANGE. The Class D Shares of
CANTV (which are the only class of Shares underlying the ADSs) are listed on
the Caracas Stock Exchange. Purchaser recognizes that the existence of a
liquid trading market for the Class D Shares in Venezuela is important to the
shareholders of CANTV. Consequently, the current strategy of AES is to cause
CANTV to maintain the listing of those Class D Shares on the Caracas Stock
Exchange, and to request the listing of the Class D shares of the surviving
corporation of the merger described below.
The purchase of Shares pursuant to the Venezuelan Offer will substantially
reduce the number of
14
Class D Shares of CANTV that might otherwise trade publicly and may also
reduce the number of holders of Shares. In view of the number of Class D
Shares that would remain outstanding after completion of the Offers,
Purchaser believes that there will continue to be a market for the Class D
Shares. However, the reduction in publicly traded Class D Shares will
likely adversely affect the liquidity, marketability and market value of
the Class D Shares.
LISTING OF THE ADSS ON THE NEW YORK STOCK EXCHANGE AND REGISTRATION OF THE
ADSS UNDER THE U.S. EXCHANGE ACT. The ADSs are currently listed on the New
York Stock Exchange. Purchaser intends to cause CANTV to maintain (subject to
applicable listing criteria) the listing of ADSs on the New York Stock
Exchange following the purchase of ADSs pursuant to the U.S. Offer, and to
request the listing of the American Depositary Shares of the surviving
corporation in the merger described below, on the New York Stock Exchange.
However, it is possible that, due to decreases in the number of ADS holders,
trading volume and the potential reduction of the market value of the ADSs
following the consummation of the U.S. Offer, the ADSs will no longer meet
the continued listing requirements of the New York Stock Exchange. In the
event that ADSs fail to meet its continued listing requirements, the New York
Stock Exchange may choose, at its discretion, to delist the ADSs.
The ADSs are currently "margin securities" under the regulations of the Board
of Governors of the U.S. Federal Reserve System, Federal Reserve Board, which
has the effect, among other things, of allowing brokers to extend credit on
the collateral of such securities. If the New York Stock Exchange listing for
the ADSs is terminated following the purchase of ADSs pursuant to the U.S.
Offer, the ADSs will no longer constitute margin securities for the purposes
of the Federal Reserve Board's margin regulations and, therefore, could no
longer be used as collateral for loans made by brokers.
The ADSs are currently registered under the U.S. Securities Exchange Act of
1934, as amended (the "U.S. EXCHANGE ACT"). Although Purchaser has no current
plans to deregister the ADSs, such registration may be terminated upon
application of CANTV to the U.S. Securities and Exchange Commission ("SEC")
if the ADSs are not listed on a national securities exchange and there are
fewer than 300 record holders of ADSs resident in the United States.
Termination of the registration of the ADSs under the U.S. Exchange Act would
substantially reduce the information required to be furnished by CANTV to
holders of ADSs and to the SEC and would make certain of the provisions of
the U.S. Exchange Act, such as the requirements of Rules 13e-3 and 13e-4
under the U.S. Exchange Act with respect to "going private" transactions, no
longer applicable to the ADSs. Furthermore, "affiliates" of CANTV and persons
holding restricted securities of CANTV may be deprived of the ability to
dispose of such securities pursuant to Rule 144 promulgated under the U.S.
Securities Act of 1933, as amended.
The purchase of ADSs pursuant to the U.S. Offer will reduce substantially the
number of ADSs that might otherwise trade publicly and will reduce the number
of holders of ADSs. In view of the number of ADSs that would remain
outstanding after completion of the Offers, Purchaser believes that there
will continue to be a market for the ADSs. However, the reduction in publicly
traded ADSs will likely adversely affect the liquidity, marketability and
market value of the ADSs.
C. ACCURATE DESCRIPTION OF ANY PLAN OR PROPOSAL THAT MAY BE RELATED TO THE
LIQUIDATION OF THE CORPORATION, THE SALE OF THE ASSETS THEREOF, THE MERGER
WITH ANOTHER CORPORATION, THE SPLIT OR SPIN-OFF OR ANY OTHER MATERIAL
CHANGE WITH RELATION TO THE PURPOSE, BUSINESS BRANCH, INVESTMENTS, MANNER
OF CONDUCTING BUSINESS OR CORPORATE REORGANIZATION.
MERGER. Purchaser intends as promptly as practicable following consummation
of the Offers, and prior to the payment of any dividends, to consummate a
merger between Purchaser and CANTV in which Purchaser would be the surviving
corporation. Prior to the consummation of this merger, Purchaser would
transfer to TelCom 2 all the Shares and ADSs owned by Purchaser (including
the Shares and ADSs purchased pursuant to the Offers). Upon the merger, all
shareholders of CANTV other than TelCom 2 will receive shares of Purchaser in
exchange for their Shares, which will change its name to CANTV and would
continue all of the business and operations of CANTV. As a result of the
merger, Purchaser (also referred to as the surviving corporation), would have
as shareholders all those who were shareholders of CANTV prior to the merger,
who will hold the same interest in the surviving corporation and the same
rights granted by the class of shares they held in CANTV immediately prior to
the merger.
15
In accordance with the Capital Markets Law, the proposed merger would have to
be notified to the CNV 30 days prior to the shareholders meeting that will
consider the merger, so that the CNV may exercise its oversight and control
powers on the capital markets and the entities subject to its control to
protect investors, including minority shareholders.
Under CANTV's Bylaws and Venezuelan law, the merger would require the
approval of the holders of a majority of CANTV's outstanding capital stock
present at a meeting at which there was a propertly constituted quorum, and
the holders of a majority of CANTV's Class B Shares. In the event Purchaser
purchases Shares and ADSs pursuant to the Offers, Purchaser and its Related
Persons would be able to approve the merger without the vote of any other
holders of CANTV's capital stock, other than the Venezuelan government, the
holder of all Class B Shares. Purchaser is requesting that the holder of
Class B Shares approve the merger. Purchaser also believes that the merger is
subject to the approval of CONATEL.
Under Venezuelan law the merger could not be consummated until the expiration
of a three month period following shareholder approval and publication of
notice of the merger, unless the merger was approved by all creditors of
CANTV. If after the expiration of such three month period, no CANTV creditor
has opposed the merger or if any such CANTV creditor who has opposed the
merger has withdrawn such objection, the merger could be consummated. If any
creditor opposes the merger during such three month period, the merger could
not be consummated until such opposition was withdrawn or until a Venezuelan
court ruled that the merger could proceed.
As a result of the merger, the surviving corporation will have the same
general capital structure, financial condition and operations and will have
the same tangible or intangible assets, rights and obligations that CANTV had
before the merger. Following the merger, shareholders of CANTV will continue
as shareholders of the surviving corporation, holding the same class of
shares held in CANTV prior to the merger. The Bylaws of the surviving
corporation will be amended to be consistent with the Bylaws and capital
structure of CANTV, including the maintenance of the rights of holders of
Class B and Class C shares. The shares of the surviving corporation will be
registered with the National Securities Registry in accordance with the
Capital Markets Laws and regulations thereunder. The class D shares of the
surviving corporation will be listed on the Caracas Stock Exchange (as the
Class D Shares of CANTV are currently listed) and, subject to the matters set
forth in this Venezuelan Offer to Purchase, the American Depositary Shares
representing the surviving corporation's class D shares will trade on the New
York Stock Exchange. Based upon its review to date of public information to
date, Purchaser is not aware of any third party consents under CANTV's
contracts, other than under a loan agreement, that would be required to
effect the merger. Purchaser currently intends to either cause CANTV to
obtain the consent of the lender under the loan agreement or refinance the
loan. In addition, to the extent any additional consents were required,
Purchaser currently intends to seek to obtain such consents. In addition,
following the merger, Purchaser intends to transfer some of the assets of
CANTV to a wholly owned subsidiary of CANTV.
SEE ANNEX G FOR CERTAIN U.S. TAX CONSIDERATIONS RELATED TO THE PROPOSED
MERGER AND SUBSEQUENT CASH DISTRIBUTIONS APPLICABLE TO U.S. HOLDERS OF
SHARES.
POTENTIAL SALE OF MOVILNET. Following consummation of the Offers, Purchaser
intends to seek to sell CANTV's interest in its wireless business,
currently held by its wholly-owned subsidiary Telecomunicaciones Movilnet
C.A. ("MOVILNET"). Purchaser is considering a variety of mechanisms for
effecting such sale, including a negotiated transaction with a third party
and/or a public offering of Movilnet shares through a capital markets
transaction. In this regard, representatives of Purchaser have held
negotiations with a third party regarding a possible sale of Movilnet.
Purchaser believes that Movilnet would be a very attractive asset for
international telecommunications operators and that the sale of Movilnet
would create proceeds which could be distributed to all shareholders of
CANTV's capital stock while increasing competition in the Venezuelan
telecommunications market. However, there can be no assurance that a sale
of Movilnet could be effected, the price thereof or the amount, if any,
that could be distributed to shareholders as a result of any such sale. The
sale of Movilnet is subject to the approval of CONATEL.
16
The sale of Movilnet would reduce the consolidated assets of CANTV in an
amount equal to the value of Movilnet's assets sold. However, such sale would
also increase the consolidated assets of CANTV in an amount equal to the cash
or the market value of any other asset which CANTV receives as proceeds of
such sale. As a result of the sale of Movilnet, CANTV would cease to render
mobile phone services through Movilnet. Purchaser contemplates that the
proceeds and any control premium derived from the sale of Movilnet would
result in funds that could be distributed to all holders of CANTV shares in
proportion to their Share ownership in CANTV.
Except as otherwise disclosed in this Venezuelan Offer to Purchase,
Purchaser does not have any other present plans or proposals that relate to
or would result in any extraordinary corporate transaction, such as a
merger, reorganization or liquidation, involving CANTV or any of its
subsidiaries, a sale or transfer of a material amount of assets of CANTV or
any of its subsidiaries or any material changes in CANTV's capitalization
or dividend policy or any other material changes in CANTV's corporate
structure or business.
D. PROJECTS INVOLVING THE ISSUANCE OF ADDITIONAL SHARES AND CAPITAL INCREASES
OR THE RESALE IN WHOLE OR IN PART OF THE INTERESTS TO BE PURCHASED.
Other than with respect to the transfer of Shares and ADSs purchased pursuant
to the Offers to TelCom 2 after consummation of the Offers, as described
above, currently, Purchaser does not have any plans regarding a capital
increase of CANTV or the resale of the Shares to be purchased pursuant to the
Offers.
Purchaser reserves the right, subject to compliance with Venezuelan law, to
transfer or assign, in whole or from time to time in part, to one or more of
its Related Persons, the right to purchase Shares and ADSs tendered pursuant
to the Offers. Any such transfer or assignment will not relieve Purchaser of
its obligation under the Offers or prejudice the rights of tendering holders
of Shares and ADS to receive payment for Shares and ADSs on the terms and
conditions of the Offers.
Purchaser, AES and CEDC currently do not have any plans or proposals
following completion of the Offers to acquire additional Shares and ADSs, but
reserve the right to do so in the future. Although Purchaser, AES and CEDC
have no such plans, following the consummation of the Offers, AES, CEDC or
Purchaser may decide, directly or indirectly through their Related Persons,
and subject to applicable law (including Venezuelan tender offer
regulations), to purchase additional Shares or ADSs. There can be no
assurance that AES, CEDC, Purchaser or any of their Related Persons will
effect any such purchases or as to the prices thereof which could be higher
or lower than or equal to the purchase price per Share or ADS to be paid
pursuant to the Offers.
E. INFORMATION ON WHETHER IT IS PLANNED TO MAKE THE TARGET COMPANY, ITS
SUBSIDIARIES OR AFFILIATES BEAR, DIRECTLY OR INDIRECTLY, THE ACQUISITION
COST OR TO DO SO THROUGH THE SALE OF ITS ASSETS, MERGERS, ASSOCIATIONS OR
EXECUTION OF AGREEMENTS OF ANY KIND.
Neither the financial expenses related to the Offers nor the cost of
acquisition of the Shares or ADSs shall be borne, either directly or
indirectly, by CANTV, or its affiliates or subsidiaries, or through the sale
of assets, mergers, associations or execution of any type of agreements.
Neither the sale of Movilnet nor the merger of CANTV with and into the
Purchaser will cause CANTV or its affiliates directly or indirectly to bear
the costs of the acquisition of the Shares or ADSs under the Offers.
The sale of Movilnet would reduce the consolidated assets of CANTV in an
amount equal to the value of Movilnet's assets sold. However, such sale would
also increase the consolidated assets of CANTV in an amount equal to the cash
or the market value of any other asset which CANTV receives as proceeds of
such sale. As a result of the sale of Movilnet, CANTV would cease to render
mobile phone services through Movilnet. Purchaser contemplates that the
proceeds and any control premium derived from the sale of Movilnet would
result in funds that could be distributed to all holders of CANTV shares in
proportion to their Share ownership in CANTV.
17
F. ACCURATE DESCRIPTION OF THE SOURCE OF FUNDS, COMPLYING WITH THE REQUIREMENTS
SET FORTH IN THE RULES ON PREVENTION, CONTROL AND AUDITING OF THE CAPITAL
LEGITIMATION OPERATIONS APPLICABLE TO THE VENEZUELAN MARKET.
Purchaser estimates that the total amount of funds required to purchase the
Shares and ADSs pursuant to the Offers will be approximately US$1.371 billion
plus the costs and expenses related to the Offers. Purchaser is pursuing
various sources for the funds for the Offers, and to pay the related costs
and expenses, including limited recourse financing, internal resources,
corporate borrowings, sales of securities and other sources. In this regard,
Purchaser has held negotiations with Related Persons of its financial
advisors relating to a limited recourse credit facility. Additionally, an
agreement among AES, CEDC and TelCom 2 contemplates that AES will contribute
$500 million with respect to the Offers. See Section 6.g. Purchaser believes
that the funds required to purchase tendered Shares and ADSs pursuant to the
Offers can be obtained on a timely basis. Neither the Venezuelan Offer nor
the U.S. Offer is conditioned on the completion of any financing
arrangements.
AES, the ultimate parent of Purchaser, is the "joint guarantor" of the full
amount of the purchase price to be paid for the Shares and ADSs purchased
pursuant to the Offers upon the terms and conditions set forth in this
Venezuelan Offer to Purchase and the U.S. Offer to Purchase, being
US$1,371,213,306.29. The guarantee is evidenced by a document, executed and
notarized before the Commencement Date of the Venezuelan Offer, the form of
which has been attached as ANNEX C to this Venezuelan Offer to Purchase.
4. INFORMATION ON THE PURCHASER' S OWNERSHIP OF SHARES
A. NUMBER AND PERCENTAGES OF THE SHARES AND SECURITIES THAT GRANT RIGHTS ON THE
SHARES OR VOTING RIGHTS DIRECTLY OR INDIRECTLY OWNED BY PURCHASER IN THE
SHARE CAPITAL OF THE TARGET COMPANY.
AES and CEDC beneficially own 64,000,524 Class D Shares and 1,000 ADSs,
representing approximately 6.9% of the outstanding capital stock of CANTV.
This includes (i) 63,999,524 Class D Shares held by Inversiones Inextel,
C.A., a wholly owned subsidiary of CEDC, received upon the conversion of
virtually all of Inversiones Inextel's interest in VenWorld, and (ii) 1,000
Class D Shares and 1,000 ADSs owned by Purchaser (such Shares and ADSs were
transferred to Purchaser on August 29, 2001, from Inversiones Onapo, C.A., an
indirect wholly owned subsidiary of CEDC).
In addition, Inversiones Inextel has requested that VenWorld convert its
remaining interest in VenWorld into 476 Class D shares of CANTV, all pursuant
to the Bylaws of VenWorld and the Association Agreement (described in Section
5.b of this Venezuelan Offer to Purchase).
B. DESCRIPTION OF ANY OTHER CONTRACTUAL RIGHT THAT MAY HAVE AN EFFECT
EQUIVALENT TO A SHARE IN THE SHARE CAPITAL OR IN SECURITIES THAT GRANT A
RIGHT ON SHARES IN THE TARGET COMPANY.
Other than as described under Section 4.a above, none of AES, CEDC or
Purchaser has contractual rights that may have an effect equivalent to a
share in the share capital or in securities that grant rights on the Shares
issued by CANTV.
C. NUMBER AND PERCENTAGES OF OTHER SECURITIES IN THE TARGET COMPANY, INCLUDING
DEBT SECURITIES, THAT PURCHASER OWNS DIRECTLY OR INDIRECTLY OR BY
AGREEMENT.
None.
5. INFORMATION ON RELATIONSHIPS BETWEEN PURCHASER AND THE TARGET COMPANY.
A. DESCRIPTION OF ANY CONTRACT, AGREEMENT OR RELATIONS BETWEEN PURCHASER AND
THE TARGET COMPANY, PARENT CORPORATIONS OR CONTROLLED CORPORATION, THEIR
DIRECTORS OR THEIR MAJORITY OR MINORITY SHAREHOLDERS, IN FULL FORCE AND
EFFECT DURING THE THREE (3) YEAR PERIOD PRIOR TO THE DATE OF NOTICE OF THE
VENEZUELAN OFFER WITH THE CNV.
18
In 1991, VenWorld Telecom, C.A. ("VENWORLD"), a Venezuelan company formed by
GTE Corporation (now Verizon Telecommunications Inc. ("VERIZON")), TI
Telefonica Internacional de Espana, S.A. ("TELEFoNICA"), EDC, AT&T
International Inc. ("AT&T") and Consorcio Inversionista Mercantil Cima C.A.
to acquire Class A Shares in connection with the privatization of CANTV by
the Government of Venezuela, acquired operating control and 40% of the then
outstanding capital stock of CANTV. According to publicly available
information, VenWorld owned, as of April 30, 2001, 400,000,000 Class A Shares
representing all of the Class A Shares and approximately 43.2% of CANTV's
outstanding capital stock. As of such date, the shareholders of VenWorld also
included certain other minority shareholders.
The shareholders of VenWorld are parties to an association agreement, dated
as of August 1, 1991, as amended (the "ASSOCIATION AGREEMENT"). Under the
terms of the Association Agreement, any shareholder of VenWorld may now
require that VenWorld convert all or part of the VenWorld shares held by such
shareholder into its pro rata interest in the Class A Shares held by
VenWorld, provided that such Class A Shares so converted must first be
irrevocably offered for sale to the other shareholders of VenWorld at a price
per share equal to 95% of the average market price of the ADSs during a
period specified in the Association Agreement.
The Association Agreement also provides that any shareholder of VenWorld who
wishes to sell, transfer or assign any shares of VenWorld must first offer
the shares it wishes to transfer to the other VenWorld shareholders at a
price per share specified by the offering shareholder and in accordance with
a procedure set forth in the Association Agreement.
Between April 2000 and July 13, 2001, Purchaser believes that the following
conversions of VenWorld shares have occurred:
o Inversiones Inextel has converted virtually all of its interest in
VenWorld into 63,999,524 Class D Shares held by VenWorld (representing
approximately 6.9% of the outstanding capital stock of CANTV).
Inversiones Inextel has requested that VenWorld convert its remaining
interest in VenWorld into 476 Class D Shares.
o A wholly owned subsidiary of AT&T converted all of its interest in
VenWorld into 20,000,000 Class A shares held by VenWorld (representing
2.2% of the outstanding capital stock of CANTV). Purchaser does not know
whether AT&T still owns these shares.
o Some other shareholders of VenWorld have had their interests in
VenWorld converted into 3,913,917 Class D Shares.
The Association Agreement also contains provisions providing for the
election of directors of
VenWorld and CANTV, veto rights and non compete, among others. Pursuant to
these provisions, representatives of CEDC currently serve as a director and
such director's alternate on the Board of Directors of CANTV.
B. DESCRIPTION OF ANY AGREEMENT THAT HAS BEEN VALID AND IN FULL FORCE AND
EFFECT DURING THE THREE (3) YEAR PERIOD PRECEDING THE DATE OF NOTICE OF THE
VENEZUELAN OFFER WITH THE CNV AND WHICH RELATES TO THE SHARES, SECURITIES
REPRESENTING RIGHTS ON SHARES OR VOTING RIGHTS IN THE TARGET COMPANY, ITS
PARENT OR CONTROLLED CORPORATIONS.
See Section 5.a of this Venezuelan Offer to Purchase.
6. SPECIFIC OFFER CONDITIONS
A. NUMBER OR PERCENTAGE OF SHARES OR SECURITIES THAT PURCHASER IS BOUND TO
PURCHASE; COMMITMENT TO PURCHASE THEM UNDER THE PROPOSED CONDITIONS, AND IF
APPLICABLE, THE NUMBER OR PERCENTAGE OF SHARES OR SECURITIES BELOW WHICH IT
RESERVES THE RIGHT NOT TO DEEM FAILED AN OFFER THAT HAS NOT BEEN WHOLLY
ACCEPTED. THE RIGHT NOT TO DEEM AN OFFER FAILED MAY ONLY BE EXERCISED IF
EXPRESSLY RESERVED BY PURCHASER, PROVIDED THAT THE OFFER ACCEPTANCE
INCLUDES A NUMBER OF SHARES AND RIGHTS REPRESENTING AT LEAST SEVENTY FIVE
PER CENT (75%) OF THE SHARES AND RIGHTS THAT PURCHASER HAS INITIALLY
OFFERED TO PURCHASE.
19
(I) NUMBER OR PERCENTAGE OF SHARES OR SECURITIES THAT IT IS BOUND TO PURCHASE;
FIRM COMMITMENT TO PURCHASE THEM UNDER THE PROPOSED CONDITIONS.
The purpose of the Venezuelan Offer is to purchase a number of outstanding
Shares (free of liens, security assignments, privileges, preferential
rights, and other encumbrances or interests that may adversely affect the
full use, enjoyment and disposition thereof) which, together with the
Class D Shares represented by ADSs to be purchased pursuant to the U.S.
Offer, represent 43.19% of the outstanding capital stock of CANTV. As of
the date hereof, AES beneficially owns (through subsidiaries, including
Inversiones Inextel, C.A., a wholly owned subsidiary of CEDC) 64,000,524
Class D Shares and 1,000 ADSs, representing in the aggregate approximately
6.9% of the outstanding capital stock of CANTV. In addition, Inversiones
Inextel owns 136 shares of VenWorld, which Inversiones Inextel has
requested that Venworld convert into 476 Shares.
If valid tenders of Shares are received in the Venezuelan Offer from
exceeding 199,968,608 Shares and more than 28,566,944 ADSs are validly
tendered in the U.S. Offer, proration rules will apply. See Section 6.g of
this Venezuelan Offer to Purchase.
CANTV's outstanding share capital consists of 926,037,385 Shares divided
into four classes (A, B, C and D) with a par value of Bs.36.90182224915
each.
(II) PURCHASER RESERVATION OF THE RIGHT TO DEEM THE VENEZUELAN OFFER FAILED
If (i) the Coordinator of the Venezuelan Offer fails to receive valid
shareholder tenders that allow Purchaser to purchase a number of Shares
(free and clear of any liens, security assignments, privileges,
preferential rights and other encumbrances or interests that may adversely
affect the full use, enjoyment and disposition of such Shares) that,
together with the Class D Shares represented by ADSs to be purchased
pursuant the U.S. Offer, constitute at least 43.19% of the outstanding
shares of capital stock of CANTV, or (ii) fewer than 199,968,608 Shares
are validly tendered in the Venezuelan Offer, or (iii) fewer than
28,566,944 ADSs are validly tendered in the U.S. Offer, or (iv) an event
takes place thereby giving Purchaser the right to withdraw the Venezuelan
Offer, then Purchaser reserves the right to:
(a) extend the initial term of the Venezuelan Offer, within the limits
contemplated in the CNV Tender Offer Regulations, subject to prior
authorization from the CNV;
(b) increase the number of Shares sought in the Venezuelan Offer and
decrease the number of ADSs sought in the U.S. Offer, and if
applicable, extend the term of the Offers, provided that the
aggregate number of Shares and ADSs sought in the Offers shall always
represent at least 43.19% of the outstanding capital stock of CANTV,
in accordance with article 16 of the CNV Tender Offer Regulations,
upon prior authorization of the CNV;
(c) increase the number of ADSs sought in the U.S. Offer and decrease
the number of Shares sought in the Venezuelan Offer, and if
applicable, extend the term of the Offers, provided that (i) the
aggregate number of Shares and ADSs sought in the Offers shall always
represent at least 43.19% of the outstanding capital stock of CANTV,
and (ii) the adjusted number of Shares sought in the Venezuelan Offer
will not be lower than the number of Shares validly tendered in the
Venezuelan Offer and not withdrawn, in accordance with article 16 of
the CNV Tender Offer Regulations, upon prior authorization of the
CNV;
(d) deem the Venezuelan Offer failed and withdraw the Venezuelan Offer
in accordance with this Venezuelan Offer to Purchase; or
(e) not deem the Venezuelan Offer failed and acquire the Shares pursuant
to the Venezuelan Offer, provided that the Shares purchased represent
at least a number of Shares which, together with the Shares
represented by ADSs purchased pursuant to the U.S. Offer, represent
at least 32.39% of the outstanding capital stock of CANTV.
20
(III) WITHDRAWAL OF THE VENEZUELAN OFFER BY PURCHASER
Purchaser may withdraw the Venezuelan Offer before the Expiration Date
in the event of the occurrence of any of the following, upon
confirmation by the CNV:
REGULATORY APPROVAL; APPROVAL OF MERGER. If all regulatory approvals,
actions, waivers or consents required to consummate the Offers,
including the authorization by CONATEL of the purchase of Shares and
ADSs pursuant to the Offers, shall not have been obtained or if such
approvals shall have not remained in full force and effect, or any such
approvals impose conditions or restrictions that would be adverse to
AES, CEDC, Purchaser, CANTV or any of their respective Related Persons;
or if the holder of the Class B Shares has not cast a favorable vote of
the merger of CANTV with and into Purchaser described in Section 3.c.
GOVERNMENTAL ACTIONS AND LITIGATION. If there shall have been a threat
of, instituted or pending an action, proceeding, application or claim
before any Governmental Authority, which:
o challenges or seeks to challenge, restrains, delays or prohibits the
acquisition by Purchaser or any of its Related Persons of the Shares
or ADSs or making any of the Offers;
o prohibits the performance by AES, CEDC, Purchaser, CANTV or any of
their respective Related Persons, or anyone else, of any contracts or
arrangements entered into or to be entered into by AES, CEDC,
Purchaser, CANTV or any of their Related Persons in connection with
any of the Offers;
o obtains or seeks to obtain any material damages or otherwise
adversely affects the transactions contemplated by any of the Offers;
o prohibits or limits or seeks to prohibit or limit AES's, CEDC's,
Purchaser's or any of their Related Persons' ownership or operation
of all or any portion of their or CANTV's businesses or assets
(including without limitation, the businesses or assets of their
respective Related Persons); or compels or seeks to compel AES, CEDC,
Purchaser or any of their Related Persons to dispose of or hold
separate all or any portion of their own businesses or assets or
CANTV's businesses or assets, or imposes or seeks to impose any
limitation on the ability of AES, CEDC, Purchaser or any of their
Related Persons to conduct their own business or own their assets;
o obtains or seeks to obtain a total or partial declaration of
illegality or ineffectiveness of any of the Offers or limits or
delays or seeks to limit or delay the succesful completion of any of
the Offers or any of the transactions contemplated thereby;
o imposes or seeks to impose limitations on Purchaser's ability or the
ability of any Related Person of Purchaser effectively to acquire or
hold or to exercise full voting rights or any other ownership rights
of the Shares or ADSs;
o adversely affects CANTV, Purchaser, or their Related Persons or might
result in a substantial diminution in the value of the Shares or ADSs
or of the benefits expected to be derived by AES, CEDC, Purchaser or
any of their Related Persons; or
o imposes or seeks to impose any material condition which makes any of
the Offers more onerous or disadvantageous to Purchaser or any of its
Related Persons.
COMPETITION MATTERS. If the Procompetencia shall have objected to the
purchase of Shares and ADSs by Purchaser or any of its Related Persons
or shall have imposed conditions or restrictions for the consummation of
the Offers.
CHANGE OF LAW. If any statute, regulation, order or measure is sought,
proposed, enacted, promulgated, entered, threatened or enforced by any
Governmental Authority that results or might result in any of the
consequences referred to in the paragraph relating to Governmental
Actions and Litigation.
WITHDRAWAL OF THE U.S. OFFER. If ADSs validly tendered into the U.S.
Offer fail to be purchased
21
because of circumstances that, according to the terms and conditions of
the U.S. Offer, grant Purchaser the right to withdraw the U.S. Offer
(including, without limitation, if fewer than 28,566,944 ADSs are
tendered in the U.S. Offer).
CANTV ADVERSE CHANGE. If a change, or a condition, event or development
involving a prospective change shall have occurred or been threatened in
the business, properties, assets, liabilities, capitalization,
shareholders' equity, financial or other condition, operations,
licenses, franchises, authorizations, permits, permit applications,
tariffs or tariff structure, results of operations or prospects of CANTV
or any of its Related Persons which is or may be materially adverse to
CANTV or any of its Related Persons or a fact becomes known which has or
may have material adverse effects on either the value of CANTV or any of
its Related Persons or the value to AES, CEDC, Purchaser or any of their
Related Persons of the Shares or the ADSs.
If any of the following becomes known:
o that any material right resulting from contracts entered into by
CANTV or any of its Related Persons shall be impaired or otherwise
adversely affected or that any material amount of indebtedness of
CANTV or any of its Related Persons shall become accelerated or
otherwise become due prior to its stated due date, in either case
with or without notice or the lapse of time or both, as a result of
the transactions contemplated by any of the Offers;
o the existence of any covenant, term or condition in any of CANTV's or
any of its Related Persons' instruments or agreements that is or may
be materially adverse to the value of the Shares or ADSs in the hands
of AES, CEDC, Purchaser or any of their Related Persons, or may
adversely affect the consummation of the transactions contemplated by
the Offers; or
o the existence of any material fact not previously disclosed publicly
by CANTV that might adversely affect CANTV or any of its respective
subsidiaries or AES, CEDC, Purchaser or any of their Related Persons
or that might result in a substantial diminution in the value of the
Shares or ADSs or of the benefits expected to be derived by AES,
CEDC, Purchaser or any of their Related Persons.
ADVERSE MARKET AND NATIONAL AND INTERNATIONAL CHANGES. If there shall
have occurred:
o any general suspension of trading in, or limitation on prices for,
securities on any United States national securities exchange,
Venezuelan securities exchange or the United States Over-the-Counter
market;
o a declaration of a banking moratorium or any suspension of payment in
respect of banks of a general nature in the United States or
Venezuela, whether mandatory or not mandatory;
o any limitation by any Governmental Authority on, or other event which
affects or might affect the extension of credit by banks or other
lending institutions;
o commencement of a war, armed hostilities or other national or
international crisis directly or indirectly involving Venezuela or
the United States;
o a change or development involving a prospective change in the
valuation of the Bolivar relative to the U.S. dollar, or the
imposition of exchange controls, any regulated currency exchange
rates or any suspension of, or limitation on, the markets for such
currency;
o any change in taxation of the United States or Venezuela, including
any duty, right or expense to transfer Shares or ADSs or any change
of stock exchange registration rights or any other fees or duties or
expense payable as a result of the purchase of Shares or ADSs
pursuant to the Offers;
22
o any limitation of capital repatriation, remittance of dividends or
other distributions or any other change or development in foreign
investment regulation in Venezuela, which make it not possible to
proceed with any of the Offers or on the terms and in the manner
contemplated, or make the Offers more onerous or risky;
o any extraordinary or material adverse change in the financial markets
or major stock exchange indices in the United States or Venezuela or
on the market prices of the Shares or ADSs; or any adverse change in
the general political, economic, regulatory or financial conditions
in Venezuela or in the Venezuelan market that could have a material
adverse effect on CANTV's businesses, operations or prospects or the
trading in or the value of the ADSs or the Shares; or
o a material adverse change of any of the economic, political or other
national or international conditions existing at the time of the
announcement of the Offers.
COMPETING OFFERS, PROPOSALS AND AGREEMENTS.
If there shall have been publicly proposed to be made or it shall be
known that any other person or group (including CANTV or any of its
subsidiaries or affiliates) has made or intends to make a tender offer
or exchange offer for Shares or ADSs.
MAJORITY OF MEMBERS OF THE BOARD OF DIRECTORS. The purchase of more than
50% of the outstanding capital stock of CANTV shall not grant Purchaser
the ability to appoint a majority of the members of the Board of
Directors of CANTV.
AGREEMENT WITH CANTV. If AES, CEDC or Purchaser shall have reached an
agreement or understanding with CANTV that the Venezuelan Offer or the
U.S. Offer shall be terminated or amended; or entered into an agreement
or an agreement in principle with CANTV relating to a business
combination or joint venture, strategic alliance or similar arrangement
or a purchase of Shares, ADSs or assets of CANTV, in each case only if
the Board of Directors of CANTV approves the agreement because it deems
it to be in the best interests of the shareholders.
23
CHANGES IN CANTV'S CAPITAL AND OTHER DEFENSIVE MEASURES.
If after August 29, 2001, CANTV or any of its Related Persons shall have:
o issued, distributed, pledged, sold or authorized, proposed or announced the
issuance of or sale, distribution or pledge to any person of any shares of
its capital stock or any other securities; the capital stock of any of its
Related Persons; securities convertible into or exchangable for such shares
or securities; any warrants, options or other rights to acquire or control
of any such securities or any other securities of CANTV or its Related
Persons; or any other securities in respect of, in lieu of, or in
substitution for, Shares outstanding on August 29, 2001;
o declared, paid, announced or proposed to declare or pay any dividend or
distribution on any Shares or any shares of its Related Persons, or on any
other security, except for dividends or distributions declared before
August 29, 2001;
o issued, authorized, recommended or proposed the issuance or payment of any
other distribution in respect of any Shares or any shares of any of its
Related Persons;
o altered or proposed to alter any material term of any outstanding Shares or
any other security of CANTV or any of its Related Persons;
o incurred or announced its intention to incur any debt other than in the
ordinary course of business and consistent with past practice or assumed
any debt containing covenants, which are unusual for CANTV or more onerous
or disadvantageous than those customarily assumed by CANTV or its Related
Persons;
o purchased, acquired or otherwise caused a reduction in the number of, or
proposed or offered to purchase, acquire or otherwise reduce the number of
any outstanding Shares, ADSs or other securities of CANTV or its Related
Persons;
o split, combined or otherwise changed, or authorized or proposed the split,
combination or other change of any shares of CANTV or its Related Persons
or their capitalization;
o authorized, recommended, proposed, entered into or publicly announced its
intent to enter into any merger, consolidation, liquidation, dissolution,
business combination, joint venture, strategic alliance or similar
arrangement, acquisition or disposition of a material amount of assets or
securities, any material change in its capitalization, any waiver, release
or relinquishment of any material contract or comparable rights of CANTV or
any of its Related Persons or any agreement contemplating any of the
foregoing or any comparable event not in the ordinary course of business,
or taken any action to implement any such transaction previously
authorized, recommended, proposed or publicly announced;
o taken, announced or proposed any action to fund (or transfer into escrow any
amounts in cash, securities or other assets required to fund), enter into,
amend, terminate, or increase any benefits under, any employment or
labor-related agreement, arrangement or plan (other than in the ordinary
course of business and consistent with past practice) so as to provide for
increased benefits to the employees as a result of or in connection with
the transactions contemplated by the Offers or either of them or any change
of control of CANTV;
o amended or proposed or authorized any amendment to CANTV's or its Related
Party's Bylaws or similar organizational documents;
o agreed in writing or otherwise, or proposed or held a shareholders meeting,
to take any of the foregoing actions or Purchaser shall have learned about
any such action which has not previously been publicly disclosed by CANTV;
or
o authorized, recommended, proposed or entered into any other transaction that
could individually or in the aggregate adversely affect the value of the
Shares or ADS to Purchaser, AES, CEDC or any of their Related Persons.
"RELATED PERSON" shall mean with respect to any person, any other person
that individually or jointly with any other person, directly or indirectly or
through one or more intermediaries, controls, is controlled by, or is under
common control with, such person.
24
"GOVERNMENTAL AUTHORITY" shall mean any individual or body or any officer
of the national, state or municipal power, including governmental,
legislative, judicial, of the citizen power, the electoral power
authorities, whether centralized or decentralized, as well as
supranational, communitarian or foreign or any other person vested,
temporarily or permanently with public duties, in each case, provided that
they have competence or jurisdication over the Shares, the ADSs, the
Offers, Purchaser, AES, CEDC, CANTV or any of their respective Related
Persons.
Purchaser shall pay all expenses derived from the withdrawal of the
Venezuelan Offer by Purchaser.
(IV) CHANGES IN CANTV CAPITAL STRUCTURE; DIVIDENDS AND DISTRIBUTIONS
If, on or after August 29, 2001, CANTV (i) splits, combines or otherwise
changes any classes of shares of its stock or its capitalization, (ii)
issues or sells any additional securities of CANTV or otherwise causes an
increase in the number of outstanding securities of CANTV or (iii) acquires
currently outstanding shares of its capital stock or otherwise causes a
reduction in the number of outstanding shares of its capital stock,
Purchaser may, without prejudice to the rights of withdrawal contemplated
hereby, make adjustments in the purchase price and other terms in the
Venezuelan Offer, including, without limitation, the amount of Shares to be
purchased.
If, on or after August 29, 2001, CANTV declares or pays any dividend on the
Shares or makes any distribution (including, without limitation, any and
all non-cash dividends, distributions or rights, the issuance of additional
or other shares of capital stock, securities or rights issued or issuable
in respect thereof (whether pursuant to a stock dividend or stock split, or
otherwise) (collectively the "DISTRIBUTIONS")) with respect to the Shares
that is payable or distributable to holders of Shares of record (including
holders of record of Class D Shares represented by ADSs) on a date prior to
the transfer of the Shares and ADSs on the shareholders registry book to
the name of Purchaser or its nominee or transferee, then without prejudice
to the rights of withdrawal contemplated hereby, (a) the purchase price per
Share may be reduced by Purchaser by the per Share amount of any such cash
dividend or cash distribution and (b) the whole of any Distributions to be
received by the tendering holders of Shares will (i) be received and held
by the tendering holder of Shares for the account of Purchaser and will be
required to be promptly remitted and transferred by each tendering holder
of Shares to the Receiving Agent for the account of Purchaser, accompanied
by appropriate documents of transfer, or (ii) at the direction of
Purchaser, be exercised for the benefit of Purchaser, in which case the
proceeds of such exercise will promptly be remitted to Purchaser. Pending
such remittance and subject to applicable law, Purchaser will be entitled
to all rights and benefits as owner of any such Distributions or proceeds
thereof and may withhold the entire offer price or deduct from the offer
price the amount or value thereof.
B. PRICE TO BE OFFERED IF THE CONSIDERATION IS IN CASH. IF THE CONSIDERATION IS
IN SECURITIES, DEFINITION, CHARACTERISTICS, EXCHANGE VALUE, AND CRITERIA
FOR DETERMINING SUCH VALUES. THE PRICE OR PARITY BEING OFFERED CANNOT BE
LOWER THAN THE AVERAGE PRICE OF THE SHARES AND CERTIFICATES THEREOF AT THE
PERTINENT STOCK EXCHANGES, DURING SIX (6) MONTHS PRIOR TO THE FILING OF
THIS STATEMENT, EXCEPT IF THE COMISIoN NACIONAL DE VALORES DE VENEZUELA,
UNDER SPECIAL CONDITIONS AND UPON THE REQUEST OF PURCHASER, AUTHORIZES A
LOWER PRICE.
The offered price is US$3.4285714 per Share, payable as described in
Section 6.c. For the sole purpose of compliance with Article 95 of the
Venezuelan Central Bank Law, it is indicated that the offered price of
US$3.4285714 is equivalent to approximately Bs. 2,547.43 based on the
reference exchange rate of Bs. 743 per US$.
If the price to be paid for ADSs pursuant to the U.S. Offer is increased,
Purchaser will make a corresponding increase to the price to be paid per
Share purchased pursuant to the Venezuelan Offer, taking into account the
number of Class D Shares represented by each ADS.
Purchase of Shares under the Venezuelan Offer will take place through the
Caracas Stock Exchange. Consequently, the price of Shares payable according
to the Venezuelan Offer will, except as described below, be subject to the
1% proportional income tax provided for in Article 77 of the Venezuelan
Income Tax Law, which will be withheld by the Caracas Stock Exchange. The
above mentioned income tax will be levied on the gross sale price.
25
Non-residents of Venezuela who are entitled to the benefits of treaties to
prevent double taxation currently in effect between Venezuela and France,
Portugal, Belgium, Norway, Italy, Germany, the Czech Republic, Trinidad &
Tobago, the Netherlands, Switzerland, the United Kingdom, Sweden, the
United States, Barbados and Indonesia (the "TAX TREATY BENEFICIARIES") are
not subject to the 1% proportional income tax provided for in Article 77 of
the Venezuelan Income Tax Law and may not be subject to the 1% withholding
on the purchase price by the Caracas Stock Exchange, provided that such Tax
Treaty Beneficiaries satisfy the requirements of the Venezuelan tax
authorities. The Tax Treaty Beneficiaries must take into account that it
may not be possible to timely comply with the certification requirements in
order to lift the application of the withholding before the Settlement
Date, and therefore the Caracas Stock Exchange may be required to apply
such withholding.
THIS SUMMARY IS NOT INTENDED TO BE A LEGAL OPINION FOR ANY HOLDER OF
SHARES. CONSEQUENTLY, EACH HOLDER OF SHARES MUST CONSULT WITH ITS OWN
ADVISOR WITH REGARD TO ANY APPLICABLE REQUIREMENT PROVIDED FOR IN THE TAX
LAWS AND REGULATIONS, AND ANY SPECIFIC TAX CONSEQUENCES RESULTING FROM THE
OFFER, INCLUDING THE APPLICABILITY AND AVAILABILITY OF ANY EXEMPTION OR ANY
DOUBLE TAXATION TREATY FOR SUCH HOLDER OF SHARES.
SEE ANNEX G FOR CERTAIN U.S. TAX CONSIDERATIONS RELATED TO THE PURCHASE OF
SHARES IN THE VENEZUELAN OFFER APPLICABLE TO U.S. HOLDERS OF SHARES.
C. PAYMENT CONDITIONS
The Paying Agent of the Venezuelan Offer will, for the account of
Purchaser, pay the purchase price with respect to the Shares purchased to
each holder of Shares who has validly tendered into the Venezuelan Offer
and that have been validly transfered to Purchaser, no later than five (5)
trading days after the Settlement Date of the Venezuelan Offer. Payment
shall be made in accordance with the procedures set forth in the
regulations of the CNV and the Caracas Stock Exchange. Payment shall be
made in checks which shall be made available to holders of Shares from the
fifth (5th) Venezuelan stock exchange trading day following the Settlement
Date (or through deposit in an account as contemplated in the Share Letter
of Transmittal). Payment shall be deemed effectively made when the checks
are made available to holder of Shares, or if applicable, when the deposit
is effected.
The amounts payable to the holders of Shares under the Venezuelan Offer
with respect to the Shares purchased in the Venezuelan Offer shall be
rounded up to the nearest U.S. dollar or Bolivar cent.
Under the Venezuelan Offer, payment for the Shares will be made in U.S.
dollars or, at the option of the tendering holders of Shares that indicated
so in the Share Letter of Transmittal, in Bolivars. Purchaser will seek to
reach an agreement with the Central Bank of Venezuela to acquire Bolivars
in a special exchange transaction at a pre-established exchange rate. If an
agreement is reached at an acceptable exchange rate and on such other terms
and conditions acceptable to Purchaser, tendering holders of Shares who
have elected to receive payment in Bolivars will receive the purchase price
for Shares in Bolivars, based on the exchange rate obtained from the
Venezuelan Central Bank. Holders of Shares will not bear the costs or
expenses incurred by Purchaser.
If Purchaser does not reach an agreement with the Venezuelan Central Bank
as described above, holders of Shares who have elected to receive the
purchase price in Bolivars in the Share Letter of Transmittal, will receive
the purchase price in Bolivars at an exchange rate equal to the average of
the exchange rates at which Purchaser has obtained the amount of Bolivars
necessary to pay the aggregate purchase price in Bolivars to all tendering
holders of Shares who elected payment in Bolivars, which will be published
on the fifth business day following the Settlement Date of the Venezuelan
Offer.
If a holder of Shares tendering into the Venezuelan Offer is paid the
purchase price for Shares in Bolivars, the fluctuation of exchange rates
could result in the purchase price received by such tendering holder being
more or less than the purchase price paid in the concurrent U.S. Offer.
26
D. GUARANTIES OFFERED TO SELLERS, AS PROVIDED FOR IN THE REGULATIONS.
Prior to the Commencement Date, AES, the ultimate parent of Purchaser,
became the "joint guarantor" of the full amount of the purchase price to be
paid for the Shares and the ADSs purchased pursuant to the Offers upon the
terms and conditions of this Venezuelan Offer to Purchase and the U.S.
Offer to Purchase, being US$1,371,213,306.29 or, solely for the purpose of
complying with Article 95 of the Venezuela Central Bank Law,
1,018,811,486,573.47 Bolivars at the exchange rate of 743 Bolivars per U.S.
dollar. Based on the financial statements of AES audited by Deloitte &
Touche, AES's shareholders equity as of December 31, 2000 was US$5.54
billion and AES's total assets as of December 31, 2000 were approximately
US$33 billion.
E. TERM OF THE OFFER, AS PROVIDED FOR IN THE REGULATIONS
Holders of Shares shall have until 6:00 p.m. Caracas time (5:00 p.m. New
York City time), on Monday, October 29, 2001 (the "EXPIRATION DATE") to
accept the Venezuelan Offer. The Expiration Date may be extended, subject
to prior approval of the CNV.
F. PRORATION RULES, IN CASE OF TENDERS IN EXCESS OF THE NUMBER OF SHARES THAT
ARE OFFERED TO PURCHASE, FOLLOWING THE CRITERIA SET FORTH IN THE
REGULATIONS.
If valid tenders of Shares are received in the Venezuelan Offer exceeding
199,968,608 Shares and more than 28,566,944 ADSs are validly tendered in
the U.S. Offer, proration rules will apply in the Venezuelan Offer and in
the U.S. Offer. If proration applies in the Venezuelan Offer, Purchaser
will purchase from each tendering holder of Shares in the Venezuelan Offer
a number of Shares equal to the number of Shares validly tendered by such
holders of Shares multiplied by a fraction, the numerator of which is
199,968,608 and the denominator of which is the number of Shares validly
tendered in the Venezuelan Offer to the Receiving Agent; provided, however,
that proration will not apply with respect to holders that have validly
tendered the only one Share they own, in accordance with the CNV Tender
Offer Regulations.
The number of Shares available for tender in the Venezuelan Offer is
subject to fluctuation, on a daily basis, based on deposits and withdrawals
of Class D Shares (being the only class of Shares underlying the ADSs) with
and from the Depositary of ADSs. Pursuant to the Deposit Agreement, upon a
deposit of Class D Shares, the number of outstanding Class D Shares is
decreased; upon a withdrawal of Class D Shares, the number of outstanding
Class D Shares is increased. Proration in the Venezuelan Offer may be
adversely affected to the extent that Class D Shares are withdrawn from the
Depositary of ADSs and are tendered in the Venezuelan Offer. Similarly,
proration in the U.S. Offer may be adversely affected to the extent that
additional Class D Shares are deposited with the Depositary of ADSs and
ADSs issued upon such deposits are tendered in the U.S. Offer.
CANTV's outstanding share capital consists of 926,037,385 Shares divided
into four classes (A, B, C and D) with a par value of Bs.36.90182224915
each.
See the Information Supplement attached to this document as ANNEX G for a
description of the capital stock of CANTV and its different classes of
shares.
G. OFFER RELATED PRELIMINARY AGREEMENTS TO WHICH THE OFFEROR IS A PARTY, OR
WHICH ARE KNOWN TO IT AND OF WHICH IT HAS ACCURATE INFORMATION ON THE
PERSONS WITH WHOM THESE PRELIMINARY AGREEMENTS HAVE BEEN ENTERED INTO,
INCLUDING SALE OPTIONS, NEGOTIATION PROMISES OR SIMILAR.
On August 29, 2001, prior to the Announcement Date of the Venezuelan Offer
AES, CEDC and TelCom 2 entered into an agreement pursuant to which, on or
before December 1, 2001, AES must contribute, or cause an affiliate to
contribute to TelCom 2 as an equity contribution US$500 million or such
greater amount as AES shall determine. Contemporaneously with AES's
contribution, CEDC must contribute, or cause Inversiones Inextel C.A. to
contribute, to TelCom 2 as an equity contribution the Shares held by
Inversiones Inextel and such additional amounts in cash as the parties
shall determine. The Shares contributed to TelCom 2 will be valued at a
price per Share equal to the purchase price per Share in the Venezuelan
Offer.
27
JP Morgan, CSFB and BofA are acting as financial advisors to AES in
connection with the Offers (the "FINANCIAL ADVISORS"). The compensation of
the Financial Advisors shall not exceed US$13 million. Purchaser has
retained Activalores to act as the Coordinator of the Venezuelan Offer,
Unibanca, Banco Universal, S.A. as Receiving Agent, Trustee of the Class C
Shares and Paying Agent of the Venezuelan Offer, and Inverunion S.A. Casa
de Bolsa as the Facilitating Agent for the Class C Shares. The Coordinator,
Receiving Agent, Trustee of the Class C Shares, Paying Agent and
Facilitating Agent for the Class C Shares will receive reasonable and
customary compensation for their services and will be reimbursed for
certain reasonable out-of-pocket expenses. The Financial Advisors,
Coordinator, Receiving Agent, Trustee of the Class C Shares, Paying Agent
and Facilitating Agent for the Class C Shares will be indemnified against
certain liabilities in connection therewith. In the ordinary course of
business, the Financial Advisors and their affiliates engage in securities
trading, market-making and brokerage activities and may, at any time, hold
long or short positions and may trade or otherwise effect transactions in
securities of CANTV.
H. COMMITMENT MADE TO ANY PERSON WHO HAS SOLD SHARES REPRESENTING MORE THAN TWO
PER CENT (2%) OF THE RIGHTS TO VOTE IN THE CORPORATION, DURING A TERM OF
SIX (6) MONTHS BEFORE THE COMMENCEMENT DATE WITH RESPECT TO PURCHASER'S
INTENT TO PAY SUCH PERSON, UPON REQUEST MADE DURING THE TERM OF THE OFFER,
THE DIFFERENCE BETWEEN THE RECEIVED PRICE AND THE PRICE OFFERED IN THE
OFFER, IF HIGHER. IN SUCH CASES, THE NAME AND DESCRIPTION OF SAID SELLERS
MUST BE EXPRESSLY STATED.
Not applicable.
7. THE OFFER AND CONTENTS OF CERTAIN SPECIAL LAWS
A. ACCURATE DESCRIPTION OF THE CONSEQUENCES OF THE TRANSACTION, TAKING INTO
ACCOUNT THE RULES APPLICABLE TO ECONOMIC CONCENTRATIONS PURSUANT TO THE
VENEZUELAN LAW ON PROMOTION AND PROTECTION OF FREE COMPETITION AND THE
REGULATIONS THEREUNDER.
The purchase of Shares and ADSs by Purchaser pursuant to the Offers does
not result in restraining consequences or effects on competition, all in
accordance with the Law on Promotion and Protection of Free Competition and
the Regulations No. 1 thereunder, since Purchaser and its Related Persons
participate in relevant markets that are different from the relevant
markets of CANTV.
B. IN CASE PURCHASER IS, EITHER DIRECTLY OR INDIRECTLY, A COMPETITOR OF THE
TARGET COMPANY, THE FOLLOWING MUST BE EXPRESSLY MENTIONED:
-- THE CONTENT OF THE PRIOR FAVORABLE PRONOUNCEMENT BY THE SUPERINTENDENCY
FOR THE PROMOTION AND PROTECTION OF FREE COMPETITION IN CONNECTION WITH
THE TRANSACTION, OR
-- DETAILED EXPLANATION OF THE REASONS WHY, IN THE OPINION OF PURCHASER,
SAID PRONOUNCEMENT IS NOT NECESSARY, SINCE NO FORBIDDEN CONCENTRATION IN
THE RELEVANT MARKET, EITHER IN WHOLE OR IN PART, RESULTS FROM THE
TRANSACTION.
(i) Under the Venezuelan "economic concentration" regime and article
6 of Regulation N degrees 2 of the Law on Promotion and
Protection of Free Competition, there is no legal obligation on
Purchaser to request from Procompetencia a prior evaluation of
the Offers. However, as described in Section 7.d of this
Venezuelan Offer to Purchase, CONATEL must approve the purchase
of Shares and ADSs pursuant to the Offers and before doing so,
CONATEL must obtain Procompetencia's favorable opinion.
(ii) EDC, a related company of Purchaser, is a company that provides
electricity services in Caracas and urban suburbs and
participates in the generation, transmission and distribution of
electricity markets. In addition, AES and its related companies
have certain non-electric businesses, incuding the following in
telecommunications:
o EDC has a general license relating to establishment and operation of
telecommunications networks. This license was granted through Resolution
N degrees HGTS-00045 issued by CONATEL on May 10, 2001.
28
o CEDC holds 100% of the capital stock of C.A. Telecommunicaciones
Caracas, a holder of a concession for the installation, maintenance,
administration, operation and commercial exploitation, within the
national territory, of a Service of Direct Satellite Communications
("SDSC") in the form of data. This concession was granted through
Concession Administrative Title N degrees SCDS-C-004 dated December 2,
1998. CANTV does not operate in the SDSC market and therefore, there is
no resulting effect on "market concentration" in connection with the
Offers.
o CEDC holds an interest in Comunicaciones Moviles EDC, C.A., holder of a
concession to install, maintain, manage, operate and commercially exploit
a Trunking System in the Metropolitan Area of Caracas and its suburbs, La
Guaira, Litoral Central, Center North Coast Zone, Barlovento and the
State of Anzoategui. This concession was granted through Concession
Administrative Title N degrees SCE-C-021 dated August 21, 1998. CANTV
does not operate in the market covered by this concession and therefore,
there is no resulting effect on "market concentration" in connection with
the Offers.
o On August 3, 2001, AES Network Communications SCS ("AES NETWORK")
requested from CONATEL a General License to establish and exploit
telecommunications networks. Currently, AES Network does not render any
services.
o CEDC has a minority and passive interest in Convergence Communications.
Additionally, CEDC's subsidiary, Venezuela Convergence de Venezuela C.A.,
has decided to close its operations in Venezuela this calendar year.
CANTV operates nationwide in basic telephone services (public and
private), cellular phones, internet and data solutions. The
telecommunications activities of the abovementioned entities affiliated
with Purchaser are at the very beginning and limited to specific services
(in some of which CANTV has no presence, such as SDSC and trunking) and
specific areas of the country. Therefore, the acquisition of Shares and
ADSs pursuant to the Offers does not increase the degree of "market
concentration" and does not create any barriers of entry to these markets
to new participants.
Purchaser and its affiliates are engaged in rendering electricity
services, while CANTV is a provider of telecommunications services.
Therefore, Purchaser and its affiliates, on the one hand, and CANTV, on
the other, are not direct or indirect competitors in their core businesses
and a "market concentration" that violates applicable law will not occur
as a result of the successful completion of the Offers.
(iii) EDC and CANTV have their respective systems of posts and ducts, which are
general telecommunications rights of ways. CANTV uses the posts and ducts
to place telecommunications cabling, while EDC uses them to place
electricity cabling, except for certain ducts in which EDC has placed a
fiber line.
EDC's electricity cables cannot be used for telecommunication
transmissions, and telecommunication cables cannot be used for provide
electricity. Accordingly, they are not interchangeable .
In addition, in the city of Caracas, there are other companies that have
been installing ducts, such as Supercable, Net Uno, Telcel, Global
Crossing, through which they have placed their fiber network.
All companies which own or control general telecommunications rights of
ways (posts, ducts) must allow their use by those who request it. In
effect, the general telecommunications rights of ways are subject to a
regulatory regime contained in articles 126 through 129 of the Organic
Telecommunications Law ("OTL"), which contemplates that all persons
holding or controlling general telecommunications rights of ways must
allow access to interested third parties. The provisions of the OTL forbid
any anticompetitive use of the general telecommunications rights of ways.
If the holder denies access to third parties, it can be forced by CONATEL
to allow access, with the prior opinion of Procompetencia, through a
summary proceeding set forth in the OTL.
(iv) The transaction results in efficiencies, derived from synergies in
distribution systems and attention to users, which will improve the
quality of services and client and consumer satisfaction.
See also Section 7.d of this Venezuelan Offer to Purchase.
29
C. TRANSACTION AUTHORIZATION GIVEN BY THE SUPERINTENDENCY OF BANKS, IN
ACCORDANCE WITH ARTICLE 16 OF THE GENERAL ACT ON BANKS AND OTHER FINANCIAL
INSTITUTIONS, IN CASE OF SHARES OR CERTIFICATES OF SHARES OF A BANK OR ANY
OTHER FINANCIAL INSTITUTION.
Not applicable.
D. IF APPLICABLE, AUTHORIZATION GIVEN BY ANY GOVERNMENTAL BODY HAVING
JURISDICTION, IN CASE SUCH AUTHORIZATION IS NECESSARY IN ACCORDANCE WITH
ANY APPLICABLE LAW, TAKING INTO CONSIDERATION THE PURPOSE OF THE TARGET
COMPANY.
Pursuant to the OTL and the Concession Contract between the Bolivarian
Republic of Venezuela and CANTV, CONATEL must approve the purchases of the
Shares and ADSs pursuant to the Offers. On September 10, 2001, Purchaser
requested such approval. The purchase of Shares and ADSs pursuant to the
Offers is subject to obtaining such approval.
E. PLACE AND MANNER OF THE ACCEPTANCE NOTICE
(I) MANNER OF ACCEPTANCE (TENDER)
Holders of Shares must comply with the following steps in order to accept
the Venezuelan Offer on
or before the Expiration Date:
o Complete and sign the Share Letter of Transmittal (a copy of which is
included as ANNEX D of this Venezuelan Offer to Purchase).
o Submit the Share Letter of Transmittal and any other required documents
at any of the places designated for such purpose by the Coordinator or
the Receiving Agent of the Venezuelan Offer, indicating the currency of
payment.
o If the holders of Shares have share certificates for the tendered
Shares, the holders of Shares must deliver such certificates together
with the Share Letter of Transmittal.
The Shares tendered shall be deposited or transferred to the Caja
Venezolana de Valores sub-account held by the selling holder of Shares
specially opened by Activalores, the Coordinator for the Venezuelan Offer,
for the Venezuelan Offer in the CVV Caja Venezolana de Valores, S.A.
("CVV").
Shares deemed as treasury shares or reciprocal interests as defined in the
Capital Markets Law and the regulations thereunder shall not be accepted in
the Offers.
The holder of Shares must indicate the number of Shares to be tendered in
the Share Letter of Transmittal. If the holder of Shares is the owner of
fewer Shares than indicated in the Share Letter of Transmittal, the tender
will only be deemed validly made with respect to such fewer number of
Shares owned by such holder of Shares. If such holder of Shares owns more
Shares than indicated in the Share Letter of Transmittal, the tender will
only be deemed validly made with respect to the number of Shares indicated
in the Share Letter of Transmittal.
The Share Letter of Transmittal must be signed by the person registered in
CANTV's shareholders registry book or the person holding the sub-account
maintained with the CVV, unless the tender is made by duly authorized
representatives or agents. The name indicated in the Share Letter of
Transmittal must be the same as that recorded in CANTV's shareholders
registry book or in the CVV sub-account.
The representatives or agents of the holders of Shares must submit evidence
of their capacity and authority to tender Shares on behalf of the holder to
the satisfaction of Purchaser and the Coordinator. If the tendering holder
of Shares is a natural person, the Share Letter of Transmittal must be
signed by such person's spouse, if applicable.
Holders of ADSs who wish to tender into the Venezuelan Offer may do so by
withdrawing the Class D Shares underlying such ADSs from the Depositary of
ADSs and tendering such Class D Shares into the Venezuelan Offer.
Conversely, holders of Class D Shares who wish to tender into the U.S.
Offer may do so by depositing their Class D Shares with the Depositary of
ADSs. The ADSs received
30
on such deposit may then be tendered into the U.S. Offer. Please contact
the Depositary of the ADSs, or the Coordinator at the telephone number and
address set forth on the back cover page, if you need any assistance in
converting your ADSs into Class D Shares or your Class D Shares into ADSs.
Costs associated with the conversion shall be borne by the party requesting
the conversion.
Purported tenders that fail to comply with the requirements and conditions
set forth herein shall not be deemed valid tenders in the Venezuelan Offer.
Shares deemed as treasury shares or reciprocal interests under the terms of
the Capital Markets Law and the rules passed by the CNV shall not be
accepted in the Venezuelan Offer.
Pursuant to the Share Letter of Transmittal, the Receiving Agent, among
other things, shall take all actions required to (i) sell the Shares
accepted to Purchaser, (ii) transfer the Shares to Purchaser, (iii)
coordinate with the Paying Agent the issuance of checks for payment of the
Shares and the making of the checks available to the tendering holders of
Shares, (iv) return the Shares not acquired to the tendering holders as
indicated in this Venezuelan Offer to Purchase, and (v) in general,
coordinate all necessary actions related to this Venezuelan Offer.
Any Shares not purchased pursuant to the Venezuelan Offer for any reason,
shall be transferred to a sub-account of the corresponding holder of Shares
with a depositary of the CVV that such holder indicated to the Coordinator
of the Venezuelan Offer.
All prior powers of attorney or consents granted by the holders of Shares
with respect to the Shares tendered (and all distributions with respect to
such Shares) shall be, without any additional actions required, revoked,
and such holder may not grant additional powers of attorney or consent,
except in case of a withdrawal according to the terms hereof.
If a shareholders meeting of CANTV is held during the pendency of the
Offers, the Coordinator of the Venezuelan Offer shall vote the Shares
validly tendered pursuant to instructions given by the tendering holder of
Shares; provided however, that a holder of Shares shall have the right to
personally attend such meeting. In order to be valid, the instructions must
be delivered to the office of the Coordinator at least three (3) Venezuelan
stock exchange trading days prior to the date of the meeting, along with
any required proof of identity. If the Coordinator does not receive
instructions as to how to vote the Shares at least three Venezuelan stock
exchange trading days prior to the date of the meeting, the Coordinator
shall not exercise the voting rights relating to such Shares, and such
Shares shall not be counted for purposes of quorum at such meeting.
Acceptance of the Venezuelan Offer pursuant to the procedures described
above will constitute the holder of Shares' acceptance of the terms of the
Venezuelan Offer, as well as such holder's representation and warranty
that:
o such holder owns the Shares being tendered, which are free of liens,
security assignments, privileges, preferential rights, and other
encumbrances or interests that may adversely affect the full use,
enjoyment and disposition thereof;
o the tender of such Shares complies with applicable law; and
o such holder has the full power and authority to tender and assign the
Shares tendered pursuant to the Venezuelan Offer, all as specified in the
Share Letter of Transmittal.
See Section 7.e(iv) and Annex F to this Venezuelan Offer to Purchase for
information on the special procedure for the participation of the holders
of Class C Shares in the Venezuelan Offer.
(II) ACCEPTANCE PLACE
The Share Letter of Transmittal, as well as any other document that must be
submitted with it, must be delivered to the places designated for such
purpose by the Coordinator or the Receiving Agent of the Venezuelan Offer,
which places shall be from time to time announced through media of national
coverage, upon authorization of the CNV.
See Section 7.e(iv) and Annex F to this Venezuelan Offer to Purchase for
information on the special procedure for the participation of the holders
of Class C Shares in the Venezuelan Offer.
31
(III) WITHDRAWAL OF TENDERS
Purchaser waives its right provided in Article 18 of the Regulations for
the benefit of all holders of Shares. Article 18 of the Regulations
prohibits the withdrawal of securities tendered pursuant to a tender offer
except in the case of a competitive offer or bid.
As a result of such waiver by Purchaser, Shares tendered pursuant to the
Venezuelan Offer may be withdrawn by the tendering holders on or before the
Expiration Date, even in the absence of a competitive offer or bid,
provided that the notice of withdrawal is received by the Receiving Agent
at the offices designated by it, on or before the Expiration Date.
IN ANY CASE, ACCEPTANCE OF THE VENEZUELAN OFFER SHALL BECOME IRREVOCABLE AS
OF THE EXPIRATION DATE, EXCEPT IN THE EVENT THAT THE VENEZUELAN OFFER IS
EXTENDED IN ACCORDANCE WITH ITS TERMS.
In order for the withdrawal to be effective, the Receiving Agent for the
Venezuelan Offer must receive on or before the Expiration Date, at the
addresses mentioned in Section 7.e(ii) herein, a withdrawal notice granted
by the person who signed the Share Letter of Transmittal and authenticated,
or granted before the offices appointed by the Receiving Agent. The number
of Shares related to the withdrawal must be mentioned in such notice.
Withdrawal of tendered Shares shall not prevent the holder of shares from
accepting the Venezuelan Offer again, on or before the Expiration Date,
following the procedure described herein.
See Section 7.e(iv) and Annex F to this Venezuelan Offer to Purchase for
information on the special procedure for the participation of the holders
of Class C Shares in the Venezuelan Offer.
(IV) SPECIAL PROCEDURE TO TENDER IN THE VENEZUELAN OFFER AND WITHDRAW CLASS C
SHARES BY CLASS C SHAREHOLDERS.
The Venezuelan Offer is open to all holders of Class C Shares (the "CLASS C
SHAREHOLDERS"), including those who have not paid in full the original
purchase price of their Class C Shares and whose Class C Shares are pledged
(the "PLEDGE") in favor of: Banco Mercantil, S.A.; C.A. Banco Universal;
Citibank, N.A.; Corp Banca, C.A.; Banco Universal; Unibanca, Banco
Universal, C.A. ("UNIBANCA"); and other trusts originally established by
the Fondo de Inversiones de Venezuela (now Banco de Desarrollo Economico y
Social de la Republica Bolivariana de Venezuela (BANDES)) (the "ORIGINAL
TRUSTS").
Any Class C Shareholder who wishes to sell his/her Class C Shares is
required to transfer such holder's Class C Shares in trust to Unibanca. The
tender of the Class C Shares in the Venezuelan Offer will then be made by
Unibanca as "Trustee" of the Special Management and Guarantee Trust (the
"SPECIAL TRUST"). The purposes of the Special Trust are (i) to facilitate
the sale of the Class C Shares to Purchaser pursuant to the Venezuelan
Offer and (ii) to guarantee the payment in full of the balance due by such
Class C Shareholders, if any, to the Original Trusts.
Pursuant to Article 5e. of CANTV's Bylaws, every Class C Shareholder who
wishes to tender his/her Class C Shares in the Venezuelan Offer is required
to previously offer such Class C Shares to the other Class C Shareholders
in the internal market of CANTV's shareholders (the "INTERNAL MARKET").
Class C Shareholders who wish to tender their Class C Shares in the
Venezuelan Offer, or their agents, are required to complete and sign the
Share Letter of Transmittal, which may be obtained by Class C Shareholders
in Unibanca branches designated for such purpose.
The Share Letter of Transmittal includes a power of attorney granted to
Inverunion S.A. Casa de Bolsa, the Facilitating Agent for the Class C
Shares, authorizing the Facilitating Agent for the Class C Shares, in the
event the Class C Shares have not been cleared from the preferential right
in favor of the other Class C Shareholders, to offer, at no cost to such
holders, the number of Class C Shares indicated in the Share Letter of
Transmittal in the Internal Market.
Alternatively, the Class C Shareholders may follow, directly or through
authorized brokers, the process of the Internal Market, in which case the
Class C Shareholders will bear any cost incurred in such process.
Thereafter such shareholders are required to transfer their Class C Shares
to the Special Trust.
32
The Class C Shareholders may withdraw their Class C Shares from the
Venezuelan Offer at any time before the Expiration Date of the Venezuelan
Offer, through a withdrawal letter which may be obtained in the designated
Unibanca branches. However, if at the time of the request of the
withdrawal, the Class C Shares have been published as offered in the
Internal Market, the process of the Internal Market must be followed with
respect to such Class C Shares. If any or all of such Class C Shares are
acquired in the Internal Market, the Class C Shareholder will be bound by
such transaction.
After Class C Shares are withdrawn from the Venezuelan Offer, the Class C
Shareholder owning such shares may tender them again in the Venezuelan
Offer, provided that the Share Letter of Transmittal is completed again
with sufficient time to tender the Class C Shares before the Expiration
Date of the Venezuelan Offer.
The Class C Shareholders may tender all or some of their Class C Shares.
However, because the Venezuelan Offer may be subject to proration, it is
possible that not all the tendered Class C Shares will be purchased. In
such case, the Trustee will return Class C Shares not purchased to the
applicable Class C Shareholder.
In the event that a shareholder meeting of CANTV is held while the
Venezuelan Offer is open, but before the Class C Shares are purchased by
Purchaser, the Trustee will grant Class C Shareholders a general
authorization to attend the meeting and cast their vote with regards to the
Class C Shares transferred to the Special Trust by them.
NONE OF THE TRUSTEE, PURCHASER, THE FACILITATING AGENT FOR THE CLASS C
SHARES, THE COORDINATOR FOR THE VENEZUELAN OFFER OR ANY OTHER PERSON
RELATED TO THE VENEZUELAN OFFER SHALL BE LIABLE IF THE TRANSFER OF THE
CLASS C SHARES TO THE TRUSTEE CANNOT BE CLOSED BECAUSE (I) THE CLASS C
SHARES ARE SOLD IN THE INTERNAL MARKET OR (II) THE ORIGINAL TRUSTS DO NOT
RELEASE THE PLEDGE AND/OR DO NOT AUTHORIZE THE TRANSFER IN TRUST OF THE
CLASS C SHARES TO THE SPECIAL TRUST.
Annex F contains the instructions to be published in the press to provide
information to Class C Shareholders who wish to tender their Class C Shares
in the Venezuelan Offer.
F. COMMITMENT OF PURCHASER TO PAY ALL THE EXPENSES RELATED TO THE ACCEPTANCE.
Purchaser shall bear all the expenses related to the acceptance of the
Venezuelan Offer, under the terms and conditions hereof and pursuant to the
Regulations.
Tendering holders of Shares will not be obligated to pay transfer taxes on
the sale of their Shares pursuant to the Venezuelan Offer, except for the
1% tax as set forth in Section 6.b of this Venezuelan Offer to Purchase.
Record owners of Shares who accept the Venezuelan Offer will not have to
pay brokerage fees or similar expenses.
Purchaser will pay a commission equal to 0.20% of the purchase price paid
for the Shares (other than Class C Shares) of a holder accepting the
Venezuelan Offer and whose Shares (other than Class C Shares) are acquired
by Purchaser to any broker duly authorized in Venezuela, including to the
Coordinator of the Venezuelan Offer, that has assisted the holder of Shares
in the acceptance of the Venezuelan Offer provided that such broker is
identified in the Share Letter of Transmittal completed by such holder.
Only one broker may be indicated in each Share Letter of Transmittal
corresponding to Shares purchased in the Venezuelan Offer. This commission
will be paid only if the applicable Shares are actually purchased in the
Venezuelan Offer. With respect to Class C Shares, this commission will be
received by the Facilitating Agent for the Class C Shares.
No commissions will be paid with respect to Shares tendered under the
Venezuelan Offer which are beneficially owned by brokers. Purchaser will
not be responsible for any other commission nor for expenses resulting from
the release of guarantees or preferential rights over the Class C Shares.
33
THE COORDINATOR OF THE VENEZUELAN OFFER IS:
[ACTI VALORES LOGO]
SOCIEDAD DE CORRETAJE
Calle Los Chaguaramos
Centro Gerencial Mohedano PH-A
La Castellana
Caracas, Venezuela
Tel: (212)201-7511
www.activalores.com
mail@activalores.com
THE RECEIVING AGENT, TRUSTEE OF THE CLASS C SHARES AND PAYING AGENT OF THE
VENEZUELAN OFFER IS:
[UNIBANCA LOGO]
Avenida Universidad, Esquina El Chorro
Torre Unibanca
Caracas, Venezuela
Tel: (0212)-501-7942
Fax: (0212)-501-8485
THE FACILITATING AGENT FOR THE CLASS C SHARES IS:
[GRAPHIC OMITTED] INVERUNION S.A.
CASA DE BOLSA
Avenida Universidad, Esquina El Chorro
Torre Unibanca
Caracas, Venezuela
Tel: (0212)-501-7942
Fax: (0212)-501-8485
THE FINANCIAL ADVISORS OF THE VENEZUELAN OFFER ARE:
[JP MORGAN LOGO]
[CREDIT SUISSE FIRST BOSTON LOGO]
[BANK OF AMERICA SECURITIES]
THE LEGAL ADVISOR OF THE VENEZUELAN OFFER IS:
D'EMPAIRE REYNA BERMuDEZ ABOGADOS
Edificio Bancaracas, P.H.
Plaza La Castellana
Caracas 1160, Venezuela
Tel: (212)264-6244
Fax: (212)264-7543
www.drbalegal.com
34
ANNEX A-1
AES COMUNICACIONES DE VENEZUELA, C.A. (FORMERLY INVERSIONES D72410, C.A.)
FINANCIAL STATEMENT
AS OF APRIL 20, 2001
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
A-1-1
AES COMUNICACIONES DE VENEZUELA, C.A. (FORMERLY INVERSIONES D72410, C.A.)
FINANCIAL STATEMENT
CONTENTS
PAGE
-----
Report of Independent Public Accountants ................... 1
Balance sheet as of April 20, 2001 ......................... 2
Notes to financial statement as of April 20, 2001 .......... 3
A-1-2
(Translation of a report and financial statement originally issued in Spanish)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Inversiones D72410, C.A.:
We have audited the accompanying balance sheet of Inversiones D72410, C.A.
(a company incorporated in Venezuela), as of April 20, 2001. This balance sheet
and its notes are the responsibility of the Company's management. Our
responsibility is to express an opinion on this balance sheet based on our
audit.
We conducted our audit in accordance with auditing standards generally
accepted in Venezuela. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of Inversiones D72410, C.A. as of
April 20, 2001, in conformity with accounting principles generally accepted in
Venezuela.
PORTA, CACHAFEIRO, LARIA & ASOCIADOS
A MEMBER FIRM OF ANDERSEN
Carlos A. Rivillo
Public Accountant
CPC N degrees 10.517
July 12, 2001
A-1-3
INVERSIONES D72410, C.A.
BALANCE SHEET -- APRIL 20, 2001
(STATED IN CONSTANT BOLIVARS)
CURRENT ASSET
Cash .................................................................... 600,000
-------
600,000
=======
SHAREHOLDERS' EQUITY
Capital stock -- 600,000 shares of Bs. 1 each, fully subscribed and paid 600,000
-------
600,000
=======
The accompanying notes are an integral part
of this financial statement.
A-1-4
INVERSIONES D72410, C.A.
NOTES TO FINANCIAL STATEMENT
APRIL 20, 2001
(STATED IN CONSTANT BOLIVARS)
1. INCORPORATION AND PURPOSE:
Inversiones D72410, C.A. was incorporated on April 20, 2001. The Company
is mainly engaged in the conduction of all kind of investments; the purchase
and sale of shares, securities, bonds, chattels and real estate; the conduction
of economic and financial surveys; the rendering of managerial advisory
services, and in general, any other licit trade activity necessary to meet the
Company's main object. The Company has not initiated commercial operations.
2. EXPLANATION ADDED FOR TRANSLATION TO ENGLISH:
The accompanying financial statement is presented on the basis of
accounting principles generally accepted in Venezuela. Certain accounting
principles applied by the Company in its financial statement for use in
Venezuela may not conform with generally accepted accounting principles in
other countries.
A-1-5
ANNEX A-2
INDEPENDENT AUDITORS' REPORT
To the Stockholders of The AES Corporation:
We have audited the accompanying consolidated balance sheets of The AES
Corporation and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of operations, changes in stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 2000.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on the financial
statements based on our audits. The accompanying consolidated financial
statements give retroactive effect to the merger of The AES Corporation and
IPALCO Enterprises, Inc., which has been accounted for as a pooling of
interests as described in Note 2 to the consolidated financial statements. We
did not audit the financial statements of C.A. La Electricidad de Caracas and
Corporation EDC, C.A. and their subsidiaries ("EDC"), a majority-owned
subsidiary, which statements reflect total assets constituting 10% of
consolidated total assets as of December 31, 2000, total revenues constituting
7% of consolidated total revenues and total net income constituting 14% of
consolidated net income for 2000. Those financial statements were audited by
other auditors whose report has been furnished to us, and our opinion, insofar
as it relates to the amounts included for EDC, is based solely on the report of
such other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits, and the report of the other auditors, provide a reasonable basis for
our opinion.
In our opinion, based on our audits and the report of the other auditors,
such consolidated financial statements present fairly, in all material
respects, the financial position of The AES Corporation and subsidiaries as of
December 31, 2000 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States
of America.
Deloitte & Touche LLP
McLean, VA
January 29, 2001
(May 23, 2001 as to Note 20)
A-2-1
THE AES CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
2000 1999
----------- -----------
(AMOUNTS IN MILLIONS,
EXCEPT SHARES AND PAR
VALUE)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................................... $ 950 $ 693
Short-term investments .................................................................. 1,297 339
Accounts receivable -- net of reserves of $203 - 2000; $105 - 1999....................... 1,564 986
Inventory ............................................................................... 571 408
Receivable from affiliates .............................................................. 27 2
Deferred income taxes ................................................................... 167 185
Prepaid expenses and other current assets ............................................... 1,208 337
-------- --------
Total current assets .................................................................... 5,784 2,950
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land .................................................................................... 657 256
Electric generation and distribution assets ............................................. 18,627 15,530
Accumulated depreciation and amortization ............................................... (2,651) (2,078)
Construction in progress ................................................................ 2,874 1,558
-------- --------
Property, plant, and equipment -- net ................................................... 19,507 15,266
-------- --------
OTHER ASSETS:
Deferred financing costs -- net ......................................................... 381 243
Project development costs ............................................................... 114 53
Investments in and advances to affiliates ............................................... 3,122 1,575
Debt service reserves and other deposits ................................................ 517 328
Excess of cost over net assets acquired -- net .......................................... 2,307 1,851
Other assets ............................................................................ 1,306 956
-------- --------
Total other assets ...................................................................... 7,747 5,006
-------- --------
Total ................................................................................... $ 33,038 $ 23,222
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES:
Accounts payable ........................................................................ $ 833 $ 479
Accrued interest ........................................................................ 417 233
Accrued and other liabilities ........................................................... 1,318 763
Recourse debt -- current portion ........................................................ -- 335
Non-recourse debt -- current portion .................................................... 2,471 991
-------- --------
Total current liabilities ............................................................... 5,039 2,801
-------- --------
LONG-TERM LIABILITIES:
Non-recourse debt ....................................................................... 12,863 9,521
Recourse debt ........................................................................... 3,458 2,167
Deferred income taxes ................................................................... 1,863 2,139
Other long-term liabilities ............................................................. 1,603 754
-------- --------
Total long-term liabilities ............................................................. 19,787 14,581
-------- --------
MINORITY INTEREST ....................................................................... 1,442 1,207
COMMITMENTS AND CONTINGENCIES (NOTE 7) .................................................. -- --
COMPANY-OBLIGATED CONVERTIBLE MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUSTS
HOLDING SOLELY JUNIOR SUBORDINATED DEBENTURES OF AES .................................... 1,228 1,318
STOCKHOLDERS' EQUITY:
Preferred stock, no par value -- 50 million shares authorized; none issued .............. -- --
Common stock, $.01 par value -- 1,200 million and 1,000 million shares authorized for
2000 and 1999, respectively, 535 million issued and 522 million outstanding in 2000, 468
million issued and 453 million outstanding in 1999 ..................................... 5 4
Additional paid-in capital .............................................................. 5,172 3,052
Retained earnings ....................................................................... 2,551 1,811
Accumulated other comprehensive loss .................................................... (1,679) (995)
Treasury Stock, at cost: 2000 -- 13 million shares, 1999 -- 15 million shares ........... (507) (557)
-------- --------
Total stockholders' equity .............................................................. 5,542 3,315
-------- --------
Total ................................................................................... $ 33,038 $ 23,222
======== ========
See notes to consolidated financial statements.
A-2-2
THE AES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
----------- ----------- -----------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
REVENUES .............................................. $ 7,582 $ 4,124 $ 3,257
Cost of Sales ......................................... (5,615) (2,858) (2,213)
Selling, General and Administrative Expenses .......... (85) (71) (56)
Severance and Transaction Costs ....................... (84) -- --
Interest Expense ...................................... (1,356) (705) (550)
Interest and Other Income ............................. 249 88 68
Gain on Contract Buyout/Termination and Sale of
Assets ............................................... 31 91 13
Gain on Sale of Available for Sale Securities ......... 112 -- --
Impairment Loss ....................................... -- (62) --
Environmental Fine .................................... (17) -- --
Equity in Pre-tax Earnings of Affiliates .............. 475 21 232
-------- -------- --------
INCOME BEFORE INCOME TAXES, MINORITY INTEREST, AND
EXTRAORDINARY ITEMS .................................. 1,292 628 751
Income Taxes .......................................... 366 190 220
Minority Interest ..................................... 119 64 94
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEMS ..................... 807 374 437
Extraordinary Items -- (loss) gain on early
extinguishment of debt -- net of applicable income
tax .................................................. (11) (17) 4
-------- -------- --------
NET INCOME ............................................ $ 796 $ 357 $ 441
======== ======== ========
BASIC EARNING PER SHARE:
Before extraordinary items ............................ $ 1.67 $ 0.88 $ 1.10
Extraordinary items ................................... (0.02) (0.04) 0.01
-------- -------- --------
BASIC EARNING PER SHARE ............................... $ 1.65 $ 0.84 $ 1.11
======== ======== ========
DILUTED EARNING PER SHARE:
Before extraordinary items ............................ $ 1.61 $ 0.86 $ 1.06
Extraordinary items ................................... (0.02) (0.04) 0.01
-------- -------- --------
DILUTED EARNING PER SHARE ............................. $ 1.59 $ 0.82 $ 1.07
======== ======== ========
See notes to consolidated financial statements.
A-2-3
THE AES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
----------- ----------- -------------
(AMOUNTS IN MILLIONS)
OPERATING ACTIVITIES:
Net income .......................................................... $ 796 $ 357 $ 441
Adjustments to net income:
Depreciation and amortization ....................................... 697 388 299
Gain from sale of available-for-sale securities ..................... (112) -- --
Gain from sale of assets ............................................ (31) -- --
Provision for deferred taxes ........................................ (13) 11 68
Minority interest earnings .......................................... 119 64 94
Undistributed earnings of affiliates ................................ (320) 30 (58)
Other ............................................................... (34) 38 (77)
Changes in operating assets and liabilities:
Increase in accounts receivable ..................................... (270) (154) (2)
Increase in inventory ............................................... (56) (45) (12)
Decrease in other current assets .................................... (156) (87) 2
Decrease in other assets ............................................ (132) (31) 5
Increase (decrease) in accounts payable ............................. 257 (61) (5)
Increase in accrued interest ........................................ 126 85 44
Decrease in accrued and other liabilities ........................... (225) (184) (36)
-------- -------- ---------
Net cash provided by operating activities ........................... 646 411 763
-------- -------- ---------
INVESTING ACTIVITIES:
Property additions .................................................. (2,226) (938) (597)
Acquisitions -- net of cash acquired ................................ (1,818) (5,713) (1,623)
Proceeds from the sales of assets ................................... 234 650 301
Sale of short-term investments ...................................... 195 49 98
Purchase of short-term investments .................................. (96) (98) (2)
Affiliate advances and equity investments ........................... (515) (193) (69)
Increase in short-term investments .................................. (1,110) (80) (4)
Project development costs ........................................... (96) (84) (57)
Debt service reserves and other assets .............................. (101) (94) 32
-------- -------- ---------
Net cash used in investing activities ............................... (5,533) (6,501) (1,921)
-------- -------- ---------
FINANCING ACTIVITIES:
(Repayments) borrowings under the revolver, net ..................... (195) 102 206
Issuance of non-recourse debt and other coupon bearing
securities ......................................................... 7,081 6,427 2,115
Repayments of non-recourse debt and other coupon bearing
securities ......................................................... (2,831) (1,289) (1,075)
Payments for deferred financing costs ............................... (136) (119) (47)
Repayments of other long-term liabilities ........................... (174) (46) (67)
(Distributions to) contributions by minority interests, net ......... (54) 32 90
Issuance of common stock, net ....................................... 1,508 1,226 165
Common stock dividends paid ......................................... (55) (51) (48)
-------- -------- ---------
Net cash provided by financing activities ........................... 5,144 6,282 1,339
INCREASE IN CASH AND CASH EQUIVALENTS ............................... 257 192 181
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ........................ 693 501 320
-------- -------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR .............................. $ 950 $ 693 $ 501
======== ======== =========
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest-net of amounts capitalized ............... $ 1,191 $ 608 $ 477
Cash payments for income taxes-net of refunds ....................... 216 112 106
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for acquisitions ................................ 67 48 --
Liabilities assumed in purchase transactions ........................ 2,098 3,570 139
Conversion of AES Trust I and AES Trust II (see Note 8) ............. 550 -- --
See notes to consolidated financial statements.
A-2-4
THE AES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER COMPREHENSIVE
------------------- PAID-IN RETAINED COMPREHENSIVE TREASURY INCOME
SHARES AMOUNT CAPITAL EARNINGS LOSS STOCK (LOSS)
---------- -------- ------------ ---------- --------------- ---------- --------------
(AMOUNTS IN MILLIONS)
Balance at January 1, 1998 ........... 391.4 4 1,426 1,113 (131) (404)
Net income ........................... -- -- -- 441 -- -- $ 441
Foreign currency translation
adjustment .......................... -- -- -- -- (212) -- (212)
---- -------
Comprehensive income ................. $ 229
=======
Dividends declared ................... -- -- -- (49) -- --
Issuance of common stock through
public offerings .................... 8.6 -- 184 -- -- --
Purchase of treasury stock ........... ( 1.1) -- -- -- -- (65)
Issuance of common stock under
benefit plans and exercise of
stock options and warrants .......... 3.1 -- 42 -- -- --
Tax benefit associated with the
exercise of options ................. -- -- 19 -- -- --
------ -- ----- ----- ---- ----
Balance at December 31, 1998 ......... 402.0 4 1,671 1,505 (343) (469)
------ -- ----- ----- ---- ----
Net income ........................... -- -- -- 357 -- -- $ 357
Foreign currency translation
adjustment .......................... -- -- -- -- (759) -- (759)
Unrealized gains on marketable
securities .......................... -- -- -- -- 107 -- 107
-------
Comprehensive loss ................... $ (295)
=======
Dividends declared ................... -- -- -- (51) -- --
Issuance of common stock through
public offerings .................... 48.0 -- 1,280 -- -- --
Issuance of common stock pursuant
to acquisitions ..................... 1.8 -- 48 -- -- --
Purchase of treasury stock ........... ( 1.6) -- -- -- -- (88)
Issuance of common stock under
benefit plans and exercise of
stock options and warrants .......... 3.2 -- 30 -- -- --
Tax benefit associated with the
exercise of options ................. -- -- 23 -- -- --
------ -- ----- ----- ---- ----
Balance at December 31, 1999 ......... 453.4 4 3,052 1,811 (995) (557)
====== == ===== ===== ==== ====
Net income ........................... -- -- -- 796 -- -- $ 796
A-2-5
THE AES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(CONT'D)
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER COMPREHENSIVE
----------------- PAID-IN RETAINED COMPREHENSIVE TREASURY INCOME
SHARES AMOUNT CAPITAL EARNINGS LOSS STOCK (LOSS)
-------- -------- ------------ ---------- --------------- ---------- --------------
(AMOUNTS IN MILLIONS)
Foreign currency translation
adjustment .......................... -- -- -- -- (575) -- (575)
Unrealized losses and realized gains
on marketable securities ............ -- -- -- -- (107) -- (107)
Minimum pension liability
adjustment .......................... -- -- -- -- (2) -- (2)
-------
Comprehensive income ................. $ 112
=======
Dividends declared ................... -- -- -- (56) -- --
Issuance of common stock through
public offerings and Tecon
conversions ......................... 59.2 1 1,946 -- -- --
Issuance of common stock pursuant
to acquisitions ..................... 1.3 -- 67 -- -- --
Issuance of common stock under
benefit plans and exercise of
stock options and warrants .......... 7.8 -- 50 -- -- 50
Tax benefit associated with the
exercise of options ................. -- -- 57 -- -- --
----- --- ------ ------ ------- ------
Balance at December 31, 2000 ......... 521.7 $ 5 $5,172 $2,551 $(1,679) $ (507)
===== === ====== ====== ========= ======
See notes to consolidated financial statements.
A-2-6
THE AES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The AES Corporation and its subsidiaries and affiliates, (collectively
"AES" or "the Company") is a global power company primarily engaged in owning
and operating electric power generation and distribution businesses in many
countries around the world.
The consolidated financial statements have been prepared to give
retroactive effect to the merger with IPALCO Enterprises, Inc. ("IPALCO"),
which has been accounted for as a pooling of interests ("pooling") as more
fully discussed in Note 2.
Principles of Consolidation--The consolidated financial statements of the
Company include the accounts of The AES Corporation, its subsidiaries, and
controlled affiliates. Investments in 50% or less owned affiliates, over which
the Company has the ability to exercise significant influence but not control,
are accounted for using the equity method. Intercompany transactions and
balances have been eliminated.
Cash and Cash Equivalents--The Company considers unrestricted cash on
hand, deposits in banks, certificates of deposit, and short-term marketable
securities with an original maturity of three months or less to be cash and
cash equivalents.
Investments--Securities that the Company has both the positive intent and
ability to hold to maturity are classified as held-to-maturity and are carried
at historical cost. Other investments that the Company does not intend to hold
to maturity are classified as available-for-sale or trading. Unrealized gains
or losses on available-for-sale investments are recorded as a separate
component of stockholders' equity. Investments classified as trading are marked
to market on a periodic basis through the statement of operations. Interest and
dividends on investments are reported in interest income. Gains and losses on
sales of investments are recorded using the specific identification method.
Short-term investments consist of investments with original maturities in
excess of three months but less than one year. Short-term investments also
include $1.2 billion of restricted cash. Debt service reserves and other
deposits, which might otherwise be considered cash and cash equivalents, are
treated as non-current assets (see Note 5).
Inventory--Inventory, valued at the lower of cost or market (first in,
first out method), consists of coal, fuel oil, other raw materials, spare parts
and supplies. Inventory consists of the following (in millions):
DECEMBER 31,
----------------
2000 1999
------ -------
Coal, fuel oil, and other raw materials ......... $298 $243
Spare parts and supplies ........................ 273 165
---- ----
Total ........................................... $571 $408
==== ====
Property, Plant, and Equipment--Property, plant, and equipment is stated
at cost. The cost of renewals and betterments that extend the useful life of
property, plant and equipment are also capitalized. Depreciation, after
consideration of salvage value, is computed using the straight-line method over
the estimated composite useful lives of the assets. Depreciation expense stated
as a percentage of average cost of depreciable property, plant and equipment
was, on a composite basis, 3.70%, 3.73% and 3.41% for the years ended December
31, 2000, 1999 and 1998, respectively. The components of our electric
generation and distribution assets and the related rates of depreciation are as
follows.
A-2-7
USEFUL COMPOSITE
LIFE RATE
------ ---------------
Generation and Distribution Facilities ......... 2.0% -- 10.0%
10-50 yrs
Other Buildings ............................... 2.5% -- 5.0%
20-40 yrs. .....................................
Leasehold Improvements ........................ 3.3% -- 10.0%
10-30 yrs. .....................................
Furniture and Fixtures ........................ 14.3% -- 50.0%
2-7 yrs ........................................
Maintenance and repairs are charged to expense as incurred. Emergency and
rotable spare parts inventories are included in electric generation and
distribution assets and are depreciated over the useful life of the related
components.
Construction in Progress--Construction progress payments, engineering
costs, insurance costs, salaries, interest, and other costs relating to
construction in progress are capitalized. Construction in progress balances are
transferred to electric generation and distribution assets when each asset is
ready for its intended use. Interest capitalized during development and
construction totaled $225 million, $105 million, and $80 million in 2000, 1999,
and 1998, respectively.
Excess of Cost Over Net Assets Acquired--Excess of cost over net assets
acquired is amortized on a straight-line basis over the estimated benefit
period which ranges from 10 to 40 years. Excess of cost over net assets
acquired at December 31, 2000 and 1999 are shown net of accumulated
amortization of $128 million and $70 million, respectively.
Long-lived Assets--In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of, the Company evaluates the
impairment of long-lived assets, as well as excess of cost over net assets
acquired, based on the projection of undiscounted cash flows whenever events or
changes in circumstances indicate that the carrying amounts of such assets may
not be recoverable. In the event such cash flows are not expected to be
sufficient to recover the recorded value of the assets, the assets are written
down to their estimated fair values (see Note 12) based on discounted cash flow
analysis.
Deferred Financing Costs--Financing costs are deferred and amortized over
the related financing period using the effective interest method or the
straight-line method when it does not differ materially from the effective
interest method. Deferred financing costs are shown net of accumulated
amortization of $105 million and $89 million as of December 31, 2000 and 1999,
respectively.
Project Development Costs--The Company capitalizes the costs of developing
new construction projects after achieving certain project-related milestones
that indicate that the project is probable of completion. These costs represent
amounts incurred for professional services, permits, options, capitalized
interest, and other costs directly related to construction. These costs are
transferred to property when significant construction activity commences, or
expensed at the time the Company determines that development of a particular
project is no longer probable. The continued capitalization of such costs is
subject to ongoing risks related to successful completion, including those
related to government approvals, siting, financing, construction, permitting,
and contract compliance.
Income Taxes--The Company follows SFAS No. 109, Accounting for Income
Taxes. Under the asset and liability method of SFAS No. 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
the existing assets and liabilities, and their respective income tax bases.
Foreign Currency Translation--Subsidiaries and affiliates whose functional
currency is other than the U.S. Dollar translate their assets and liabilities
into U.S. Dollars at the current exchange rates in effect at the end of the
fiscal period. The revenue and expense accounts of such subsidiaries and
affiliates are translated into U.S. Dollars at the average exchange rates that
prevailed during the period. The gains or losses that result from this process,
and gains and losses on intercompany foreign currency transactions
A-2-8
which are long-term in nature, and which the Company does not intend to settle
in the foreseeable future, are shown in accumulated other comprehensive loss in
the stockholders' equity section of the balance sheet. Gains and losses that
arise from exchange rate fluctuations on transactions denominated in a currency
other than the functional currency (except those that are accounted for as
hedges) are included in determining net income. Foreign currency transaction
gains and losses that are intended to hedge an identifiable foreign currency
commitment are deferred and included in the measurement of the related foreign
currency transaction. For subsidiaries operating in highly inflationary
economies, the U.S. Dollar is considered to be the functional currency, and
transaction gains and losses are included in determining net income.
During 1999, the Brazilian Real experienced a significant devaluation
relative to the U.S. Dollar, declining from 1.21 Reais to the Dollar at
December 31, 1998 to 1.81 Reais at December 31, 1999. The exchange rate was
1.96 Reais to the Dollar at December 31, 2000. This continued devaluation
resulted in significant foreign currency translation and transaction losses
particularly during 1999. The Company recorded $64 and $203 million before
income taxes of non-cash foreign currency transaction losses on its investments
in Brazilian equity-method affiliates during 2000 and 1999, respectively.
Revenue Recognition and Concentration--Revenues from the sale of
electricity and steam generation are recorded based upon output delivered and
capacity provided at rates as specified under contract terms or prevailing
market rates. Electricity distribution revenues are recognized when power is
provided. Revenues from power sales contracts entered into after 1991 with
escalating scheduled rates are recognized based on the output delivered at the
lower of the amount billed or the average rate over the contract term. Several
of the Company's power plants rely primarily on one power sales contract with a
single customer for the majority of revenues (see Note 7). No single customer
accounted for at least 10% of revenues in 2000, 1999 or 1998. The prolonged
failure of any of the Company's customers to fulfill contractual obligations or
make required payments could have a substantial negative impact on AES's
revenues and profits.
Regulation--The Company has investments in electric distribution
businesses located in the United States and certain foreign countries that are
subject to regulation by the applicable regulatory authority. Our distribution
businesses operate in markets that are subject to price-cap regulation, which
means the price of electricity is regulated as opposed to the investors' rate
of return. For the regulated portion of these businesses, the Company
capitalizes incurred costs as deferred regulatory assets when there is a
probable expectation that future revenue equal to the costs incurred will be
billed and collected as a direct result of the inclusion of the costs in an
increased tariff set by the regulator. The deferred regulatory asset is
eliminated when the Company collects the related costs through billings to
customers. Regulators in the respective jurisdictions typically perform a
tariff review for the distribution companies on an annual basis. If a regulator
excludes all or part of a cost from recovery, that portion of the deferred
regulatory asset is impaired and is accordingly reduced to the extent of the
excluded cost. The Company has recorded deferred regulatory assets of $291
million and $162 million at December 31, 2000, and 1999, respectively, that it
expects to pass through to its customers in accordance with and subject to
regulatory provisions. The regulatory assets include $110 million and $30
million at December 31, 2000, and 1999, respectively, that were recorded by the
Company's equity method affiliates in Brazil. The deferred regulatory assets at
entities which are controlled and consolidated by the Company are recorded in
other assets on the consolidated balance sheets.
Derivatives--The Company enters into various derivative transactions in
order to hedge its exposure to certain market risks. The Company currently has
outstanding interest rate swap, cap, and floor agreements that hedge against
interest rate exposure on floating rate non-recourse debt. These transactions,
which are classified as other than trading, are accounted for using settlement
accounting, and any gain or loss is included in interest cost. Any fees are
amortized as yield adjustments. Written interest rate options are
marked-to-market through earnings.
The Company enters into currency swaps and forwards to hedge against
foreign currency risk on certain non-functional currency-denominated
liabilities. Gains and losses on each contract are computed by multiplying the
foreign currency amount of the contract by the difference between the spot rate
at the
A-2-9
balance sheet date and the spot rate at the date of inception of the contract
and recognized in the statement of operations. Any discount or premium on a
currency swap or forward is accounted for separately from gains and losses on
the contract and is amortized to net income over the life of the contract.
The Company enters into electric and gas derivative instruments, including
swaps, options, forwards and futures contracts to manage its risks related to
electric and gas sales and purchases. Gains and losses arising from derivative
financial instrument transactions that hedge the impact of fluctuations in
energy prices are recognized in income concurrent with the related purchases
and sales of the commodity. If a derivative financial instrument is entered
into for trading purposes, it is marked-to-market with net gains reported
within revenues or net losses reported within cost of sales. If a derivative
financial instrument contract is terminated because it is probable that a
transaction or forecasted transaction will not occur, any gain or loss as of
such date is immediately recognized. If a derivative financial instrument
contract is terminated early for other economic reasons, any gain or loss as of
the termination date is deferred and recorded concurrently with the related
energy purchase or sale.
Earnings Per Share--Basic and diluted earnings per share are based on the
weighted average number of shares of common stock and potential common stock
outstanding during the period, after giving effect to stock splits (see Note
11). Potential common stock, for purposes of determining diluted earnings per
share, includes the effects of dilutive stock options, warrants, deferred
compensation arrangements, and convertible securities. The effect of such
potential common stock is computed using the treasury stock method or the
if-converted method, as applicable.
Use of Estimates--The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires the Company to make estimates and assumptions that affect reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. Significant items subject to such estimates
and assumptions include the carrying value of long-lived assets; valuation
allowances for receivables, the recoverability of deferred regulatory assets
and the valuation of certain financial instruments, deferred tax assets,
environmental liabilities and potential litigation claims and settlements (see
Note 7).
Reclassifications--Certain reclassifications have been made to
prior-period amounts to conform with the 2000 presentation.
2. BUSINESS COMBINATIONS
On March 27, 2001, AES completed its merger with IPALCO through a share
exchange transaction in accordance with the Agreement and Plan of Share
Exchange dated as of July 15, 2000, between AES and IPALCO and IPALCO became a
wholly-owned subsidiary of AES. The Company accounted for the combination as a
pooling. IPALCO is an Indianapolis-based utility with approximately 3,000 MW of
generation and 433,000 customers in and around Indianapolis.
At the effective date of the share exchange, each of the outstanding
shares of IPALCO common stock was converted into the right to receive 0.463
shares of AES common stock. The Company issued approximately 41.5 million
shares of AES common stock to complete the transaction.
The table below sets forth combined revenues, extraordinary items, and net
income of AES and IPALCO for the years ended December 31, 2000, 1999, and 1998:
A-2-10
YEARS ENDED DECEMBER 31,
------------------------------------
2000 1999 1998
------------ --------- ---------
(IN MILLIONS)
Revenues:
AES ............... $6,691 $3,253 $2,398
IPALCO ............ 891 871 859
------ ------ ------
$7,582 $4,124 $3,257
====== ====== ======
Extraordinary items:
AES ............... $ (7) $ (17) $ 4
IPALCO ............ (4) -- --
-------- ------ ------
$ (11) $ (17) $ 4
======= ====== ======
Net Income:
AES ............... $ 641 $ 228 $ 311
IPALCO ............ 155 129 130
------- ------ ------
$ 796 $ 357 $ 441
======= ====== ======
No AES or IPALCO accounting policies were required to be conformed as a
result of the merger. Both AES and IPALCO have the same fiscal years. There
were no intercompany transactions between the two companies.
The Company has accounted for the following transactions using the
purchase method of accounting as of the effective date of each transaction.
Accordingly, the purchase price of each transaction has been allocated based
upon the estimated fair value of the assets and the liabilities acquired as of
the acquisition date, with any excess reflected as excess of cost over net
assets acquired.
In June 2000, pursuant to its tender offer for American Depositary Shares
("ADSs"), a subsidiary of the Company purchased for cash approximately 35
million ADSs, each representing 50 shares, of C.A. La Electricidad de Caracas
and Corporacion EDC, C.A. (together, "EDC") at $28.50 per ADS. Also in June,
pursuant to its tender offer for all outstanding shares of EDC, a subsidiary of
the Company purchased approximately 1.1 billion shares of EDC at $0.57 per
share. The purchases brought the Company's ownership interest in EDC to
approximately 81%. Subsequently, the Company's total ownership reached
approximately 87% due to a stock buyback program initiated by EDC in July. The
total purchase price was $1.7 billion of cash. EDC is the largest private
integrated utility in Venezuela, covering the capital region of Caracas. It has
interests in distribution businesses in Venezuela, as well as El
Salvador-together serving over 1 million customers. EDC also provides 2,265 MW
of installed capacity through its generation facilities in Venezuela. The
purchase price allocation was as follows (in millions):
A-2-11
Purchase price ................................................. $ 1,700
Less: Stockholders' equity of Grupo EDC
Capital stock .................................................. (508)
Paid-in surplus ................................................ (245)
Retained earnings .............................................. (1,353)
Treasury stock ................................................. 323
Adjustment of assets and liabilities to fair value:
Property and equipment ......................................... (1,578)
Contractually obligated losses on assets to be sold ............ 185
Deferred income tax asset ...................................... 231
Employee severance plan ........................................ 157
Investment in subsidiaries ..................................... 36
Elimination of intangible asset - goodwill ..................... 7
Other net assets ............................................... 25
--------
Excess of fair value of net assets acquired over purchase price-
Negative goodwill ............................................. $ (1,020)
Property and equipment was reduced by the excess of the fair value of the net
assets acquired over the purchase price. The cost of the acquisition was
allocated on the basis of estimated fair value of the assets acquired and
liabilities assumed, primarily based upon an independent appraisal. As of
December 31, 2000, the severance plan was completed and the workforce was
reduced by approximately 2,500 people. All of the costs associated with the
plan were recorded during 2000, and all of the cash payments were made in 2000.
In August 2000, a subsidiary of the Company completed the acquisition of a
59% equity interest in a Hidroelectrica Alicura S.A. ("Alicura") in Argentina
from Southern Energy, Inc. and its partners. Alicura operates a 1,000 MW
peaking hydro facility located in the province of Neuquen, Argentina. The
purchase price of approximately $205 million includes the assumption of
existing non-recourse debt. In December, a subsidiary of the Company acquired
an additional 39% ownership interest in Alicura, 19.5% ownership interests each
from the Federal Government of Argentina and the Province of Neuquen, for
approximately $9 million. At December 31, 2000, the Company's ownership
interest was 98%. The employees of Alicura own the remaining 2%. All of the
purchase price was allocated to property, plant and equipment and is being
depreciated over the useful life.
In October 2000, a subsidiary of the Company completed the acquisition of
Reliant Energy International's 50% interest in El Salvador Energy Holdings,
S.A. ("ESEH") which owns three distribution companies in El Salvador. The
purchase price for this interest in ESEH was approximately $175 million. The
three distribution companies, Compania de Alumbrado Electrico de San Salvador,
S.A. de C.V., Empresa Electrica de Oriente, S.A. de C.V. Distribuidora
Electrica de Usulutan, S.A. De C.V. serve 3.5 million people, approximately 60
percent of the population of El Salvador, including the capital city of San
Salvador. A subsidiary of the Company had previously acquired a 50% interest in
ESEH through its acquisition of EDC. Through the purchase of Reliant Energy
International's ownership interest, the Company owns a controlling interest in
the three distribution companies. The total purchase price for 100% of the
interest in ESEH approximated $302 million, of which approximately $200 million
was allocated to excess of costs over net assets acquired and is being
amortized over 40 years.
In December 2000, the Company acquired all of the outstanding shares of
KMR Power Corporation ("KMR"), including the buyout of a minority partner in
one of KMR's subsidiaries, for approximately $85 million. The acquisition was
financed through the issuance of approximately 949,000 shares of AES common
stock and cash. KMR owns a controlling interest in two gas-fired power plants
located in Cartagena, Colombia: a 100% interest in the 314 MW TermoCandelaria
power plant and a 66% interest in the 100 MW Mamonal plant. Approximately $59
of the purchase price was allocated to excess of cost over net assets acquired
and is being amortized over 40 years.
In January 1999, a subsidiary of the Company acquired a 49% interest in
AES Panama, an entity resulting from the merger of Empresa de Generacion
Electrica Chiriqui and Empresa de Generacion
A-2-12
Electrica Bayano, two generation companies in Panama with four facilities
representing a total of 283 MW. The acquisition was completed for approximately
$91 million, including $46 million of non-recourse debt. AES controls the board
of directors of AES Panama, and therefore, consolidates it.
In July 1999, a subsidiary of the Company acquired all of the outstanding
shares of NewEnergy Ventures, Inc. ("NewEnergy"), a retail energy distribution
company, for approximately $90 million plus assumed liabilities of
approximately $183 million. NewEnergy provides electric energy to customers in
deregulated energy markets in the United States. The acquisition was financed
through a combination of cash, debt and approximately 1.7 million shares of AES
common stock. Approximately $152 million of the purchase price was allocated to
excess of cost over net assets acquired.
In August 1999, a subsidiary of the Company acquired a controlling 51%
interest in Eletronet in Brazil for approximately $155 million. The purchase
price is to be paid in annual installments through 2002. The remaining 49% is
owned by a subsidiary of Centrais Electricas Brasileiras, S.A. ("Eletrobras"),
a Brazilian government-owned utility. Eletronet was created in 1998 by the
minority owner to construct a national broadband telecommunications network
attached to the existing national transmission grid in Brazil. The business
activities of Eletronet currently represent construction activities, preparing
the network for its intended use. Therefore, no results of operations have been
included in the table below for this acquisition.
In August 1999, a subsidiary of the Company completed the acquisition of
50% of Empresa Distribuidora de Electricidad del Este, S.A. ("EDE Este"), for
approximately $109 million. EDE Este is the distribution company providing
electricity to approximately 400,000 customers in the eastern portion of the
Dominican Republic. Approximately $76 million of the acquisition cost
represents the excess of cost over net assets acquired and it is being
amortized over 40 years. The Company controls the board of directors, and
therefore, consolidates EDE Este.
In November 1999, a subsidiary of the Company acquired a controlling
interest in Companhia de Geracao de Energia Eletrica Tiete ("Tiete"), a
generating company in the State of Sao Paulo, Brazil, with 2,644 MW of capacity
comprised of nine hydroelectric generating facilities, for approximately $498
million. AES acquired approximately 62% of the voting stock and approximately
14% of the preferred stock representing approximately 39% of the total capital
stock of Tiete. In December 1999, a subsidiary of the Company acquired an
additional 10% of the voting stock of Tiete, representing approximately 5% of
total capital, for approximately $50 million. The Company owns approximately
71% of voting stock and approximately 44% of total capital.
In November 1999, a subsidiary of the Company completed its acquisition of
CILCORP for approximately $886 million in cash. CILCORP is an integrated
electric and gas utility based in Central Illinois that combines three
coal-fired generation plants producing an aggregate 1,157 MW of capacity and an
extensive transmission and distribution network that serves electricity and gas
customers. In August 1999, AES received from the Securities and Exchange
Commission an exemption from certain requirements of the Public Utility Holding
Company Act of 1935 allowing it to purchase CILCORP while maintaining its
existing ownership interest in its Qualifying Facilities, as defined
thereunder. The cost of the acquisition was allocated on the basis of estimated
fair value of the assets acquired and liabilities assumed. The liabilities
assumed in the transaction consisted of $14 million in merger-related personnel
costs. Approximately $573 million of the purchase price represent the excess of
cost over net assets acquired and is being amortized over 40 years.
The table below presents unaudited pro forma operating results as if all
of the acquisitions had occurred at the beginning of the periods shown (in
millions, except per share amounts). The pro forma amounts include certain
adjustments, primarily for depreciation and amortization based on the allocated
purchase price and additional interest expense:
A-2-13
YEARS ENDED DECEMBER 31, 2000 1999
------------------------ ----------- -----------
Revenues .................................. $ 8,137 $ 6,181
Income before extraordinary items ......... 833 574
Net income ................................ 822 557
Basic earnings per share .................. $ 1.67 $ 1.25
Diluted earnings per share ................ $ 1.61 $ 1.21
The pro forma results are based upon assumptions and estimates that the
Company believes are reasonable. The pro forma results do not purport to be
indicative of the results that actually would have been obtained had the
acquisitions occurred at the beginning of the periods shown, nor are they
intended to be a projection of future results.
The purchase price allocations for EDC, Alicura, ESEH, Nigen (see Note 4)
and KMR have been completed on a preliminary basis, subject to adjustments
resulting from engineering, environmental, legal and other analyses during the
respective allocation periods. The accompanying consolidated financial
statements include the operating results of EDC from June 2000, Alicura from
August 2000, ESEH from October 2000, KMR from December 2000, AES Panama from
January 1999, NewEnergy from July 1999, Eletronet and EDE Este from August
1999, and CILCORP and Tiete from November 1999.
In January 2001, following the expiration on December 28, 2000 of a
Chilean tender offer, Inversiones Cachagua Limitada, a Chilean subsidiary of
AES, paid cash for 3,466,600,000 shares of common stock of Gener S.A ("Gener").
Also in January 2001, following the expiration on December 29, 2000, of the
simultaneous United States offer to exchange all ADSs of Gener for AES common
stock, AES issued shares of common stock in exchange for Gener ADSs tendered
pursuant to the United States offer, which, together with the shares acquired
in the Chilean offer, resulted in AES's acquisition of approximately 96.5% of
the capital stock of Gener. The purchase price for the acquisition of Gener is
approximately $1.4 billion plus the assumption of approximately $700 million of
non-recourse debt. At December 31, 2000, $848 million of cash had been raised
by AES through the issuance of debt and equity for the purchase of Gener. This
amount is recorded as restricted cash in short-term investments in the
accompanying December 31, 2000 balance sheet.
PENDING BUSINESS COMBINATIONS
In April 2000, a subsidiary of the Company announced its intention to
launch a tender offer to acquire all outstanding common and preferred shares of
Tiete. This transaction must be approved by the local regulatory authority. The
acquisition price has not been determined.
In May 2000, a subsidiary of the Company won a bid to purchase a
controlling interest in the 1,580 MW Mohave Generating Station ("Mohave") in
Laughlin, Nevada from Southern California Edison Company ("Edison") and Nevada
Power Company for $667 million. Mohave provides power to Phoenix, Arizona, Las
Vegas, Nevada and Southern California. The approval to permit AES to purchase
the 56% interest currently held by Edison was denied by the California Public
Utility Commission. AES continues to pursue the purchase but there can be no
assurance that the Company will be successful in acquiring the ownership
interest on the terms determined in the original competitive bid.
In February 2001, a subsidiary of the Company entered into an agreement to
acquire Thermo Ecotek Corporation ("Thermo Ecotek"), a wholly owned subsidiary
of Thermo Electron Corporation. The purchase price for the transaction is
approximately $195 million in cash, plus additional closing adjustments to
reimburse the seller for project development expenses incurred between
September 30, 2000, and the closing date of the transaction. Thermo Ecotek is a
developer and operator of gas-fired, biomass-fired (agricultural and wood
waste) and coal-fired power plants. The portfolio of assets to be acquired by
AES includes 516 gross MW of operating power assets in the United States, the
Czech Republic, and Germany, a natural gas storage project in the United
States, and over 1,250 MW of advanced development power projects in the United
States. The transaction is subject to a number of closing conditions, including
anti-trust and other state and federal regulatory approvals, as well as
customary conditions. The closings will be structured in two phases, both of
which are expected to close by the end of 2001.
A-2-14
3. ASSET ACQUISITIONS
In May 1999, a subsidiary of the Company acquired the assets of Ecogen
Energy ("Ecogen"), which consists of two gas-fired power stations in Victoria,
Australia, for approximately $100 million. The power stations, Yarra and
Jeeralang, have a total installed capacity of 966 MW. They provide peaking
capacity for the Australian national electricity market.
Also in May 1999, a subsidiary of the Company completed the acquisition of
six electric generating stations from New York State Electric and Gas ("NYSEG")
for approximately $962 million. Concurrently, the subsidiary sold two of the
plants to an unrelated third party for $650 million and simultaneously entered
into a leasing arrangement with the unrelated party (see Note 7). These six
coal-fired electric generating plants have a total installed capacity of 1,424
MW.
In November 1999, a subsidiary of the Company completed its acquisition of
the Drax Power Station ("Drax") for approximately $3 billion. The Drax station
is a 3,960 MW coal-fired power station in northern England. The purchase price
was paid in cash and was financed with a mixture of non-recourse senior bank
lending, subordinated bridge lending and equity provided by AES. In conjunction
with this acquisition, the Company assumed $1.3 billion of liabilities of which
$1.1 billion relate to deferred income taxes and the remainder consists of the
fair value of assumed liabilities.
4. INVESTMENTS IN AND ADVANCES TO AFFILIATES
The Company is a party to joint venture/consortium agreements through
which the Company has equity investments in Companhia Energetica de Minas
Gerais ("CEMIG"), Light-Servicos de Eletricidade S.A. ("Light") and Eletropaulo
Metropolitana Electricidade de Sao Paulo S.A. ("Eletropaulo"). The joint
venture/consortium parties generally share operational control of the investee.
The agreements prescribe ownership and voting percentages as well as other
matters. The Company records its share of earnings from its equity investees on
a pre-tax basis. The Company's share of the investee's income taxes is recorded
in income tax expense.
Effective May 1, 2000, the Company disposed of its investment in
Northern/AES Energy. The disposition of the investment did not have a material
effect on the Company's financial condition or results of operations.
In May 2000, the Company completed the acquisition of 100% of Tractebel
Power Ltd ("TPL") for approximately $67 million and assumed liabilities of
approximately $200 million. TPL owned 46% of Nigen. The Company also acquired
an additional 6% interest in Nigen from minority stockholders during the year
ended December 31, 2000 through the issuance of approximately 99,000 common
shares of AES stock valued at approximately $4.9 million. With the completion
of these transactions, the Company owns approximately 98% of Nigen's common
stock and began consolidating its financial results beginning May 12, 2000.
Approximately $100 million of the purchase price was allocated to excess of
costs over net assets acquired and is being amortized over 23 years.
In May 2000, a subsidiary of the company acquired an additional 5% of the
preferred, non-voting shares of Eletropaulo for approximately $90 million. In
January 2000, 59% of the preferred non-voting shares were acquired for
approximately $1 billion at auction from BNDES, the National Development Bank
of Brazil. The price established at auction was approximately $72.18 per 1,000
shares, to be paid in four annual installments commencing with a payment of
18.5% of the total price upon closing of the transaction and installments of
25.9%, 27.1% and 28.5% of the total price to be paid annually thereafter. At
December 31, 2000, the Company had a total economic interest of 49.6% and a
voting interest of 17.35% in Eletropaulo. The Company accounts for this
investment using the equity-method based on the related consortium agreement
that allows the exercise of significant influence.
In August 2000, a subsidiary of the Company acquired a 49% interest in
Songas Limited for approximately $40 million. Songas Limited owns the Songo
Songo Gas-to-Electricity Project in Tanzania. Under the terms of a project
management agreement, the Company has assumed overall project management
responsibility. The project consists of the refurbishment and operation of five
natural gas wells in coastal Tanzania, the construction and operation of a 65
mmscf/day gas processing plant and
A-2-15
related facilities, the construction of a 230 km marine and land pipeline from
the gas plant to Dar es Salaam and the conversion and upgrading of an existing
112 MW power station in Dar es Salaam to burn natural gas, with an optional
additional unit to be constructed at the plant. Since the project is currently
under construction, no revenues or expenses have been incurred, and therefore
no results are shown in the following table.
In December 2000, a subsidiary of the Company with EDF International S.A.
("EDF") completed the acquisition of an additional 3.5% interest in Light from
two subsidiaries of Reliant Energy for approximately $136 million. Pursuant to
the acquisition, the Company acquired 30% of the shares while EDF acquired the
remainder. With the completion of this transaction, the Company owns
approximately 21.14% of Light.
In December 2000, a subsidiary of the Company entered into an agreement
with EDF to jointly acquire an additional 9.2% interest in Light, which is held
by a subsidiary of Companhia Siderurgica Nacional ("CSN"). Pursuant to this
transaction, the Company acquired an additional 2.75% interest in Light for
$114.6 million. This transaction closed in January 2001.
Following the purchase of the Light shares previously owned by CSN, AES
and EDF will together be the controlling shareholders of Light and Eletropaulo.
AES and EDF have agreed that AES will eventually take operational control of
Eletropaulo and the telecom businesses of Light and Eletropaulo, while EDF will
eventually take operational control of Light and Eletropaulo's electric
workshop business. AES and EDF intend to continue to pursue a further
rationalization of their ownership stakes in Light and Eletropaulo, the result
of which AES would become the sole controlling shareholder of Eletropaulo and
EDF would become the sole controlling shareholder of Light. Upon consummation
of the transaction, AES will begin consolidating Eletropaulo's operating
results. The structure and process by which this rationalization may be
effected, and the resulting timing, have yet to be determined and will likely
be subject to approval by various Brazilian regulatory authorities and other
third parties. As a result, there can be no assurance that this rationalization
will take place.
In May 1999, a subsidiary of the Company acquired subscription rights from
the Brazilian state-controlled Eletrobras, which allowed it to purchase
preferred, non-voting shares in Light and Eletropaulo. The aggregate purchase
price of the subscription rights and the underlying shares in Light and
Eletropaulo was approximately $53 million and $77 million, respectively, and
represented 3.7% and 4.4% economic ownership interest in their capital stock,
respectively.
The following table presents summarized financial information (in
millions) for the Company's investments in 50% or less owned investments
accounted for using the equity method:
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2000 1999 1998
-------------------------------------------- --------- --------- ---------
Revenues .................................. $ 6,241 $ 5,960 $ 8,091
Operating Income .......................... 1,989 1,839 2,079
Net Income ................................ 859 62 1,146
Current Assets ............................ 2,423 2,259 2,712
Noncurrent Assets ......................... 13,080 15,359 19,025
Current Liabilities ....................... 3,370 3,637 4,809
Noncurrent Liabilities .................... 5,927 7,536 7,356
Stockholder's Equity ...................... 6,206 6,445 9,572
A-2-16
Relevant equity ownership percentages for these investments are presented
below:
AFFILIATE COUNTRY 2000 1999 1998
------------------------------- ---------------- ----------- ----------- -----------
CEMIG ........................ Brazil 21.62% 21.62% 21.62%
Elsta ........................ Netherlands 50.00 50.00 50.00
Kingston ..................... Canada 50.00 50.00 50.00
Light ........................ Brazil 21.14 17.68 13.75
Eletropaulo .................. Brazil 49.60 9.90 4.10
Medway Power, Ltd ............ United Kingdom 25.00 25.00 25.00
Nigen ........................ United Kingdom - 46.17 46.51
Northern/AES Energy .......... United States - 50.00 45.37
OPGC ......................... India 49.00 49.00 n/a
Chigen Affiliates ............ China 30.00 30.00 30.00
Songas Limited ............... Tanzania 49.00 n/a n/a
In 2000 and 1999, the results of operations and the financial position of
the Brazilian affiliates, Light, Eletropaulo and CEMIG, were negatively
impacted by the devaluation of the Brazilian Real.
The Company's after tax share of undistributed earnings of affiliates
included in consolidated retained earnings was $370 million, $96 million, and
$139 million at December 31, 2000, 1999 and 1998, respectively. The Company
charged and recognized construction revenues, management fee and interest on
advances to its affiliates which aggregated $11 million, $21 million, and $19
million for each of the years ended December 31, 2000, 1999, and 1998,
respectively.
5. INVESTMENTS
The short-term investments and debt service reserves and other deposits
were invested as follows (in millions):
DECEMBER 31,
-------------------
2000 1999
--------- -------
RESTRICTED CASH AND CASH EQUIVALENTS (1) ............... $1,718 $384
------ ----
HELD-TO-MATURITY:
U.S. treasury and government agency securities ......... -- 12
Certificates of deposit ................................ 86 --
Commercial paper ....................................... 7 91
------ ----
Subtotal ............................................... 93 103
------ ----
AVAILABLE-FOR-SALE:
Equity securities ...................................... -- 175
Certificates of deposit ................................ 1 --
Commercial paper ....................................... -- 5
------ ----
Subtotal ............................................... 1 180
------ ----
TRADING:
Equity securities ...................................... 2 --
------ ----
TOTAL .................................................. $1,814 $667
====== ====
----------
(1) Amounts required to be maintained in cash in accordance with certain
covenants of various project financing agreements and lease contracts.
Restricted cash at December 31, 2000, also includes certain cash
deposited in escrow for pending acquisitions (See Note 2).
A-2-17
The Company's investments are classified as held-to-maturity,
available-for-sale or trading. The amortized cost and estimated fair value of
the held-to-maturity and available-for-sale investments (other than the equity
securities discussed below) were approximately the same. The trading
investments are recorded at fair value.
Short-term investments classified as held-to-maturity and
available-for-sale were $93 million and $1 million, respectively, at December
31, 2000, and short-term investments classified as held-to-maturity and
available for-sale were $75 million and $180 million, respectively, at December
31, 1999. Short-term investments classified as trading were $2 million and $0,
respectively, at December 31, 2000 and 1999. Also included in short-term
investments at December 31, 2000 and 1999 was restricted cash of approximately
$1.2 billion and $84 million, respectively.
During 1999, a subsidiary of the Company recorded directly to
shareholders' equity an unrealized after-tax gain of approximately $107 million
resulting from its investment in Internet Capital Group, Inc. ("ICGE"), an
internet holding company, which went public in August 1999. The gross
unrealized gain on these available-for-sale securities was $174 million and the
related taxes were approximately $67 million. The cost basis and the market
value for the investment were approximately $1 million and $175 million
respectively, at December 31, 1999 (1 million shares). In 2000, a subsidiary of
the Company sold approximately one million shares of ICGE resulting in a
realized gain of approximately $112 million. The after-tax proceeds from these
sales were applied primarily to the reduction of the Company's outstanding
unsecured debt. During 2000, unrealized losses of approximately $62 million
($38 million after-tax) were recorded to reflect the decrease in market price
for the unsold shares.
6. LONG-TERM DEBT
Non-recourse Debt-Non-recourse debt at December 31, 2000, and 1999
consisted of the following (in millions):
DECEMBER 31,
INTEREST FINAL -----------------------
RATE(1) MATURITY 2000 1999
---------- --------- ----------- ---------
VARIABLE RATE:
Bank loans ...................................... 9.70% 2022 $ 7,037 $ 5,099
Commercial paper ................................ 8.89 2008 637 812
Debt to (or guaranteed by) multilateral or export
credit agencies ................................ 7.37 2018 649 564
Other ........................................... 14.34 2030 837 865
FIXED RATE:
Bank loans ...................................... 5.00 2025 2,003 1,176
Notes and bonds ................................. 9.46 2029 3,994 1,823
Debt to (or guaranteed by) multilateral or export
credit agencies ................................ 5.76 2007 164 128
Other ........................................... 8.92 2003 13 45
-------- -------
SUBTOTAL ........................................ 15,334 10,512
Less: Current maturities ........................ (2,471) (991)
-------- -------
TOTAL ........................................... $ 12,863 $ 9,521
======== =======
----------
(1) Weighted average interest rate at December 31, 2000.
Non-recourse debt borrowings are primarily collateralized by the capital
stock of the relevant subsidiary and in certain cases the physical assets of,
and all significant agreements associated with, such business. Such debt is not
a direct obligation of the AES parent corporation. These non-recourse
financings include structured project financings, acquisition financings,
working capital facilities and all other consolidated debt of the subsidiaries.
The Company has issued shares of common stock to consolidated subsidiaries as
collateral under various borrowing arrangement (see Note 10).
A-2-18
The Company has interest rate swap and forward interest rate swap
agreements in an aggregate notional principal amount of $2.5 billion at
December 31, 2000. The swap agreements effectively change the variable interest
rates on the portion of the debt covered by the notional amounts to weighted
average fixed rates ranging from approximately 5.21% to 9.90%. The agreements
expire at various dates from 2001 through 2023. In the event of nonperformance
by the counterparties, the Company may be exposed to increased interest rates;
however, the Company does not anticipate nonperformance by the counterparties,
which are multinational financial institutions.
Certain commercial paper borrowings of subsidiaries are supported by
letters of credit or lines of credit issued by various financial institutions.
In the event of nonperformance or credit deterioration of the institutions, the
Company may be exposed to the risk of higher effective interest rates. The
Company does not believe that such nonperformance or credit deterioration is
likely.
Recourse Debt-Recourse debt obligations are direct borrowings of the AES
parent corporation and at December 31, 2000 and 1999, consisted of the
following (in millions):
INTEREST FINAL FIRST CALL
RATE MATURITY DATE 2000 1999
---------- ---------- ----------- ----------- -----------
Corporate revolving bank loan ................. 8.70% 2003 2000 $ 140 $ 335
Senior notes .................................. 8.75% 2002 -- 300 --
Senior notes .................................. 8.00% 2008 2000 200 200
Senior notes .................................. 9.50% 2009 -- 750 750
Senior notes .................................. 9.38% 2010 -- 850 --
Senior subordinated notes ..................... 10.25% 2006 2001 250 250
Senior subordinated notes ..................... 8.38% 2007 2002 325 325
Senior subordinated notes ..................... 8.50% 2007 2002 375 375
Senior subordinated debentures ................ 8.88% 2027 2004 125 125
Convertible junior subordinated notes ......... 4.50% 2005 2001 150 150
Unamortized discounts ......................... (7) (8)
-------- --------
SUBTOTAL ...................................... 3,458 2,502
Less: Current maturities ...................... -- (335)
------- -------
Total ......................................... $3,458 $2,167
======= =======
In March 2000, the Company entered into an $850 million revolving credit
agreement with a syndicate of banks, which provides for a combination of either
loans or letters of credit up to the maximum borrowing capacity. Loans under
the facility bear interest at either Prime plus a spread of 0.50% or LIBOR plus
a spread of 2%. Such spreads are subject to adjustment based on the Company's
credit ratings and the term remaining to maturity. This facility replaced the
Company's then existing separate $600 million revolving credit facility and
$250 million letter of credit facilities. As of December 31, 2000, $365 million
was available.
In December 2000, the Company obtained a $600 million bank commitment with
the same terms as the $850 million revolving credit agreement. There were no
amounts outstanding under this facility at December 31, 2000. The facility was
terminated upon issuance of Senior Notes in February 2001 (see Note 20).
Commitment fees on both facilities at December 31, 2000 are .50% per
annum. The Company's recourse debt borrowings are unsecured obligations of the
Company.
A-2-19
Future Maturities of Debt-Scheduled maturities of total debt at December
31, 2000, are (in millions):
2001 .................... $ 2,471
2002 .................... 2,824
2003 .................... 1,563
2004 .................... 899
2005 .................... 890
Thereafter .............. 10,145
-------
Total ................... $18,792
=======
Covenants--The terms of the Company's revolving bank loan, senior and
junior subordinated notes, and non-recourse debt agreements contain certain
restrictive covenants. The covenants provide for, among other items,
maintenance of certain reserves, and require that minimum levels of working
capital, net worth, and certain financial ratio tests are met. The most
restrictive of these covenants include limitations on incurring additional debt
and on the payment of dividends to stockholders.
As of December 31, 2000, approximately $486 million of restricted cash was
maintained in accordance with certain covenants of the debt agreements, and
these amounts were included within short-term investments and debt service
reserves and other deposits in the consolidated balance sheet.
Various lender and governmental provisions restrict the ability of the
Company's subsidiaries to transfer retained earnings to the parent company.
Such restricted retained earnings amounted to approximately $5 billion at
December 31, 2000.
7. COMMITMENTS, CONTINGENCIES AND RISKS
Operating Leases--As of December 31, 2000, the Company was obligated under
long-term non-cancelable operating leases, primarily for office rental and site
leases. Rental expense for operating leases, excluding amounts related to the
sale/leaseback discussed below, was $13 million, $7 million, and $4 million in
the years ended December 31, 2000, 1999 and 1998, respectively. The future
minimum lease commitments under these leases are $13 million for 2001, $8
million for 2002, $7 million for 2003, $6 million for 2004, $6 million for
2005, and a total of $66 million for the years thereafter.
Sale/Leaseback--In May 1999, a subsidiary of the Company acquired six
electric generating stations from NYSEG (See Note 3). Concurrently, the
subsidiary sold two of the plants to an unrelated third party for $650 million
and simultaneously entered into a leasing arrangement with the unrelated party.
This transaction has been accounted for as a sale/leaseback with operating
lease treatment. Rental expense was $54 million and $26 million in 2000 and
1999, respectively. Future minimum lease commitments are $58 million for 2001,
$63 million for 2002, $58 million for 2003, $63 million for 2004, $59 million
for 2005 and a total of $1.4 billion for the years thereafter.
In connection with the lease of the two power plants, the subsidiary is
required to maintain a rent reserve account equal to the maximum semi-annual
payment with respect to the sum of the basic rent and fixed charges expected to
become due in the immediately succeeding three-year period. At December 31,
2000 and 1999, the amount deposited in the rent reserve account approximated
$31 million and $30 million, respectively. This amount is included in
restricted cash and can only be utilized to satisfy lease obligations.
The agreements governing the leases restrict the subsidiary's ability to
incur additional indebtedness, sell its assets or merge with another entity.
The ability of the subsidiary to make distributions is restricted unless
certain covenants, including the maintenance of certain coverage ratios, are
met. The subsidiary is also required to maintain an additional liquidity
account initially equal to $65 million less the balance of the rent reserve
account. A letter of credit from a bank for $36 million has been obtained to
satisfy this requirement.
Contracts--Operating subsidiaries of the Company have entered into
"take-or-pay" contracts for the purchase of electricity from third parties.
Purchases in 2000 were approximately $189 million. The future
A-2-20
commitments under these contracts are $244 million for 2001, $226 million for
2002, $205 million for 2003, $167 million for 2004, $144 million for 2005 and a
total of $840 million for the years thereafter.
Operating subsidiaries of the Company have entered into various long-term
contracts for the purchase of fuel subject to termination only in certain
limited circumstances. Purchases in 2000 were approximately $689 million. The
future commitments under contracts are $782 million for 2001, $490 million for
2002, $642 million for 2003, $580 million for 2004, $460 million for 2005, and
$2.1 billion thereafter.
In connection with the acquisition of the assets of Ecogen in May 1999, a
subsidiary of the Company assumed contingent liabilities related to the plants'
performance. If plant availability and contract performance specifications are
not met, then a subsidiary of the Company may be required to make payments of
up to $141 million to a third party under the terms of an electricity price
hedge agreement.
Several of the Company's power plants rely on power sales contracts with
one or a limited number of entities for the majority of, and in some cases all
of, the relevant plant's output over the term of the power sales contract. The
remaining term of power sales contracts related to the Company's power plants
range from 5 to 29 years. However, the operations of such plants are dependent
on the continued performance by customers and suppliers of their obligations
under the relevant power sales contract, and, in particular, on the credit
quality of the purchasers. If a substantial portion of the Company's long-term
power sales contract were modified or terminated, the Company would be
adversely affected to the extent that it was unable to find other customers at
the same level of contract profitability. Some of the Company's long-term power
sales agreements are for prices above current spot market prices. The loss of
one or more significant power sales contracts or the failure by any of the
parties to a power sales contract to fulfill its obligations thereunder could
have a material adverse impact on the Company's business, results of operations
and financial condition.
During 2000, the wholesale electricity market in California experienced a
significant imbalance in the supply of, and demand for electricity, which
resulted in significant electricity price increases and volatility.
California's two largest utilities are required to purchase wholesale power and
to sell it at fixed prices to retail end users. Because the cost of wholesale
power has exceeded the price the utilities can charge their retail customers,
these utilities are facing severe financial difficulties. There can be no
assurances that such utilities can, or will choose to, honor their financial
commitments. In the event that such utilities become insolvent or otherwise
choose not to honor their commitments, creditors (including certain of the
Company's subsidiaries) may seek to exercise whatever remedies may be
available, including, among other things, placing the utilities into
involuntary bankruptcy. There can be no assurances that amounts owing directly
or indirectly from such utilities will be recovered. In addition, the
California Independent System Operator has sought a Temporary Restraining Order
over some of the generators, including AES subsidiaries, arguing that, in times
of declared emergencies, generators are required to continue to provide
electricity to the market even if there is no credit-worthy purchaser for the
electricity. The bulk of the Company's revenues in California are not subject
to this credit risk, because they are generated under the tolling agreement
entered into by AES Southland. But the Company's other subsidiaries have some
exposure to this risk. At December 31, 2000 the Company had receivables of
approximately $27 million that are subject to this credit risk. In addition,
because these utilities have defaulted on amounts due in the state sanctioned
markets, the markets have sought to recover those amounts pro rata from other
market participants, including certain of the Company's subsidiaries.
Environmental--As of December 31, 2000, the Company has recorded
cumulative liabilities associated with acquired generation plants of
approximately $37 million for projected environmental remediation costs. During
2000, the Company incurred a $17 million environmental fine and will be
required to incur capital expenditures related to excess nitrogen oxide air
emissions at certain of its generating facilities in California.
In May 2000, the New York State Department of Environmental Conservation
("DEC") issued a Notice of Violation ("NOV") to NYSEG for violations of the
Federal Clean Air Act and the New York Environmental Conservation Law at the
Greenidge and Westover plants related to NYSEG's alleged failure to undergo an
air permitting review prior to making repairs and improvements during the 1980s
A-2-21
and 1990s. Pursuant to the agreement relating to the acquisition of the plants
from NYSEG, AES Eastern Energy agreed with NYSEG that AES Eastern Energy will
assume responsibility for the NOV, subject to a reservation of AES Eastern
Energy's right to assert any applicable exception to its contractual
undertaking to assume pre-existing environmental liabilities. The Company
believes it has meritorious defenses to any actions asserted against it and
expects to vigorously defend itself against the allegations; however, the NOV
issued by the DEC, and any additional enforcement actions that might be brought
by the New York State Attorney General, the DEC or the U.S. Environmental
Protection Agency ("EPA"), against the Somerset, Cayuga, Greenidge or Westover
plants, might result in the imposition of penalties and might require further
emission reductions at those plants.
The EPA has commenced an industry-wide investigation of coal-fired
electric power generators to determine compliance with environmental
requirements under the Federal Clean Air Act associated with repairs,
maintenance, modifications and operational changes made to the facilities over
the years. The EPA's focus is on whether the changes were subject to new source
review or new performance standards, and whether best available control
technology was or should have been used. On August 4, 1999, the EPA issued a
NOV to the Company's Beaver Valley plant, generally alleging that the facility
failed to obtain the necessary permits in connection with certain changes made
to the facility in the mid-to-late 1980s. The Company believes it has
meritorious defenses to any actions asserted against it and expects to
vigorously defend itself against the allegations.
The Company's generating plants are subject to emission regulations. The
regulations may result in increased operating costs or the purchase of
additional pollution control equipment if emission levels are exceeded.
The Company reviews its obligations as it relates to compliance with
environmental laws, including site restoration and remediation. Because of the
uncertainties associated with environmental assessment and remediation
activities, future costs of compliance or remediation could be higher or lower
than the amount currently accrued. Based on currently available information,
the Company does not believe that any costs incurred in excess of those
currently accrued will have a material effect on the financial condition and
results of operations of the Company.
Derivatives--Certain subsidiaries and an affiliate of the Company enter
into interest rate, foreign currency, electricity and gas derivative contracts
with various counterparties, and as a result, the Company is exposed to the
risk of nonperformance by it's counterparties. The Company does not anticipate
nonperformance by the counterparties.
The Company is exposed to market risks on derivative contracts and on
other unmatched commitments to purchase and sell energy on a price and quantity
basis. Such market risks are monitored to limit the Company's exposure.
Guarantees--In connection with certain of its project financing,
acquisition, and power purchase agreements, AES has expressly undertaken
limited obligations and commitments, most of which will only be effective or
will be terminated upon the occurrence of future events. These obligations and
commitments, excluding those collateralized by letter-of-credit obligations
discussed below, were limited as of December 31, 2000, by the terms of the
agreements, to an aggregate of approximately $659 million. The Company is also
obligated under other commitments, which are limited to amounts, or percentages
of amounts, received by AES as distributions from its project subsidiaries.
These amounts aggregated $71 million as of December 31, 2000. In addition, the
Company has commitments to fund its equity in projects currently under
development or in construction. At December 31, 2000, such commitments to
invest amounted to approximately $111 million.
Letters of Credit--At December 31, 2000, the Company had $603 million in
letters of credit outstanding, which operate to guarantee performance relating
to certain project development activities and subsidiary operations. The
Company pays a letter-of-credit fee ranging from 0.50% to 2.0% per annum on the
outstanding amounts. In addition, the Company had $134 million and a subsidiary
of the Company had $220 million in surety bonds outstanding at December 31,
2000.
A-2-22
Litigation--In September 1999, an appellate judge in the Minas Gerais,
Brazil state court system granted a temporary injunction that suspends the
effectiveness of a shareholders' agreement for CEMIG. This appellate ruling
suspends the shareholders' agreement while the action to determine the validity
of the shareholders' agreement is litigated in the lower court. In early
November 1999, the same appellate court judge reversed this decision and
reinstated the effectiveness of the shareholders' agreement, but did not
restore the super majority voting rights that benefited the Company. In March
2000, a state court in Minas Gerais again ruled that the shareholders'
agreement was invalid. The Company has appealed this decision. AES must exhaust
all state-level appeals before the matter is heard before the Brazilian federal
court. The Company intends to vigorously pursue its legal rights in this matter
and to restore all of its rights regarding CEMIG, and does not anticipate that
this temporary suspension of the shareholders' agreement will have a
significant effect on its financial condition or results of operations. Failure
to prevail in this matter would limit the Company's influence on the daily
operations of CEMIG. However, the Company would still own approximately 21.6%
of the voting common stock of CEMIG.
In November 2000, the Company was named in a purported class action suit
along with six other defendants alleging unlawful manipulation of the
California wholesale electricity market, resulting in inflated wholesale
electricity prices throughout California. Alleged causes of action include
violation of the Cartwright Act, the California Unfair Trade Practices Act and
the California Consumers Legal Remedies Act. In December 2000, the case was
removed from the San Diego County Superior Court to the U.S. District Court for
the Southern District of California. The Company believes it has meritorious
defenses to any actions asserted against it and expects that it will defend
itself vigorously against the allegations.
In addition, the crisis in the California wholesale power markets has
directly or indirectly resulted in several administrative and legal actions
involving the Company's businesses in California. Each of the Company's
businesses in California (AES Southland, AES Placerita and AES New Energy) are
subject to overlapping state investigations by the California Attorney
General's Office, the Market Oversight and Monitoring Committee of the
California Independent System Operator ("ISO"), and the California Public
Utility Commission. Each of these investigations are currently in the document
gathering stage, and the businesses have responded to multiple requests for the
production of documents and data surrounding the operation and bidding behavior
of the plants.
In August 2000, the Federal Energy Regulatory Commission ("FERC")
announced an investigation into the national wholesale power markets, with
particular emphasis upon the California wholesale electricity market, in order
to determine whether there has been anti-competitive activity by wholesale
generators and marketers of electricity. The FERC has requested documents from
each of the AES Southland plants. Similar to the state investigation, the FERC
investigation has focused their attention to date upon the forced and planned
maintenance outages taken by the plants in 2000.
AES Drax Power Ltd. ("AES Drax") is currently in arbitration proceedings
involving a financial hedge agreement entered into with a subsidiary of Texas
Utilities, Inc. ("TXU"), in which TXU pays to AES Drax capacity and variable
payments and in turn receives the Pool Purchase Price in respect of the volume
of MWs that they request to be delivered. The Pool was replaced by the New
Energy Trading Arrangements ("NETA"), and therefore the Pool Purchase Price no
longer exists. AES believes that the hedging agreement contemplated this
transition by providing a mechanism for converting the agreement so that it can
function for its full 15-year term. TXU disagrees with this position. In
December 2000, AES Drax commenced an arbitration seeking an Expert
Determination regarding what changes to the agreement must be made to reflect
the introduction of NETA. AES believes that the expert panel is empowered to
determine such changes, and only such changes, to preserve the commercial
intent of the agreement (which is defined in the agreement), but TXU has
requested the panel to terminate the hedging agreement. The Company believes
that it has meritorious defenses, and it expects to vigorously pursue its
interests. AES Drax and TXU suspended the arbitration and negotiated mutually
acceptable changes to the hedging agreement. AES Drax was required to obtain
the approval of its project lenders for such an amendment. AES Drax has
obtained the approval of the project lenders and rating agencies for the
amendment.
A-2-23
Risks Related to Regulated and Foreign Operations--AES operates businesses
in many regulated and foreign environments. There are certain economic,
political, technological and regulatory risks associated with operating in
these environments. Investments in foreign countries may be impacted by
significant fluctuations in foreign currency exchange rates. During 2000 and
1999, the Company's financial position and results of operations were adversely
affected by a significant devaluation of the Brazilian Real relative to the
U.S. Dollar.
The distribution businesses, which the Company owns or has investments in
are subject to regulatory review or approval which could limit electricity
tariff rates charged to customers or require the return of amounts previously
collected. These regulatory environments are also subject to change, which
could impact the results of operations.
In certain locations, particularly developing countries or countries that
are in a transition from centrally planned to market-oriented economies, the
electricity purchasers, both wholesale and retail, may be unable or unwilling
to honor their payment obligations. Collection of receivables may be hindered
in these countries due to ineffective systems for adjudicating contract
disputes.
In June 1999, a subsidiary of the Company assumed long-term managerial and
voting control of two regional electric distribution companies ("RECs") in
Kazakhstan as part of a settlement of receivables outstanding from the
government of Kazakhstan. The Company's claim against the government was for
electricity previously provided. The contractual rights to control the
operations of the RECs received in this transaction were valued at
approximately $26 million, based on the net present value of incremental cash
flows expected to be received as a result of operating the RECs. The value of
the contract rights was recorded in the statement of operations in 1999. The
two distribution businesses serve approximately 1.8 million people. The Company
expects that the government of Kazakhstan will abide by the terms and periods
agreed to in the original memorandum of understanding that currently governs
the Company's operating control of the RECs. However, the contract is subject
to economic, political and regulatory risks associated with operating in
Kazakhstan. The Company does not consolidate the RECs because it operates them
under a management agreement and does not have a controlling ownership interest
in them.
Leveraged Lease Investments--One of the Company's subsidiaries has
investments in leveraged leases totaling $141 million. Related deferred tax
liabilities total $106 million. The investment includes estimated residual
values totaling $88 million. Leveraged lease residual value assumptions are
adjusted on a periodic basis, based on independent appraisals.
Sale of Accounts Receivable--A subsidiary of the Company has sold, on a
revolving basis, an undivided interest in $50 million of its accounts
receivable.
8. COMPANY-OBLIGATED CONVERTIBLE MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUSTS
During 1997, two wholly owned special purpose business trusts (AES Trust I
and AES Trust II) issued Term Convertible Preferred Securities ("Tecons"). On
March 31, 1997, AES Trust I issued 5 million of $2.6875 Tecons (liquidation
value $50) for total proceeds of $250 million and concurrently purchased $250
million of 5.375% junior subordinated convertible debentures due 2027 of AES
(individually the 5.375% Debentures). On October 29, 1997, AES Trust II issued
6 million of $2.75 Tecons (liquidation value $50) for total proceeds of $300
million and concurrently purchased $300 million of 5.5% junior subordinated
convertible debentures due 2012 of AES (individually the 5.5% Debentures).
During 2000, the Company called for redemption of AES Trust I and AES Trust II.
Substantially all of AES Trust I Tecons were converted into approximately 14
million shares of AES common stock and substantially all of AES Trust II Tecons
were converted into approximately 11 million shares of AES common stock.
During 1999, AES Trust III, a wholly owned special purpose business trust,
issued 9 million of $3.375 Tecons (liquidation value $50) for total proceeds of
approximately $518 million and concurrently purchased approximately $518
million of 6.75% junior subordinated convertible debentures due 2029
(individually, the 6.75% Debentures).
A-2-24
During 2000, AES Trust VII, a wholly owned special purpose business trust,
issued 9.2 million of $3.00 Tecons (liquidation value $50) for total proceeds
of approximately $460 million and concurrently purchased approximately $460
million of 6% junior subordinated convertible debentures due 2008
(individually, the 6% Debentures and collectively with the 6.75% Debentures,
the Junior Subordinated Debentures). The sole assets of AES Trust III and VII
(collectively, the Tecon Trusts) are the Junior Subordinated Debentures.
AES, at its option, can redeem the 6.75% Debentures after October 17,
2002, which would result in the required redemption of the Tecons issued by AES
Trust III, for $52.10 per Tecon, reduced annually by $0.422 to a minimum of $50
per Tecon, and can redeem the 6% Debentures after May 18, 2003, which would
result in the required redemption of the Tecons issued by AES Trust VII, for
$51.88 per Tecons, reduced annually by $0.375 to a minimum of $50 per Tecon.
The Tecons must be redeemed upon maturity of the Junior Subordinated
Debentures.
The Tecons are convertible into the common stock of AES at each holder's
option prior to October 15, 2029 for AES Trust III and May 14, 2008 for AES
Trust VII at the rate of 1.4216 and 1.0811, respectively, representing a
conversion price of $35.171 and $46.25 per share, respectively.
On November 30, 1999, three wholly owned special purpose business trusts
(individually, AES RHINOS Trust I, II, and III, collectively, the Rhinos Trusts
and with the Tecon Trusts, collectively the Trusts) issued trust preferred
securities ("Rhinos"). The aggregate amount of Rhinos issued was approximately
$250 million. Concurrent with the issuance of the Rhinos, the Rhinos Trusts
purchased approximately $258 million of junior subordinated convertible notes
due 2007. The Rhinos Trusts may be dissolved and the notes distributed to the
holders of the Rhinos at any time at the Company's option. The obligations of
the Trusts are fully and unconditionally guaranteed by AES.
Under the terms of a remarketing agreement, the initial purchaser of the
Rhinos has the right to cause a remarketing of the Rhinos if they remain
outstanding on November 30, 2002, or if certain other conditions are met.
In connection with the issuance of the Rhinos and related notes, the
Company has entered into a forward underwriting agreement for the future
placement of approximately $250 million of the Company's common stock,
preferred stock, notes or trust preferred securities.
Prior to a successful remarketing, the Rhinos are redeemable at par in
whole at any time or in part from the proceeds of a qualifying offering under
the forward underwriting commitment. The holder can require redemption only at
maturity (November 15, 2007).
Prior to February 28, 2003, the Rhinos are not convertible. On and after
February 28, 2003, the Rhinos are convertible at any time at the option of the
holder into the common stock of AES. The conversion price of the Rhinos depends
on whether or not the Trusts have completed a successful remarketing of the
Rhinos. Prior to a successful remarketing, the conversion price is equal to the
then current market price of the Company's common stock. After a successful
remarketing, the conversion price will be equal to the price specified in the
winning remarketing bid which cannot be less than the current market price of
AES common stock at the time of remarketing.
Dividends on the Tecons and Rhinos are payable quarterly at an annual rate
of 6.75% by AES Trust III, 6% by AES Trust VII and LIBOR plus 2.50% by the
Rhinos Trusts. Dividend rates for the Rhinos are subject to increase upon a
failed remarketing of the Rhinos. The Trusts are each permitted to defer
payment of dividends for up to 20 consecutive quarters, provided that the
Company has exercised its right to defer interest payments under the
corresponding debentures or notes. During such deferral periods, dividends on
the Tecons and Rhinos will accumulate quarterly and accrue interest and the
Company may not declare or pay dividends on its common stock.
Interest expense for each of the years ended December 31, 2000, 1999 and
1998, includes approximately $71 million, $38 million and $31 million for 2000,
1999 and 1998, respectively, related to the Tecon Trusts and approximately $21
million and $2 million for 2000 and 1999, respectively, related to the Rhinos
Trusts.
A-2-25
9. MINORITY INTEREST
Minority interest includes $100 million and $125 million of cumulative
preferred stock of subsidiaries at December 31, 2000 and 1999, respectively.
During 1998 a subsidiary of the Company issued $50 million of its 5.65%
non-redeemable, cumulative preferred stock. In 2000 a subsidiary of the Company
retired $25 million of its cumulative preferred stock at par value. The total
annual dividend requirement was approximately $5 million at December 31, 2000.
$22 million of the preferred stock is subject to mandatory redemption
requirements over the period 2003-2008. Except for the series of preferred
stock subject to mandatory redemption discussed above, each series of preferred
stock is redeemable solely at the option of the issuer at prices between $101
and $118 per share.
10. STOCKHOLDERS' EQUITY
Sale of Stock--In May 2000, the Company sold 24.725 million shares of
common stock at $37.00 per share. Net proceeds from the offering were $886
million. In November 2000, the Company sold 10 million shares of common stock
at $52.50 per share. Net proceeds from the offering were $520 million.
Stock Split and Stock Dividend--On April 17, 2000, the Board of Directors
authorized a two-for-one stock split, effected in the form of a stock dividend,
payable to stockholders of record on May 1, 2000. Accordingly, all outstanding
share, per share and stock option data in all periods presented have been
restated to reflect the stock split.
Shares Issued for Acquisitions--During December 2000, the Company issued
approximately 949,000 shares, valued at $51 million to fund the acquisition of
KMR. Also, during 2000, the Company issued approximately 343,000 shares, valued
at $16 million in various other acquisitions.
Restricted Stock--The Company issued restricted stock under various
incentive stock option plans. Generally, under each plan, shares of restricted
common stock with value equal to a stated percentage of participants' base
salary are initially awarded at the beginning of a three-year performance
period, subject to adjustment to reflect the participants' actual base salary.
The shares remain restricted and nontransferable throughout each three-year
performance period, vesting in one-third increments in each of the three years
following the end of the performance period. At the end of a performance
period, awards are subject to adjustment to reflect the Company's performance
compared to peer companies. Final awards under the plans can range from zero up
to 400% of the initial awards. Vested shares are no longer restricted and may
be held or sold by the participant. Compensation expense of $8 million, $1
million and $5 million for 2000, 1999 and 1998, respectively, as measured by
the market value of the common stock at the balance sheet date, has been
recognized. As of December 31, 2000, approximately 111,000 shares of restricted
stock were outstanding.
In January 2001, the final performance evaluation was completed for one of
the restricted stocks plans resulting in final awards of an additional 199,000
shares with approximately 101,000 shares becoming fully vested. All shares of
restricted stock became fully vested on the date of merger with IPALCO.
Stock Options--The Company has granted options to purchase shares of
common stock under its stock option plans. Under the terms of the plans, the
Company may issue options to purchase shares of the Company's common stock at a
price equal to 100% of the market price at the date the option is granted. The
options become eligible for exercise under various schedules. At December 31,
2000, there were approximately 1.5 million shares reserved for future grants
under the plans.
A-2-26
A summary of the option activity follows (in thousands of shares):
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------
2000 1999 1998
------------------------- ------------------------- ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
----------- ----------- ----------- ----------- ----------- ----------
Outstanding -- beginning of
year .............................. 16,698 $ 10.72 17,065 $ 8.83 19,686 $ 8.95
Exercised during the year .......... (5,069) 14.11 (2,817) 7.45 (2,884) 11.57
Forfeited during the year .......... (129) 30.85 (14) 21.83 (20) 16.00
Granted during the year ............ 4,075 36.98 2,464 20.16 283 28.95
------ -------- ------ ------- ------ ------
Outstanding -- end of year ......... 15,575 $ 16.32 16,698 $ 10.72 17,065 $ 8.83
====== ======== ====== ======= ====== ======
Eligible for exercise -- end of
year .............................. 11,449 $ 10.51 14,086 $ 9.44 14,900 $ 8.30
====== ======== ====== ======= ====== ======
The following table summarizes information about stock options outstanding
at December 31, 2000 (in thousands of shares):
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ -----------------------
WEIGHTED- WEIGHTED- WEIGHTED
AVERAGE AVERAGE AVERAGE
RANGE OF TOTAL REMAINING LIFE EXERCISE TOTAL EXERCISE
EXERCISE PRICES OUTSTANDING (IN YEARS) PRICE EXERCISABLE PRICE
------------------------- ------------- ---------------- ----------- ------------- ---------
$0.78 -- $3.24........... 34 0.1 $ 1.61 34 $ 1.61
$3.25 -- $9.88........... 6,982 4.2 7.10 6,977 7.06
$9.89 -- $14.40.......... 2,038 5.6 12.51 2,034 12.52
$14.41 -- $22.85......... 3,144 7.5 17.90 2,211 18.21
$22.86 -- $58.00......... 3,368 9.0 36.34 193 26.99
$58.01 -- $80.00......... 9 9.7 62.16 -- --
----- --- ------- ----- -------
Total ................... 15,575 6.1 $ 16.32 11,449 $ 10.51
====== === ======= ====== =======
The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued
to Employees, and has adopted SFAS No. 123, Accounting for Stock-Based
Compensation, for disclosure purposes. No compensation expense has been
recognized in connection with the options, as all options have been granted
only to AES people, including Directors, with an exercise price equal to the
market price of the Company's common stock on the date of grant. For SFAS No.
123 disclosure purposes, the weighted average fair value of each option grant
has been estimated as of the date of grant primarily using the Black-Scholes
option pricing model with the following weighted average assumptions:
FOR THE YEARS ENDED
---------------------------------
2000 1999 1998
--------- --------- ---------
Interest rate (risk-free) ......... 5.4% 6.5% 5.1%
Volatility ........................ 41% 46% 33%
Dividend yield .................... 1% -- 1%
Using these assumptions, and an expected option life of approximately 7
years, the weighted average fair value of each stock option granted was $14.40,
$22.43 and $18.99, for the years ended December 31, 2000, 1999 and 1998,
respectively.
Had compensation expense been determined under the provisions of SFAS No.
123, utilizing the assumptions detailed in the preceding paragraph, the
Company's net income and earnings per share for the years ended December 31,
2000, 1999 and 1998 would have been reduced to the following pro forma amounts
(in millions except per share amounts):
A-2-27
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
---------- ---------- ----------
NET INCOME:
As reported ............... $ 796 $ 357 $ 441
Pro forma ................. 753 341 431
BASIC EARNINGS PER SHARE:
As reported ............... $ 1.65 $ 0.84 $ 1.11
Pro forma ................. 1.56 0.81 1.09
DILUTED EARNINGS PER SHARE:
As reported ............... $ 1.59 $ 0.82 $ 1.07
Pro forma ................. 1.50 0.79 1.05
The disclosures of such amounts and assumptions are not intended to
forecast any possible future appreciation of the Company's stock or change in
dividend policy.
As of December 31, 1999, the Company had warrants outstanding to purchase
up to 2.6 million shares of common stock at $7.36 a share. These warrants
expired in July 2000. Substantially all of the warrants were exercised prior to
expiration.
Common Stock Held by Subsidiaries--As of December 31, 2000, approximately
81 million shares of the Company's common stock had been issued to consolidated
subsidiaries. These shares were issued as collateral under various borrowing
agreements and are not considered outstanding. They have been excluded from the
calculation of earnings per share.
11. EARNINGS PER SHARE
The following table presents a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations for
income before extraordinary item. In the table below, Income represents the
numerator (in millions) and Shares represent the denominator (in millions):
DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------------ ------------------------------ ------------------------------
$ PER $ PER $ PER
INCOME SHARES SHARE INCOME SHARES SHARE INCOME SHARES SHARE
-------- ---------- ---------- -------- ---------- ---------- -------- ---------- ----------
BASIC EPS
Income before extraordinary
items ........................ $807 482.1 $ 1.67 $374 422.8 $ 0.88 $437 396.6 $ 1.10
EFFECT OF DILUTIVE SECURITIES:
Stock options and warrants .... -- 9.8 (0.03) -- 9.4 (0.02) -- 9.2 (0.02)
Stock units allocated to
deferred compensation plans... -- 0.5 -- -- 0.5 -- -- 0.5 --
Tecons and other convertible
debt, net of tax ............. 22 21.1 (0.03) -- -- -- 9 13.9 (0.02)
---- ----- ------- ---- ----- ------- ---- ----- -------
DILUTED EARNINGS PER SHARE .... $829 513.5 $ 1.61 $374 432.7 $ 0.86 $446 420.2 $ 1.06
==== ===== ======= ==== ===== ======= ==== ===== =======
12. BUYOUT AND BUYDOWN OF POWER SALES AGREEMENTS
In October 1999, AES Placerita Inc. ("Placerita"), a wholly owned
subsidiary of the Company, received proceeds of approximately $110 million to
complete the buyout of its long-term power sales agreement. In connection with
the buyout, the Company incurred transaction related costs of approximately $19
million and recorded a gain on contract buyout of $91 million. The buyout of
the power sales agreement resulted in the loss of a significant customer and
required the Company to assess the recoverability of the carrying amount of
Placerita's electric generation assets. The Company recorded an impairment loss
of approximately $62 million to reduce the carrying value of the electric
generation assets to their estimated fair value after termination of the
contract. The estimated fair value was determined by an independent appraisal.
Concurrent with the buyout of the power sales contract, the Company
A-2-28
extinguished certain liabilities under the related project financing debt prior
to their scheduled maturity. As a result, the Company has recorded an
extraordinary loss of approximately $11 million, net of income tax of
approximately $5 million.
In September 1999, AES Thames Inc. ("Thames"), a wholly owned subsidiary
of the Company, amended its power sales agreement with Connecticut Light and
Power ("CL&P"), its sole customer. The amendment, which was subject to
regulatory approval, includes a partial prepayment for certain electricity to
be delivered by Thames to CL&P in the years 2001-2014. According to the terms
of the amendment, the Company will receive $532 million plus accrued interest
in return for a reduction in future electricity rates. Interest accrues on the
prepayment at a rate of 8.3% per annum from the date of regulatory approval. In
March 2000, the Connecticut Department of Public Utility Control ("DPUC")
approved the amendment to the power sales agreement. In July 2000, CL&P
requested and subsequently received approval from the DPUC to issue bonds to
fund the prepayment. The contractual receivable is recorded in other current
assets with a corresponding amount of deferred revenue in other liabilities in
the accompanying December 31, 2000 balance sheet. The deferred revenue will be
amortized into income on a ratable basis over the contract term based on
kilowatt hours provided.
13. SALE OF ASSETS
On November 20, 2000, a subsidiary of the Company sold certain assets
("the Thermal Assets") for approximately $162 million. The transaction resulted
in a gain to the Company of approximately $31 million ($19 million after tax).
Of the net proceeds, $88 million was used to retire debt specifically
assignable to the Thermal Assets. The related notes were retired in November
2000. In connection with the retirement of the debt, the Company incurred
make-whole payments and wrote off debt issuance costs of approximately $4
million, which was recorded as an extraordinary loss in 2000.
14. INCOME TAXES
Income Tax Provision--The provision for income taxes consists of the
following (in millions):
FOR THE YEARS ENDED
---------------------------------
2000 1999 1998
---------- -------- ---------
Federal:
Current .......... $151 $ 70 $57
Deferred ......... (38) 45 59
State:
Current .......... 20 11 13
Deferred ......... (4) 14 (5)
Foreign:
Current .......... 208 98 82
Deferred ......... 29 (48) 14
------ ----- -----
Total ............ $366 $ 190 $220
====== ===== =====
The Company records its share of earnings of its equity investees on a
pre-tax basis. The Company's share of the investees' income taxes is recorded
in income tax expense.
Effective and Statutory Rate Reconciliation--A reconciliation of the U.S.
statutory Federal income tax rate to the Company's effective tax rate as a
percentage of income before taxes (after minority interest) is as follows:
A-2-29
FOR THE YEARS ENDED
---------------------------------
2000 1999 1998
--------- --------- ---------
Statutory Federal tax rate ...................... 35% 35% 35%
State taxes, net of Federal tax benefit ......... 1 4 1
Taxes on foreign earnings ....................... (3) (4) (1)
Other -- net .................................... (2) (1) (2)
---- ---- ----
Effective tax rate .............................. 31% 34% 33%
==== ==== ====
Deferred Income Taxes--Deferred income taxes reflect the net tax effects
of (a) temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income
tax purposes, and (b) operating loss and tax credit carryforwards. These items
are stated at the enacted tax rates that are expected to be in effect when
taxes are actually paid or recovered.
As of December 31, 2000, the Company had Federal net operating loss
carryforwards for tax purposes of approximately $192 million expiring from 2008
through 2020, Federal general business tax credit carryforwards for tax
purposes of approximately $51 million expiring in years 2001 through 2020, and
Federal alternative minimum tax credits of approximately $53 million that
carryforward without expiration. As of December 31, 2000, the Company had
foreign net operating loss carryforwards of approximately $740 million that
expire at various times beginning in 2001, and some of which carryforward
without expiration, and foreign investment and assets tax credits of
approximately $51 million that expire at various times beginning in 2001
through 2005. The Company had state net operating loss carryforwards as of
December 31, 2000, of approximately $374 million expiring in years 2000 through
2020, and state tax credit carryforwards of approximately $7 million expiring
in years 2001 through 2009.
The valuation allowance increased by $77 million during 2000 to $119
million on December 31, 2000. This increase was the result of certain foreign
net operating loss carryforwards and Federal and state tax credits, the
ultimate realization of which is not known at this time. The Company believes
that it is more likely than not that the remaining deferred tax assets as shown
below will be realized.
Deferred tax assets and liabilities are as follows (in millions):
DECEMBER 31,
---------------------
2000 1999
--------- ---------
Differences between book and tax basis of
property and total deferred tax liability ......... $2,562 $2,591
------ ------
Operating loss carryforwards ....................... (328) (180)
Bad debt and other book provisions ................. (104) (168)
Retirement costs ................................... (75) (33)
Tax credit carryforwards ........................... (162) (96)
Other deductible temporary differences ............. (316) (202)
------ ------
Total gross deferred tax asset ..................... (985) (679)
Less: Valuation allowance .......................... 119 42
------ ------
Total net deferred tax asset ....................... (866) (637)
------ ------
Net deferred tax liability ......................... $1,696 $1,954
====== ======
Undistributed earnings of certain foreign subsidiaries and affiliates
aggregated approximately $777 million at December 31, 2000. The Company
considers these earnings to be indefinitely reinvested outside of the United
States and, accordingly, no U.S. deferred taxes have been recorded with respect
to such earnings. Should the earnings be remitted as dividends, the Company may
be subject to additional U.S. taxes, net of allowable foreign tax credits. It
is not practicable to estimate the amount of any additional taxes which may be
payable on the undistributed earnings. A deferred tax asset of $155 million has
been recorded as of December 31, 2000 for the cumulative effects of certain
foreign currency translation losses.
A-2-30
Income from operations in certain countries is subject to reduced tax
rates as a result of satisfying specific commitments regarding employment and
capital investment. The reduced tax rates for these operations will be in
effect for the life of the related businesses, at the end of which ownership
transfers back to the local government. The income tax benefit related to the
tax status of these operations are estimated to be $29 million, $27 million and
$31 million for the year ended December 31, 2000, 1999 and 1998, respectively.
Income from continuing operations before income taxes and extraordinary
items consisted of the following:
FOR THE YEARS ENDED
----------------------------
2000 1999 1998
--------- ------ -------
U.S ............. $ 605 $372 $416
Non U.S ......... 568 192 241
------ ---- ----
Total ........... $1,173 $564 $657
====== ==== ====
15. BENEFIT PLANS
Profit Sharing and Stock Ownership Plans--The Company sponsors two profit
sharing and stock ownership plans, qualified under section 401 of the Internal
Revenue Code, which are available to eligible AES people. The plans provide for
Company matching contributions, other Company contributions at the discretion
of the Compensation Committee of the Board of Directors, and discretionary tax
deferred contributions from the participants. Participants are fully vested in
their own contributions and the Company's matching contributions. Participants
vest in other Company contributions over a five-year period ending on the 5th
anniversary of their hire date. Company contributions to the plans were
approximately $11 million, $7 million and $5 million for the years ended
December 31, 2000, 1999 and 1998.
Deferred Compensation Plans--The Company sponsors a deferred compensation
plan under which directors of the Company may elect to have a portion, or all,
of their compensation deferred. The amounts allocated to each participant's
deferred compensation account may be converted into common stock units. Upon
termination or death of a participant, the Company is required to distribute,
under various methods, cash or the number of shares of common stock accumulated
within the participant's deferred compensation account. Distribution of stock
is to be made from common stock held in treasury or from authorized but
previously unissued shares. The plan terminates and full distribution is
required to be made to all participants upon any change of control of the
Company (as defined in the plan document). No stock associated with
distributions was issued during 2000 under such plan.
In addition, the Company sponsors an executive officers' deferred
compensation plan. At the election of an executive officer, the Company will
establish an unfunded, nonqualified compensation arrangement for each officer
who chooses to terminate participation in the Company's profit sharing and
employee stock ownership plans. The participant may elect to forego payment of
any portion of his or her compensation and have an equal amount allocated to a
contribution account. In addition, the Company will credit the participant's
account with an amount equal to the Company's contributions (both matching and
profit sharing) that would have been made on such officer's behalf if he or she
had been a participant in the profit sharing plan. The participant may elect to
have all or a portion of the Company's contributions converted into stock
units. Dividends paid on common stock are allocated to the participant's
account in the form of stock units. The participant's account balances are
distributable upon termination of employment or death.
The Company also sponsors a supplemental retirement plan covering certain
highly compensated AES people. The plan provides incremental profit sharing and
matching contributions to participants that would have been paid to their
accounts in the Company's profit sharing plan if it were not for limitations
imposed by income tax regulations. All contributions to the plan are vested in
the manner provided in the Company's profit sharing plan, and once vested are
nonforfeitable. The participant's account balances are distributable upon
termination of employment or death.
A-2-31
Defined Benefit Plans--Certain of the Company's subsidiaries have defined
benefit pension plans covering substantially all of their respective employees.
Pension benefits are based on years of credited service, age of the participant
and average earnings.
Significant weighted average assumptions used in the calculation of
pension benefits expense and obligation are as follows:
PENSION
BENEFITS
--------------
YEARS ENDED DECEMBER 31, 2000 1999
------------------------ ------ -----
Discount rates ........................................... 8% 8%
Rates of compensation increase ........................... 3% 4%
Expected long-term rate of return on plan assets ......... 9% 9%
A subsidiary of the Company has a defined benefit plan, which has a
benefit obligation of $320 million and $261 million at December 31, 2000 and
1999, and uses salary bands to determine future benefit costs rather than rate
of compensation increases. As such, rates of compensation increase in the table
above do not include amounts relating to this specific defined benefit plan.
Total pension cost for the years ended December 31, 2000 and 1999 includes
the following components (in millions):
PENSION BENEFITS
----------------------
YEARS ENDED DECEMBER 31, 2000 1999
------------------------ ------ -----
Service cost .......................................... $14 $ 13
Interest cost on projected benefit obligation ......... 55 29
Expected return on plan assets ........................ 9 (16)
Amount of curtailment loss recognized ................. 6 --
VERP benefits ......................................... 57 --
Other ................................................. (3) (3)
------ -------
Total pension cost .................................... $138 $ 23
===== ======
The changes in the benefit obligation of the plans combined for the years
ended December 31, 2000 and 1999 are as follows (in millions):
PENSION BENEFITS
------------------
2000 1999
-------- -------
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year .......... $ 650 $ 357
Effect of foreign currency exchange rate change on
beginning balance ............................... (10) (21)
Service cost ..................................... 13 10
Interest cost .................................... 55 29
Assumed in acquisitions .......................... 71 317
VERP benefits .................................... 57 --
Benefits paid .................................... (48) (24)
Other ............................................ 22 (18)
----- -----
Benefit obligation as of December 31 ............. $ 810 $ 650
===== =====
A-2-32
The changes in the plan assets of the plans combined for the years ended
December 31, 2000 and 1999 are as follows (in millions):
PENSION BENEFITS
-----------------------
2000 1999
---------- ----------
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year ......... $714 $324
Effect of foreign currency exchange rate change on
beginning balance ..................................... (6) (9)
Actual return on plan assets ........................... 12 88
Assumed in acquisitions ................................ -- 326
Benefits paid .......................................... (48) (24)
Other .................................................. 13 9
------ ------
Fair value of plan assets as of December 31 ............ $685 $714
====== ======
The funded status of the plans combined for the years ended as of December
31, 2000 and 1999 are as follows (in millions):
PENSION BENEFITS
----------------------
2000 1999
---------- ---------
Funded status .................................. $ (125) $ 64
Unrecognized net actuarial gain ................ (84) (120)
Other .......................................... 3 7
------ ------
Accrued benefit cost as of December 31 ......... $ (206) $ (49)
====== ======
All of the Company's pension plans have been aggregated in the table
above. Certain of the Company's plans at December 31, 2000, had benefit
obligations exceeding the fair value of the related plan's assets. As of
December 31, 2000, the Company had plans with benefit obligations exceeding the
fair value of plan assets by approximately $165 million.
In November 2000, a subsidiary of the Company implemented a one-time
Voluntary Early Retirement Program ("VERP"). This program offers enhanced
retirement benefits upon early retirement to eligible employees. The VERP was
available to all employees, except officers, whose combined age and years of
service will total at least 75 on June 30, 2001. Participation was limited to,
and subsequently accepted by 400 qualified employees. Participants elected
actual retirement dates in 2001. Additionally, the post-retirement benefits
will be provided to VERP retirees until age 55 at which time they will be
eligible to receive benefits from the independent VEBA trustee. The subsidiary
recognized the $57 million pre-tax non-cash pension benefit costs of the VERP
in December 2000.
During 2000, a subsidiary of the Company curtailed one of its defined
benefit plans. In connection with the curtailment, the subsidiary paid
approximately $8 million and transferred approximately $145 million of plan
assets to an independent trustee.
16. SEGMENTS
The Company operates in two business segments: generation and
distribution. Generation consists of the operation of electric power plants and
sales of electricity to nonaffiliated wholesale customers for further resale to
end-users. Distribution consists of electricity sales to end-users. Generation
and distribution are strategic business areas pursued by the Company. Although
the nature of the product is the same, segments are differentiated by the
nature of the customers and the operational differences. Within the Company's
organizational structure, the business units within each segment are
individually managed. Resources are allocated to each segment based on the
performance of the business units and the projects within each segment.
A-2-33
The accounting policies of the two business segments are the same as those
described in Note 1--General and Summary of Significant Accounting Policies.
The Company uses gross margin to evaluate the performance of generation and
distribution businesses that it controls and consolidates. Depreciation and
amortization at the generation and distribution businesses are included in the
calculation of gross margin. Corporate depreciation and amortization is
reported within selling, general and administrative expenses in the
consolidated statements of operations. Pre-tax equity in earnings is used to
evaluate the performance of generation and distribution businesses that are
significantly influenced by the Company. Sales between generation and
distribution are accounted for at fair value as if the sales were to third
parties. All intersegment activity has been eliminated with respect to revenue
and gross margin. Information about the Company's operations and assets by
segment is as follows (in millions):
PRE-TAX INVESTMENT
DEPRECIATION EQUITY IN AND
AND GROSS IN TOTAL ADVANCES PROPERTY
REVENUES (1) AMORTIZATION MARGIN EARNINGS ASSETS TO AFFILIATES ADDITIONS
-------------- -------------- -------- ---------- ---------- --------------- ----------
Year Ended December 31, 2000
Generation ................. $3,546 $329 $1,350 $ 49 $17,627 $ 584 $1,909
Distribution ............... 4,036 367 617 426 14,200 2,508 317
Corporate .................. -- 1 -- -- 1,211 30 --
------ ---- ------ ---- ------- ------ ------
Total ..................... $7,582 $697 $1,967 $475 $33,038 $3,122 $2,226
====== ==== ====== ==== ======= ====== ======
PRE-TAX INVESTMENT
DEPRECIATION EQUITY IN AND
AND GROSS IN TOTAL ADVANCES PROPERTY
REVENUES (1) AMORTIZATION MARGIN EARNINGS ASSETS TO AFFILIATES ADDITIONS
-------------- -------------- -------- ---------- ---------- --------------- ----------
Year Ended December 31, 1999
Generation ................. $1,970 $180 $ 793 $ 52 $14,250 $ 524 $688
Distribution ............... 2,154 207 473 (31) 8,693 1,051 250
Corporate .................. -- 1 -- -- 279 -- --
------ ---- ------ ----- ------- ------ ----
Total ..................... $4,124 $388 $1,266 $ 21 $23,222 $1,575 $938
====== ==== ====== ===== ======= ====== ====
PRE-TAX INVESTMENT
DEPRECIATION EQUITY IN AND
AND GROSS IN TOTAL ADVANCES PROPERTY
REVENUES (1) AMORTIZATION MARGIN EARNINGS ASSETS TO AFFILIATES ADDITIONS
-------------- -------------- -------- ---------- ---------- --------------- ----------
Year Ended December 31, 1998
Generation ................. $1,413 $126 $ 566 $ 33 $ 5,682 $ 495 $369
Distribution ............... 1,844 173 478 199 6,806 1,438 228
Corporate .................. -- -- -- -- 412 -- --
------ ---- ------ ---- ------- ------ ----
Total ..................... $3,257 $299 $1,044 $232 $12,900 $1,933 $597
====== ==== ====== ==== ======= ====== ====
----------
(1) Intersegment revenues for the years ended December 31, 2000, 1999, and
1998 were $81 million, $76 million and $69 million, respectively.
A-2-34
Revenues are recorded in the country in which they are earned and assets
are recorded in the country in which they are located. Information about the
Company's operations and long-lived assets by country are as follows (in
millions):
UNITED TOTAL
U.S. ARGENTINA BRAZIL HUNGARY PAKISTAN KINGDOM OTHER(1) NON-U.S. TOTAL
--------- ----------- -------- --------- ---------- --------- ---------- ---------- ---------
REVENUES:
2000 ............. $3,397 $ 482 $ 699 $177 $232 $1,110 $1,485 $ 4,185 $ 7,582
1999 ............. 2,063 452 376 212 206 207 608 2,061 4,124
1998 ............. 1,514 423 478 227 213 40 362 1,743 3,257
LONG-LIVED ASSETS:
2000 ............. $7,134 $1,624 $2,359 $ 91 $428 $4,483 $4,674 $13,659 $20,793
1999 ............. 6,200 1,061 2,588 121 492 4,600 1,375 10,237 16,437
1998 ............. 4,297 1,017 848 154 505 224 756 3,504 7,801
----------
(1) AES has operations in 18 countries, which are included in the other
category above. Among these countries are Venezuela, China, the Dominican
Republic and the Republic of Georgia.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of current financial assets, current financial liabilities,
and debt service reserves and other deposits, are estimated to be equal to
their reported carrying amounts. The fair value of non-recourse debt, excluding
capital leases, is estimated differently based upon the type of loan. For
variable rate loans, carrying value approximates fair value. For fixed rate
loans and preferred stock with mandatory redemption, other than securities
registered and publicly traded, the fair value is estimated using discounted
cash flow analyses based on the Company's current incremental borrowing rates.
The fair value of interest rate swap, cap and floor agreements, foreign
currency forwards and swaps, and energy derivatives is the estimated net amount
that the Company would receive or pay to terminate the agreements as of the
balance sheet date. The estimated fair values for certain of the notes and
bonds included in non-recourse debt, and certain of the recourse debt and
Tecons, which are registered and publicly traded, are based on quoted market
prices. The carrying value of Rhinos approximates fair value as they include a
rate adjustment feature that is linked to the interbank market for credit.
The estimated fair values of the Company's assets and liabilities have
been determined using available market information. The estimates are not
necessarily indicative of the amounts the Company could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
The estimated fair values of the Company's debt and derivative financial
instruments as of December 31, 2000 and 1999, are as follows (in millions):
DECEMBER 31, 2000 DECEMBER 31, 1999
----------------------------- -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------- ------------- ---------- ----------
Non-recourse debt ................................. $15,334 $15,560 $10,512 $10,465
Recourse debt ..................................... 3,458 3,343 2,502 2,495
Tecons and Rhinos ................................. 1,228 1,624 1,318 1,770
Interest rate swaps ............................... (2) (141) -- (23)
Interest rate caps and floors, net ................ (2) (7) -- 13
Foreign currency forwards and swaps, net .......... 10 14 -- --
Preferred stock with mandatory redemption ......... 22 20 22 20
Energy derivatives, net ........................... 25 (2) 4 4
The fair value estimates presented herein are based on pertinent
information as of December 31, 2000 and 1999. The Company is not aware of any
factors that would significantly affect the estimated fair value amounts since
December 31, 2000.
A-2-35
18. NEW ACCOUNTING PRONOUNCEMENTS
On January 1, 2001, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which, as amended, established
new accounting and reporting standards for derivative instruments and hedging
activities. SFAS No. 133 requires that an entity recognize all derivatives
(including derivatives embedded in other contracts) as either assets or
liabilities on the balance sheet and measure those instruments at fair value.
Changes in the derivative's fair value are to be recognized currently in
earnings, unless specific hedge accounting criteria are met. Hedge accounting
allows a derivative's gains or losses in fair value to offset related results
of the hedged item in the statement of operations and requires that a company
formally document, designate and assess the effectiveness of transactions that
receive hedge accounting. Prior to the adoption of SFAS No. 133, derivatives
that are classified as other than trading are accounted for using settlement
accounting, and any gain or loss is included in interest cost.
SFAS No. 133 allows hedge accounting for fair value and cash flow hedges.
SFAS No. 133 provides that the gain or loss on a derivative instrument
designated and qualifying as a fair value hedge as well as the offsetting gain
or loss on the hedged item attributable to the hedged risk be recognized
currently in earnings in the same accounting period. SFAS No. 133 provides that
the effective portion of the gain or loss on a derivative instrument designated
and qualifying as a cash flow hedge be reported as a component of other
comprehensive income in stockholders' equity and be reclassified into earnings
in the same period or periods during which the hedged transaction affects
earnings. The remaining gain or loss on the derivative, if any, must be
recognized currently in earnings.
The Company utilizes derivative financial instruments to manage interest
rate risk, foreign exchange risk and commodity price risk. The Company utilizes
interest rate swap, cap, and floor agreements, to manage interest rate risk on
floating rate debt. Currency forward and swap agreements are utilized to manage
foreign exchange rate risk which is a result of AES or one of its subsidiaries
entering into monetary obligations in currencies other than its own functional
currency. The Company utilizes electric and gas derivative instruments,
including swaps, options, forwards and futures, to manage the risk related to
electricity and gas sales and purchases.
The Company believes its electricity purchase contracts that meet the
definition of a derivative under SFAS No. 133, but are settled by physical
delivery, qualify for the normal purchases and sales exception and thus are not
required to be accounted for as derivatives. The Derivatives Implementation
Group ("DIG") of the Financial Accounting Standards Board is currently
discussing the accounting treatment under SFAS No. 133 for certain of these
contracts, which contain features that may be viewed as options. The DIG may
conclude that such contracts are required to be accounted for as derivatives.
The majority of the Company's derivative instruments qualify as fair value
or cash flow hedges, as defined by SFAS No. 133. As required by SFAS No. 133
for these instruments the Company has documented the effectiveness of the
hedges by performing tests to demonstrate the high correlation between the
derivative instruments and the underlying hedged commitments or transactions.
These effectiveness tests will be updated quarterly. The Company intends to
exclude the change in the time value of option contracts from its assessment of
hedge effectiveness. Although the majority of the Company's derivative
instruments qualify as fair value or cash flow hedges, adoption of SFAS No. 133
will increase volatility in reported earnings.
Adoption of SFAS No. 133 resulted in the recognition of $81.7 million of
derivative assets and $226.6 million of derivative liabilities on the Company's
balance sheet as of January 1, 2001. The derivative assets consist primarily of
commodity hedges and foreign currency swaps, but also include some interest
rate swaps. The derivative liabilities consist primarily of interest rate swaps
and commodity hedges. Additionally, adoption of SFAS No. 133 resulted in the
recognition of a charge of approximately
$1 million, net of deferred income tax effects, which was included in the first
quarter 2001 income statement as a cumulative effect of a change in accounting
principle. Adoption of the standard also resulted in a reduction of other
comprehensive income in stockholders' equity of approximately $99 million, net
of deferred income tax effects, which was included in the first quarter 2001
balance sheet as a cumulative effect of a change in accounting principle.
A-2-36
Approximately $19 million of other comprehensive income related to
derivative instruments as of January 1, 2001, is expected to be recognized as
income in earnings over the next twelve months. A portion of this amount is
expected to be offset by the effects of hedge accounting that will be
recognized in 2001.
The Company adopted Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements", during the first quarter of 2000. The
adoption of this standard did not impact its financial condition or results of
operations.
The Company adopted FASB Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation", during the second quarter of 2000.
The adoption of this standard did not impact its financial condition or results
of operations.
19. QUARTERLY DATA (UNAUDITED)
The following table summarizes the unaudited quarterly statements of
operations for the Company for 2000 and 1999, giving effect to the acquisition
of IPALCO as if it had occurred at the beginning of the earliest period
presented (in millions, except per share amounts):
QUARTER ENDED 2000
-------------------------------------------------------
MAR 31 JUN 30 SEP 30 DEC 31
------------ ----------- ----------- ------------
Revenues (1) .................................... $1,696 $ 1,751 $ 1,995 $2,141
Gross margin .................................... 476 397 520 574
Income before extraordinary items ............... 274 140 164 229
Extraordinary items, net of tax benefit ......... (7) -- -- (4)
Net income ...................................... 267 140 164 225
Basic earnings per share (1):
Before extraordinary items ...................... $ 0.60 $ 0.30 $ 0.33 $ 0.45
Extraordinary items ............................. (0.01) -- -- (0.01)
------ ------- ------- ------
Basic earnings per share ........................ $ 0.59 $ 0.30 $ 0.33 $ 0.44
====== ======= ======= ======
Diluted earnings per share:
Before extraordinary items ...................... $ 0.57 $ 0.28 $ 0.32 $ 0.44
Extraordinary items ............................. (0.01) -- -- (0.01)
------ ------- ------- ------
Diluted earnings per share ...................... $ 0.56 $ 0.28 $ 0.32 $ 0.43
====== ======= ======= ======
QUARTER ENDED 1999
-------------------------------------------------
MAR 31 JUN 30 SEP 30 DEC 31
---------- ---------- ----------- ---------
Revenues ........................................ $ 849 $ 852 $ 1,085 $ 1,338
Gross margin .................................... 283 300 310 373
Income before extraordinary items ............... 17 106 93 158
Extraordinary items, net of tax benefit ......... -- -- -- (17)
Net income ...................................... 17 106 93 141
Basic earnings per share: (1) ...................
Before extraordinary items ...................... $ 0.04 $ 0.25 $ 0.22 $ 0.35
Extraordinary items ............................. -- -- -- (0.04)
------ ------ ------- -------
Basic earnings per share ........................ $ 0.04 $ 0.25 $ 0.22 $ 0.31
====== ====== ======= =======
Diluted earnings per share:(1)
Before extraordinary items ...................... $ 0.04 $ 0.24 $ 0.21 $ 0.34
Extraordinary items ............................ -- -- -- (0.04)
------ ------ ------- -------
Diluted earnings per share ...................... $ 0.04 $ 0.24 $ 0.21 $ 0.30
====== ====== ======= =======
----------
(1) The sum of these amounts does not equal the annual amount due to rounding
or because the quarterly calculations are based on varying numbers of
shares outstanding.
A-2-37
20. SUBSEQUENT EVENTS
Through May 2, 2001, the Company issued approximately $800 million of
recourse debt in U.S. dollars and the U.K. pounds sterling maturing in 2011.
Such debt consisted of $600 million of 8.875% Senior Notes and L135 million of
8.375% Senior Notes.
On March 27, 2001, the Company merged with IPALCO in a pooling of
interests transaction. The accompanying consolidated financial statements have
been retroactively restated to reflect the combined financial position and
combined results of operations and cash flows the Company and IPALCO for all
periods presented, giving effect to the merger of IPALCO as if the combination
had occurred at the beginning of the earliest period presented (see Note 2).
In May 2001, the Department of Justice commenced an antitrust
investigation pursuant to Section 1 of the Sherman Act relating to an agreement
between AES Southland LLC and Williams Energy Services Company which the
Department of Justice alleges limits the expansion of electric generating
capacity at or near certain plants owned by AES Southland LLC. In connection
therewith, the Department sent a Civil Investigative Demand ("CID") to AES
Southland LLC requesting the answer to certain interrogatories and the
production of documents. AES Southland LLC is cooperating with the terms of the
CID.
On May 23, 2001, AES Drax received bank lender and rating agency approval
for its amendment to the TXU hedging agreement (see Note 7).
On February 12, 2001, a subsidiary of the Company entered into an
agreement to acquire Thermo Ecotek (see Note 2).
Subsequent to December 31, 2000, the Company issued approximately 2
million options to purchase shares at a price of $55.61 per share.
A-2-38
ANNEX A-3
To the Stockholders and Board of Directors of
Corporacion EDC, C.A.:
We have audited the accompanying consolidated balance sheets of Corporacion
EDC, C.A. and Subsidiaries (a company incorporated in Venezuela) as of December
31, 2000, 1999 and 1998, and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the financial
statements of the foreign subsidiaries, mentioned in Note 6, as of December 31,
2000, 1999 and 1998, which statements reflect assets and revenues that are
mentioned in Note 6. Those financial statements were audited by other auditors
whose reports have been furnished to us, and our opinion, insofar as it relates
to the amounts included for those entities, is based solely upon the report of
the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors as of December 31, 2000, 1999 and 1998, provide a reasonable basis for
our opinion.
As indicated in our auditors' report dated February 22, 1999, our opinion on
those financial statements was qualified as the balance of Bs. 5,616,287 (in
thousands) in "Equity in income and losses of affiliated companies" represented
in the consolidated statements of income for the year ended December 31, 1998,
includes a net income of Bs. 4,999,943 (in thousands), generated by foreign
companies which financial statements audited by other auditors, had not been
furnished to us at the date of our report. During the year ended December 31,
1999, the Company received such audited financial statements, registering
losses of Bs. 8,875,371 (in thousands), that corresponded to 1998, in the
statement of income for the year ended December 31, 1999. Therefore, the
investment shown in the consolidated balance sheet as of December 31, 1998, and
the consolidated income for the year then ended are overstated and the
consolidated income for the year ended December 31, 1999 is understated in such
amount.
In our opinion, based on our audits and the report of other auditors, except
for the effect of the adjustments mentioned in the preceding paragraph on the
consolidated balance sheet as of December 31, 1998 and the consolidated
statements of income for the years ended December 31, 1999 and 1998, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Corporacion EDC, C.A. and
subsidiaries as of December 31, 2000, 1999 and 1998, and the results of their
operations and their cash flows for the years ended in conformity with
generally accepted accounting principles in Venezuela.
PIERNAVIEJA, PORTA, CACHAFEIRO Y ASOCIADOS
A MEMBER FIRM OF ARTHUR ANDERSEN
[GRAPHIC OMITTED]
Hector L. Gutierrez D.
CPC N o 24321
CNV N o G-889
January 30, 2001
A-3-1
CORPORACIoN EDC, C.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000, 1999 AND 1998
(Expressed in thousands of constant bolivars as of December 31, 2000)
2000 1999 1998
------------- ---------------- ----------------
ASSETS
CURRENT ASSETS
Cash and equivalents ................................ 25,048,703 21,608,213 30,482,909
---------- ---------- ----------
Notes and accounts receivable--
Trade .............................................. 12,644,320 9,659,454 11,049,739
Subsidiaries and related companies ................. 100,883 36,785,521 3,299,208
Other .............................................. 14,197,234 5,116,592 5,378,403
---------- ---------- ----------
26,942,437 51,561,567 19,727,350
---------- ---------- ----------
Inventories, net .................................... 3,459,822 5,095,363 8,111,189
Prepaid expenses .................................... 3,087,807 132,422 227,604
---------- ---------- ----------
TOTAL CURRENT ASSETS ................................ 58,538,769 78,397,565 58,549,052
Property, plant and equipment, net .................. 233,830,616 233,764,292 237,291,582
Investments ......................................... 267,350,536 823,806,831 831,679,264
Long-term accounts receivable ....................... 240,717 310,108 20,916,590
Deferred charges and other assets ................... 6,505,840 -- --
Excess of cost over net value in books of investments
in subsidiaries .................................... 4,857,281 4,794,710 4,825,246
----------- ----------- -----------
TOTAL ASSETS ........................................ 571,323,759 1,141,073,506 1,153,261,734
=========== ============= =============
The accompanying notes are an integral part of these consolidated financial
statements
A-3-2
CORPORACIoN EDC, C.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000, 1999 AND 1998
(Expressed in thousands of constant bolivars as of December 31, 2000)
2000 1999 1998
--------------- ---------------- -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt ................................... 134,710,803 201,247,268 123,983,271
----------- ----------- -----------
Notes and accounts payable--
Trade ............................................ 6,658,732 4,318,298 4,993,785
Affiliates and related companies ................. 148,898,840 8,530,548 235,962
----------- ----------- -----------
155,557,572 12,848,846 5,229,747
Other current liabilities ......................... 19,768,222 13,695,980 9,246,602
----------- ----------- -----------
TOTAL CURRENT LIABILITIES ......................... 310,036,597 227,792,094 138,459,620
----------- ----------- -----------
LONG-TERM LIABILITIES
Long-term debt .................................... 1,751,212 110,515,846 231,503,028
Labor indemnities ................................. 852,816 543,259 365,872
Other ............................................. -- 3,600,031 660
Deferred credits .................................. -- 5,555,843 17,610,939
----------- ----------- -----------
TOTAL LONG-TERM LIABILITIES ....................... 2,604,028 120,214,979 249,480,499
----------- ----------- -----------
Minority interests ................................ 3,044,729 1,329,945 2,563,260
----------- ----------- -----------
TOTAL LIABILITIES ................................. 315,685,354 349,337,018 390,503,379
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Nominal capital stock ............................. 29,241,649 21,799,237 12,456,706
Subscribed capital stock not paid ................. -- (3,633,206) --
Capital stock updating ............................ 11,489,600 10,467,477 8,999,230
----------- ----------- -----------
40,731,249 28,633,508 21,455,936
----------- ----------- -----------
Paid-in surplus
RETAINED EARNINGS (DEFICIT)-- .................... 204,297,905 157,287,219 143,814,457
----------- ----------- -----------
(Deficit) retained ............................... (4,909,447) 151,500,658 81,796,799
Legal reserve .................................... 2,472,709 2,472,709 37,506
(2,436,738) 153,973,367 81,834,305
----------- ----------- -----------
Cumulative translation adjustment ................. (2,090,535) (18,368,642) (8,273,175)
Excess of value as per books over cost of shares in
subsidiaries and affiliates ...................... 15,136,524 470,211,036 523,926,832
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY ........................ 255,638,405 791,736,488 762,758,355
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY ........................................... 571,323,759 1,141,073,506 1,153,261,734
=========== ============= =============
The accompanying notes are an integral part of these consolidated financial
statements
A-3-3
CORPORACIoN EDC, C.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(Expressed in thousands of constant bolivars as of December 31, 2000,
except per share and per ADR amounts)
2000 1999 1998
----------------- ----------------- -----------------
OPERATING INCOME
Sale of energy .................................... 32,333,874 30,690,840 33,556,475
Services rendered and other sales ................. 30,679,952 27,945,514 23,724,994
---------- ---------- ----------
TOTAL OPERATING INCOME ............................ 63,013,826 58,636,354 57,281,469
---------- ---------- ----------
OPERATING EXPENSES
Generation ........................................ 3,168,795 2,207,538 4,174,515
Depreciation and amortization ..................... 24,710,911 25,193,342 25,201,601
Department and administrative ..................... 31,930,352 30,783,270 27,823,164
Nonrecurring expenses ............................. 2,434,589 -- --
---------- ---------- ----------
TOTAL OPERATING EXPENSES .......................... 62,244,647 58,184,150 57,199,280
---------- ---------- ----------
OPERATING INCOME .................................. 769,179 452,204 82,189
---------- ---------- ----------
FINANCING (COST) BENEFIT, NET ..................... (4,368,037) 977,469 14,251,423
OTHER (EXPENSES) INCOME, NET ...................... (8,626,148) 13,849,341 2,170,167
LOSS FROM SALE OF SUBSIDIARIES .................... (221,298,249) -- --
EQUITY IN INCOME AND LOSSES OF
AFFILIATES ....................................... (21,659,795) 6,290,478 5,616,287
------------ ---------- ----------
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES AND
MINORITY INTERESTS ............................... (255,183,050) 21,569,492 22,120,066
PROVISION FOR INCOME TAXES ........................ 6,374,662 4,286,883 2,941,662
------------ ---------- ----------
(LOSS) INCOME BEFORE MINORITY INTERESTS ........... (261,557,712) 17,282,609 19,178,404
MINORITY INTERESTS ................................ 524,587 1,140,657 394,059
------------ ---------- ----------
NET (LOSS) INCOME ................................. (261,033,125) 18,423,266 19,572,463
============ ========== ==========
NET (LOSS) EARNINGS PER SHARE ..................... ( 71.81) 5.07 5.38
============ =========== ===========
NET (LOSS) EARNINGS PER ADR ....................... (3,590.72) 253.43 269.23
============ =========== ===========
WEIGHTED AVERAGE OF OUTSTANDING SHARES ............ 3,634,833,491 3,634,833,491 3,634,833,491
============= ============== ==============
WEIGHTED AVERAGE OF OUTSTANDING ADR'S ............. 72,696,670 72,696,670 72,696,670
============= ============== ==============
The accompanying notes are an integral part of these consolidated financial
statements.
A-3-4
CORPORACIoN EDC, C.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(Stated in thousands of constant bolivars as of December 31, 2000)
2000 1999 1998
----------------- ---------------- -----------------
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net (loss) income ............................................ (261,033,125) 18,423,266 19,572,463
ADJUSTMENTS TO RECONCILE NET (LOSS) INCOME TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES
Depreciation and amortization ................................ 24,710,911 25,193,342 25,201,601
Exchange loss (gain), net .................................... (3,839,983) 13,383,058 (2,705,374)
Amortization of deferred credits ............................. (5,555,843) (15,921,649) (23,057,531)
Loss from sale of subsidiaries ............................... 221,298,249 -- --
Equity in income and losses of affiliates .................... 21,659,795 (6,290,478) (5,616,287)
Minority interests ........................................... (524,587) (1,140,657) (394,059)
Monetary gain ................................................ (15,974,101) (35,190,282) (32,330,202)
NET CHANGE IN OPERATING ASSETS AND LIABILITES
(INCREASE) DECREASE IN OPERATING ASSETS
Notes and accounts receivable ................................ (192,897,801) (6,494,368) (22,795,690)
Inventories, net ............................................. 1,635,541 3,015,824 1,274,685
Prepaid expenses ............................................. (2,955,384) (11,099,936) 676,025
Deferred charges and other assets ............................ (6,505,840) 7,159,549 2,702,206
INCREASE (DECREASE) IN OPERATING LIABILITIES
Other current liabilities .................................... 263,220,429 1,865,021 8,024,779
Net monetary loss in operating activities .................... 133,247,275 9,810,545 28,869,837
------------ ----------- -----------
Net cash provided by (used in) operating activities .......... 176,485,536 2,713,235 (577,547)
------------ ----------- -----------
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES
Increase (decrease) in permanent investments ................. 184,565,922 4,067,258 (331,116,365)
Acquisition of property, plant and equipment ................. (24,777,235) (13,921,295) (11,481,084)
Net monetary (gain) loss in investing activities ............. (143,987,615) (25,591,647) 6,081,791
------------ ----------- ------------
Net cash provided by (used in) investing activities .......... 15,801,072 (35,445,684) (336,515,658)
------------ ----------- ------------
CASH FLOWS (USED IN) PROVIDED BY FINANCING
ACTIVITIES
(Decrease) increase in bank loans and overdrafts ............. (276,908,356) (44,941,353) 326,444,229
Capital stock increase ....................................... 12,097,741 7,177,572 11,466,778
Paid-in surplus increase ..................................... 47,010,686 13,472,762 --
Net monetary gain in financing activities .................... 31,774,078 57,012,666 6,277,887
------------ ----------- ------------
Net cash (used in) provided by financing activities .......... (186,025,851) 32,721,647 344,188,894
------------ ----------- ------------
Monetary loss from holding cash and equivalents .............. (2,784,367) (4,900,624) (8,899,318)
------------ ----------- ------------
Effect of exclusion of subsidiaries in consolidation ......... (35,900) (3,963,270) (7,351,513)
------------ ----------- ------------
INCREASE (DECREASE) IN CASH AND
EQUIVALENTS .................................................. 3,440,490 (8,874,696) (9,155,142)
CASH AND EQUIVALENTS AT THE BEGINNING OF
YEAR ......................................................... 21,608,213 30,482,909 39,638,051
------------ ----------- ------------
CASH AND EQUIVALENTS AT THE END OF YEAR ....................... 25,048,703 21,608,213 30,482,909
============ =========== ============
The accompanying notes are an integral part of these consolidated financial
statements
A-3-5
CORPORACIoN EDC, C.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(Expressed in thousands of constant bolivars as of December 31, 2000)
CAPITAL STOCK
-----------------------------------------------------------
SUBSCRIBED
AND NOT
NOMINAL PAID UPDATING TOTAL
------------ --------------- -------------- ---------------
BALANCES, AS OF DECEMBER 31, 1997 4,230,707 -- 5,758,451 9,989,158
Capital stock increase ..................... 8,225,999 -- 3,240,779 11,466,778
Net income ................................. -- -- -- --
Excess of net value in books of cost of
investments in subsidiaries ............... -- -- -- --
Realization of surplus from dividends
declared in subsidiaries .................. -- -- -- --
Cumulative translation adjustment .......... -- -- -- --
--------- -- --------- ----------
BALANCES, AS OF DECEMBER 31, 1998 12,456,706 -- 8,999,230 21,455,936
Capital stock increase ..................... 9,342,531 -- 1,956,224 11,298,755
Subscribed capital stock not paid .......... -- (3,633,206) (487,977) (4,121,183)
Paid-in surplus increase ................... -- -- -- --
Net income ................................. -- -- -- --
Transfer to legal reserve .................. -- -- -- --
Realization of surplus from dividends
declared in subsidiaries .................. -- -- -- --
Cumulative translation adjustment .......... -- -- -- --
---------- ---------- --------- ----------
BALANCES, AS OF DECEMBER 31, 1999 21,799,237 (3,633,206) 10,467,477 28,633,508
Payment of pending quota ................... -- 3,633,206 487,977 4,121,183
Capital stock increase ..................... 7,442,412 -- 534,146 7,976,558
Paid-in surplus increase ................... -- -- -- --
Net loss ................................... -- -- -- --
Effect from disposal of subsidiary ......... --
Realization of surplus from dividends
declared in subsidiaries .................. -- -- -- --
Realization of surplus from investment
adjustment ................................ -- -- -- --
Cumulative translation adjustment .......... -- -- -- --
---------- ---------- ---------- ----------
BALANCES, AS OF DECEMBER 31, 2000 29,241,649 -- 11,489,600 40,731,249
========== ========== ========== ==========
(DEFICIT) RETAINED EARNINGS
------------------------------------------------
CUMULATIVE
PAID-IN (DEFICIT) LEGAL TRANSLATION
SURPLUS RETAINED RESERVE TOTAL ADJUSTMENT
------------- ----------------- ------------ ----------------- ---------------
BALANCES, AS OF DECEMBER 31, 1997 143,814,457 37,249,176 37,506 37,286,682 --
Capital stock increase ..................... -- -- -- -- --
Net income ................................. -- 19,572,463 -- 19,572,463 --
Excess of net value in books of cost of
investments in subsidiaries ............... -- -- -- -- --
Realization of surplus from dividends
declared in subsidiaries .................. -- 24,975,160 -- 24,975,160 --
Cumulative translation adjustment .......... -- -- -- -- (8,273,175)
----------- ---------- ------ ---------- ----------
BALANCES, AS OF DECEMBER 31, 1998 143,814,457 81,796,799 37,506 81,834,305 (8,273,175)
Capital stock increase ..................... -- -- -- -- --
Subscribed capital stock not paid .......... -- -- -- -- --
Paid-in surplus increase ................... 13,472,762 -- -- -- --
Net income ................................. -- 18,423,266 -- 18,423,266 --
Transfer to legal reserve .................. -- (2,435,203) 2,435,203 -- --
Realization of surplus from dividends
declared in subsidiaries .................. -- 53,715,796 -- 53,715,796 --
Cumulative translation adjustment .......... -- -- -- -- (10,095,467)
----------- ---------- --------- ---------- -----------
BALANCES, AS OF DECEMBER 31, 1999 157,287,219 151,500,658 2,472,709 153,973,367 (18,368,642)
Payment of pending quota ................... -- -- -- -- --
Capital stock increase ..................... -- -- -- -- --
Paid-in surplus increase ................... 47,010,686 -- -- -- --
Net loss ................................... -- (261,033,125) -- (261,033,125) --
Effect from disposal of subsidiary ......... 1,058,846 1,058,846 18,144,633
Realization of surplus from dividends
declared in subsidiaries .................. -- 103,564,174 -- 103,564,174 --
Realization of surplus from investment
adjustment ................................ -- -- -- -- --
Cumulative translation adjustment .......... -- -- -- -- (1,866,526)
----------- ------------ --------- ------------ -----------
BALANCES, AS OF DECEMBER 31, 2000 204,297,905 (4,909,447) 2,472,709 (2,436,738) (2,090,535)
=========== ============ ========= ============ ===========
EXCESS OF NET
VALUE IN
BOOKS ON
COST OF TOTAL
SHARES IN STOCKHOLDERS'
SUBSIDIARIES EQUITY
---------------- ----------------
BALANCES, AS OF DECEMBER 31, 1997 548,687,024 739,777,321
Capital stock increase ..................... -- 11,466,778
Net income ................................. -- 19,572,463
Excess of net value in books of cost of
investments in subsidiaries ............... 214,968 214,968
Realization of surplus from dividends
declared in subsidiaries .................. (24,975,160) --
Cumulative translation adjustment .......... -- (8,273,175)
----------- -----------
BALANCES, AS OF DECEMBER 31, 1998 523,926,832 762,758,355
Capital stock increase ..................... -- 11,298,755
Subscribed capital stock not paid .......... -- (4,121,183)
Paid-in surplus increase ................... -- 13,472,762
Net income ................................. -- 18,423,266
Transfer to legal reserve .................. -- --
Realization of surplus from dividends
declared in subsidiaries .................. (53,715,796) --
Cumulative translation adjustment .......... -- (10,095,467)
----------- -----------
BALANCES, AS OF DECEMBER 31, 1999 470,211,036 791,736,488
Payment of pending quota ................... -- 4,121,183
Capital stock increase ..................... -- 7,976,558
Paid-in surplus increase ................... -- 47,010,686
Net loss ................................... -- (261,033,125)
Effect from disposal of subsidiary ......... -- 19,203,479
Realization of surplus from dividends
declared in subsidiaries .................. (103,564,174) --
Realization of surplus from investment
adjustment ................................ (351,510,338) (351,510,338)
Cumulative translation adjustment .......... -- (1,866,526)
------------ ------------
BALANCES, AS OF DECEMBER 31, 2000 15,136,524 255,638,405
============ ============
The accompanying notes are an integral part of these consolidated financial
statements
A-3-6
(Translation of a report and financial statements originally issued in Spanish)
CORPORACIoN EDC, C.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2000, 1999 AND 1998
(Expressed in thousands of constant bolivars)
NOTE 1 -- INCORPORATION AND OPERATIONS
Corporacion EDC, C.A. (CEDC) was incorporated on July 2, 1996, and is
mainly engaged in the planning of investments in local and foreign companies,
the equity in commercial, industrial and service companies as well as in the
development and execution of similar nature projects, the financing of
commercial operations, investment securities and, in general, in all related
activities both locally and abroad. The mission of CEDC is supplying energy,
telecommunication and water services contributing to the improvement of the
living quality and progress in Venezuela, Latin America and the Caribbean.
On April 28, 2000, AES Corporation (AES) offered to buy 51% of the
Company's outstanding common stock for $0.57 per share. AES completed the
acquisition of the Company on June 8, 2000, which involved the purchase of
approximately 87% of the Company's common stock, for which AES assumed control
of Corporacion EDC, C.A. and subsidiaries on July 1, 2000.
NOTE 2 -- ACCOUNTING POLICIES
The most significant accounting policies followed by the Company and its
subsidiaries in the preparation of their consolidated financial statements, are
as follows:
A) BASIS OF PRESENTATION
The consolidated financial statements have been prepared in accordance
with the "Standards for the Preparation of Financial Statements of Entities
Subject to the Control of Comision Nacional de Valores" (CNV) (Venezuelan
Securities and Exchange Commission), issued by the CNV, and in accordance with
accounting principles generally accepted in Venezuela, issued by the Venezuelan
Federation of Public Accountants.
B) USE OF ESTIMATES
The preparation of financial statements requires management to make
certain estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results may differ from those estimates.
C) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of CEDC include the financial
statements of Generacion de Vapor GENEVAPCA, C.A., Inversiones Inextel, C.A.,
Operaciones Internacionales EDC, C.A. and subsidiaries, Grupo Industrial EDC,
C.A. and subsidiaries, Telematica EDC, C.A. and subsidiaries, Inmobiliaria EDC,
C.A. and subsidiaries, Energia EDC, C.A and subsidiaries, EDC Energy Ventures
-- Generacion Colombia, EDC Energy Ventures -- Distribucion Colombia and EDC
Energy Ventures -- El Salvador, wholly owned subsidiaries, as of December 31,
2000, 1999 and 1998. TD Communication Holdings, a subsidiary, was added to the
consolidated financial statements as of December 31, 1999. The subsidiaries EDC
Energy Ventures -- Generacion Colombia, and EDC Energy Ventures -- Distribucion
Colombia, were excluded from the consolidated financial statements as of
December 31, 2000 (See Note 6 -- Investments). All consolidated companies are
presented at their related closing date that represents a 12-month period.
Nevertheless, the most significant events occurred between the closing date
(mostly, November 30) and year-end, have been included, except for GENEVAPCA,
whose closing date is September 30, which have been consolidated, however, as
of December 31. All significant intercompany accounts and transactions have
been eliminated in consolidation.
A-3-7
D) RECOGNITION OF THE EFFECTS OF INFLATION ON THE FINANCIAL INFORMATION
In accordance with Venezuelan Statement of Accounting Principles N degrees
10, "Standards for the Preparation of Financial Statements Adjusted for
Inflation" (DPC 10) and its amendments issued by the Venezuelan Federation of
Public Accountants, the Company estates all of its consolidated financial
statements in terms of the purchasing power of the bolivar as of the end of the
latest period, thereby recognizing the effects of inflation. As a result, the
amounts of both consolidated financial statements are comparable between them,
and are also comparable to the amounts of the prior year, since they are all
expressed in currency of similar purchasing power.
During December 2000, the Venezuelan Federation of Public Accountants
issued the Venezuelan Statement of Accounting Principles N degrees 10
"Standards for the Preparation of Financial Statements Adjusted for Inflation"
(DPC 10 Revised and comprehensive 2000), which supersedes DPC 10 issued on
August 23, 1991 and its three amendments, as well as the Technical Publications
number 19 and 14. This statement becomes effective for financial statements
covering periods beginning after December 31, 2000. Early adoption is
permitted.
The Company adopted the general price-level method to restate its
historical financial statements. This method consists of restating the
financial statements in accordance with the general price-level through the
application of the General Consumer Price Index for the metropolitan area of
Caracas, published monthly by Banco Central de Venezuela, which estimates the
constant prices of the economy. The indexes used for restating, with 1997 as
the base year, were as follows:
2000 1999 1998
----------- ----------- ----------
Year-end .......... 205,97793 181,58866 151,28823
Average ........... 194,97654 167,78597 135,78224
A summary of the procedures applied to restate the consolidated financial
statements for inflation effects, in accordance with the general price-level
method is as follows:
1. Monetary assets and liabilities, represented by cash and equivalents, notes
and accounts receivable, debt and labor indemnities, are presented with the
same amounts as the basic financial statements since they represent the
monetary value of their components at the balance sheet date.
2. Nonmonetary assets, mainly represented by inventories, property, plant and
equipment and investments, stockholders' equity, are adjusted on the basis
of a factor representing the relative change of the general consumer price
index, in accordance with the date in which they originated through
December 31, 2000.
3. The profit and loss accounts (statement of income) are restated based on the
monthly general average price index in accordance with their date of
origin, except for costs and expenses related with nonmonetary assets which
are restated according to the adjusted values of the related assets.
4. The inflation (loss) gain reflects the Company's loss or gain resulting from
a net monetary denominated asset or liability position during an
inflationary period, and is included in the "Financing (cost) benefit, net"
caption in the accompanying consolidated statements of income.
E) CASH AND EQUIVALENTS
Cash and equivalents include short-term, highly liquid investments, which
have original maturities of three months or less. The monetary loss from
holding of cash and equivalents due to inflation is reflected as a separate
caption in the consolidated statements of cash flows.
F) INVENTORIES, NET
Inventories, net are recorded at the lower of cost or market, through the
average cost method, and include materials, supplies and spare parts that the
Company uses in the construction of its facilities. Inventories are presented
at the lower of the historical cost restated through the CPI or recoverable
value, for inflation adjustment purposes.
A-3-8
G) PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net, are recorded at cost, adjusted to the
changes in the General price level, and include administrative expenses and
interests capitalized exceeding inflation. Depreciation is computed using the
straight-line method based on the estimated useful lives of assets. Maintenance
and repairs are expensed as incurred, while expenditures for significant
improvements and renewals are capitalized. Upon sale or disposal of assets, the
cost and related accumulated depreciation adjusted for inflation effects are
removed from the accounts and the resulting gain or loss is reflected in
income.
H) INVESTMENTS
Investments that represent from 20% to 50% ownership of the capital stock
are accounted for under the equity accounting method. This method requires
investors to recognize their share of the investees' net income and
stockholders' equity. These investments are represented by independent entities
which are controlled jointly with other stockholders, who share income and
expense derived from the Company's operations.
Equity participation in local affiliates is recorded based on the
inflation adjusted equity value of the affiliate, while equity participation in
foreign affiliates is based on the equity value of the affiliate in bolivars,
translated to their respective currencies, as follows:
a) Assets and liabilities are translated at the year-end exchange rate.
b) Income and expenses are translated at the exchange rate effective at
the transaction date.
c) The translation effect is presented in the consolidated statement of
stockholders' equity in the "cumulative translation adjustment"
Investments that represent less than 20% ownership of the voting stock are
presented at their inflation-adjusted cost.
I) DEFERRED CHARGES
Deferred charges correspond mainly to operating and starting-up expenses
incurred by consolidated subsidiaries and are amortized through the
straight-line method over a five-year period.
J) EXCESS OF COST OVER NET VALUE IN BOOKS OF SHARES IN SUBSIDIARIES
The Company recorded the excess of cost over the net book value of shares
in subsidiaries since the acquisition cost of S.A. Venezolana Domestica de Gas
and Phoenix Internacional, C.A., consolidated subsidiaries, exceeded the
investor company's equity participation on the net assets of these companies at
the acquisition date. This excess is being amortized through charges to the
consolidated results over a 20-year period.
K) LONG-TERM ASSETS
The Company evaluates the impairment of long-term assets, including
goodwill, based on the projection of discounted cash flows whenever events or
changes in circumstances indicate that the net amounts of such assets may not
be recoverable. In the event, such cash flows are not expected to be sufficient
to recover the recorded value of the assets, the assets are recorded at their
fair values. The company has not recorded any loss related to impairment for
the years ended December 31, 2000, 1999 and 1998.
L) EMPLOYEE SEVERANCE BENEFITS
Employee severance benefits are calculated and recorded in accordance with
the Venezuelan labor law and the current bargaining agreement.
Under the current labor law, employees earn a severance indemnity equal to
five days of salary per month, up to a total of 60 days per year of service.
Such indemnities are earned once an employee has
A-3-9
completed three months of continuous service. Beginning in the second year of
service, the employees earn an additional two days of salary for each year of
service (or fraction of a year greater than six months), cumulative up to a
maximum of 30 days of salary. Severance benefits must be funded and deposited
monthly in either an individual trust or a severance fund or be accrued in the
employer's accounting records, as requested by written by each employee.
In the case of unjustified or involuntary termination, employees have the
right to an additional indemnification payment of one month of salary per year
of service up to a maximum of 150 days of the current salary. In the case of an
involuntary termination, an additional severance benefit of up to a maximum of
90 days of current salary based on length of employment must be paid.
Additionally, the Venezuelan labor law requires a mandatory annual profit
sharing distribution to all employees. The Company made distributions equal to
120 days of salary for the years ended December 31, 2000, 1999 and 1998.
M) INCOME TAXES
The provision for income tax is calculated based upon the net taxable
income of each individual company included in the consolidated financial
statements, determined in conformity with the Venezuelan tax legislation, which
does not permit tax consolidation. Deferred income taxes are provided based on
the timing differences between income and expense amounts reported for
financial statement and income tax purposes. Nevertheless, the recognition of
deferred tax assets is subject to future realization beyond a reasonable doubt.
N) REVENUE RECOGNITION
Revenues for sales of energy and services are recognized in the period
during which the sale occurs and the services are rendered. Operating revenues
include unbilled revenues from energy supplied in the amounts of Bs. 2,339,235;
Bs. 15,588 and Bs. 2,137,254, for the years ended December 31, 2000, 1999 and
1998, respectively. These amounts are included in accounts receivable in the
accompanying consolidated balance sheets.
O) CONCENTRATION OF CREDIT RISK
Although cash and equivalents, financial instruments and accounts
receivable of Corporacion EDC, C.A. are exposed to potential credit loss, the
Company does not believe such risk to be significant. Cash and equivalents
include investments mainly in certificates of deposits and commercial papers
with investment level and maturity dates of three months or less, in highly
rated financialication institutions. Most of the Company's accounts receivable
are from a broad and diverse group of customers, which as a whole, do not
represent a significant credit risk.
P) MARKET RISK
The Company is exposed to market risks, including changes in interest
rates and foreign currency exchange rates. The Company does not use derivative
financial instruments in its investment portfolio. The Company limits the
investment risk by placing its investments solely in securities of the most
reliable companies and institutions in the United States of North America. The
Company is averse to principal loss and ensures the safety and preservation of
its invested funds by limiting default risk, market risk and reinvestment.
Therefore, the Company only invests in companies and institutions supported or
guaranteed by the European or American Parent Company.
The Company mitigates default risk by investing in highly liquid, U.S.
dollar short-term investments, primarily certificates of deposits and
commercial papers with investment level, which have maturity dates of three
months or less. The Company does not expect any material loss with respect to
its investment portfolio.
Q) FAIR VALUE OF FINANCIAL INSTRUMENTS
The net value of cash and equivalents, trade accounts receivable and
payable, and fixed or variable interest rate bank loans approximate their fair
values.
A-3-10
R) DEFERRED CREDITS, NET
Deferred credits are related to the accumulated result from exposure to
inflation, net of operating and starting-up expenses incurred by Generacion de
Vapor GENEVAPCA, C.A., consolidated subsidiary, which maintained the policy of
deferring all financial interests and certain expenses incurred during its
preoperating stage; therefore, such credits are amortized through the
straight-line method over a five-years period from September 1, 1995. As of
December 31, 2000, these deferred credits have been amortized.
S) EXCESS OF NET VALUE IN BOOKS OVER THE COST OF SHARES IN SUBSIDIARIES
The excess of the net value in books over the cost of shares in
subsidiaries originated from the purchase of subsidiaries is realized as such
subsidiaries declare dividends over retained earnings before the acquisition
date.
T) NONRECURRING EXPENSES
Nonrecurring expenses presented in the consolidated statement of income,
include the expenses incurred in the voluntary mobilization plan carried our by
the Company during 2000 (See Note 13).
U) NET (LOSS) EARNINGS PER SHARE AND PER ADR
Net (Loss) earnings per share for the years ended December 31, 2000, 1999
and 1998 were calculated by dividing the net (loss) income by the
weighted-average of the number of outstanding shares during the last year,
including the corresponding stock dividends corrections.
Net (Loss) earnings per American Depositary Receipt (ADR) are calculated
by dividing the net (loss) earnings of the year by the number of outstanding
ADRs.
V) FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currency are recorded at the exchange rate
effective at the transaction date. Foreign currency assets and liabilities are
adjusted at the year-end exchange rate, and the resulting gain or loss is
reflected in income. As of December 31, balances in foreign currency are as
follows:
2000 1999 1998
IN THOUSANDS IN THOUSANDS IN THOUSANDS
US$ US$ US$
-------------- -------------- -------------
ASSETS
Short-term ........................... 73,106 17,765 20,536
Long-term ............................ -- 133,871 439,815
------ ------- -------
TOTAL ASSETS ........................ 73,106 151,636 460,351
------ ------- -------
LIABILITIES
Short-term ........................... 167,484 97,455 399,473
------- ------- -------
TOTAL LIABILITIES ................... 167,484 97,455 399,473
------- ------- -------
Net (liability) asset position ......... (94,378) 54,181 60,878
======= ======= =======
The exchange rates applied by the Company as of December 31, 2000, 1999
and 1988, were Bs. 699.75, Bs. 649.25 and Bs. 565.00 per U.S. dollar,
respectively.
W) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In November 2000, the International Accounting Standards Committee issued
International Accounting Standard ("IAS") No. 39, "Financial Instruments:
Recognition and measurement". The Standard establishes accounting and reporting
standards requiring that every derivative instrument be
A-3-11
recorded in the balance sheet as either an asset or liability measured at its
fair value. It addresses all financial instruments and covers topics such as
classification of financial assets, measurement of non-derivative financial
instruments, recognition and derecognition, and impairment.
IAS 39 is effective for fiscal years beginning after January 1, 2001.
Early adoption is permitted. IAS 19 cannot be applied retroactively, and upon
adoption, it is not anticipated that IAS 39 will have a significant impact on
the companies' results of operations or financial position.
NOTE 3 -- PRESENTATION OF COMPARATIVE FINANCIAL INFORMATION
The consolidated financial statements as of December 31, 2000 enclude --
in comparison to those as of December 31, 1999 and 1998 -- the accounts of EDC
Energy Ventures Distribucion Colombia (See Note 2 -- c "principles
consolidation"). Accordingly, for the purpose of presenting comparative
information, a summary of the consolidated balance sheets of Corporacion EDC
C.A. and subsidiaries as of December 31, 1999 and 1998, excluding the
consolidation of the financial statements of said company for the years then
ended, is as follows:
1999 1998
---------------- -------------
ASSETS
Current assets ................................. 78,361,665 49,259,452
Property, plant and equipment, net ............. 233,764,292 237,291,582
Investments .................................... 683,858,071 678,899,403
Long-term accounts receivable .................. 310,108 20,916,590
Intangible assets and deferred charges ......... 4,794,710 4,825,246
----------- -----------
1,001,088,846 991,192,273
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities ............................ 180,538,178 81,664,364
Long-term debt ................................. 114,659,135 231,869,560
Deferred charges ............................... 5,555,843 17,610,939
Minority interests ............................. 1,329,945 2,563,260
Stockholders' Equity ........................... 699,005,745 657,484,150
------------- -----------
1,001,088,846 991,192,273
============= ===========
A-3-12
NOTE 4 -- TRANSACTIONS AND BALANCES WITH SUBSIDIARIES AND RELATED COMPANIES
The most significant transactions carried out between the Company and its
subsidiaries and related companies are mainly for administrative services
rendered and received, such as technical services, professional fees,
securities purchase and sales operations, short and long-term financing and
financing interests. During the years ended December 31, 2000, 1999 and 1998,
the Company rendered and received administrative services, to the following and
related companies:
2000 1999 1998
------------ ----------- ------------
SERVICES RECEIVED
C.A. LA ELECTRICIDAD DE CARACAS
Administrative services .................. 7,871,289 2,469,192 5,581,001
Financial interests and expenses ......... 7,285,040 -- --
--------- --------- ---------
15,156,329 2,469,192 5,581,001
========== ========= =========
SERVICES PROVIDED
C.A. LA ELECTRICIDAD DE CARACAS
Administrative services .................. 1,970,634 955,866 2,449,784
EL SALVADOR ENERGY HOLDING, INC.
Consulting services ...................... -- 5,236,919 --
C.A. LUZ ELeCTRICA DE VENEZUELA
Consulting services ...................... -- -- 260,380
C.A. ELECTRICIDAD DE GUARENAS Y GUATIRE
Consulting services ...................... 116,070 -- 330,061
---------- --------- ---------
2,086,704 6,192,785 3,040,225
========== ========= =========
In December 1998, Servicios EDC, C.A., a subsidiary, transferred to White
Pearl Investment Corporation, its related company, its portfolio of investment
in shares at book value for that date, originating an account receivable of Bs.
20,916,590 (Bs. 15,142,237 stated at historical values). These accounts
receivable were guaranteed by the securities portfolio and to be recovered as
White Pearl Investment Corporation sold these shares. During the year ended
December 31, 1999, White Pearl Investment Corporation paid approximately Bs.
9,700,000 (stated in historical values) of the aforementioned balance.
Likewise, as of June 30, 2000, the remaining balance was fully paid for the
liquidation of the investment in White Pearl Investment Corporation.
A-3-13
As a result of the operations mentioned above and other less significant
transactions carried out with these companies, accounts receivable and payable
with subsidiaries and related companies, shown in the consolidated balance
sheets as of December 31, as represented by:
2000 1999 1998
--------- ------------ ------------
ACCOUNTS RECEIVABLE
AFFILIATES--
Caribe Energy Holdings L.T.D. ........................ -- 1,423,268 --
Desarrollo A-18 ...................................... -- -- 192,891
Vigilantes Caracas VICASA, S.A. ...................... -- 11,998 24,224
White Pearl Investment Corporation ................... -- 3,564,870 --
-- --------- -------
-- 5,000,136 217,115
== ========= =======
RELATED COMPANIES--
C.A. La Electricidad de Caracas ...................... -- 10,405,910 2,387,107
C.A. La Electricidad de Guarenas y Guatire ........... 13,312 47,074 309,573
C.A. Luz Electrica de Venezuela ...................... 22,725 37,673 81,885
C.A. Luz Electrica del Yaracuy ....................... 26,547 -- --
EDC Colombia Energy Ventures, Inc. ................... -- 90,993 86,732
EDC Columbian Holdings, Inc. ......................... -- 18,908,019 205,859
Empresa de Energia del Pacifico, S.A. E.S.P. ......... -- 2,207,402 --
Other ................................................ 38,299 88,314 10,937
------ ---------- ---------
100,883 31,785,385 3,082,093
------- ---------- ---------
100,883 36,785,521 3,299,208
======= ========== =========
2000 1999 1998
-------------- ----------- ----------
ACCOUNTS PAYABLE
AFFILIATES--
El Salvador Energy Holdings ................ 1,342,970 8,411,063 235,962
Desarrollo A-18 ............................ 52,688 -- --
--------- --------- -------
1,395,658 8,411,063 235,962
--------- --------- -------
RELATED COMPANIES--
C.A. La Electricidad de Caracas ............ 147,168,010 -- --
Fondo de prevision de los trabajadores de la
EDC and Subsidiaries. A.C. ................ 334,091 118,209 --
Caja de ahorro de los trabajadores de la EDC
and Subsidiaries .......................... 1,081 1,276 --
----------- --------- -------
147,503,182 119,485 --
----------- --------- -------
148,898,840 8,530,548 235,962
=========== ========= =======
The account payable to C.A. La Electricidad de Caracas, includes the
balances that Corporacion EDC, C.A. assumed in the transfer of the wholly owned
subsidiary EDC Columbian Holding, Inc. Additionally, on April 24, 2000,
Corporacion EDC C.A., received a loan from C.A. La Electricidad de Caracas for
an amount of approximately US$ 163 million (Bs. 114,059,250), maturing in 18
months, automatically renewable at a monthly interest Libor rate plus 2.5%.
A-3-14
NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net, shown in the consolidated balance
sheets as of December 31, are represented by:
ESTIMATED
USEFUL LIFE
2000 1999 1998 (IN YEARS)
---------------- ---------------- ---------------- ------------
Energy generation, transmission and
distribution plant ....................... 261,332,166 249,859,432 246,956,225 20
Real estate ............................... 3,893,279 9,273,941 8,364,792 50
Vehicles .................................. 3,654,464 1,273,501 1,671,639 5
Building, furniture and equipment ......... 38,582,107 29,906,330 27,271,069 3,5,10,20
----------- ----------- -----------
307,462,016 290,313,204 284,263,725
Accumulated depreciation .................. (92,222,135) (76,209,485) (63,141,355)
----------- ----------- -----------
215,239,881 214,103,719 221,122,370
Land ...................................... 12,887,227 12,787,835 9,150,720
Construction in process ................... 5,703,508 4,446,207 1,141,653
Property held for future use, net ......... -- 2,426,531 5,876,839
----------- ----------- -----------
TOTAL ..................................... 233,830,616 233,764,292 237,291,582
=========== =========== ===========
NOTE 6 -- INVESTMENTS
Investments in subsidiaries, affiliates and other, shown in the
consolidated balance sheets as of December 31, are represented by:
% DE
PARTICIPATION 2000 1999 1998
--------------- -------------- ------------- -------------
AFFILIATES
Assinet International, INC. ............. 48.00 -- 53,534,668 73,314,529
El Salvador Energy Holdings ............. 50.00 109,269,620 126,638,209 123,885,989
HIEDC Holding Ltd ....................... 50.00 -- 139,948,757 152,779,897
Vigilantes Caracas, VICASA S.A. ......... 45.00 -- 1,234,632 1,517,137
Other ................................... -- 1,087,107 1,087,107 1,087,107
----------- ----------- -----------
110,356,727 322,443,373 352,584,659
----------- ----------- -----------
OTHER
Caja Venezolana de Valores, S.A
(CVV) .................................. 16.10 461,948 461,948 461,948
Convergence Communication, Inc .......... 20.00 29,161,966 22,307,046 --
Sistema Electronico de Transacciones
SET, C.A. .............................. 10.00 330,822 330,822 330,822
Termocartagena Colombia E.S.P. .......... 4.00 462,000 462,000 462,000
VenWorld Telecom, C.A. .................. 16.00 126,143,662 477,654,000 477,654,000
Other ................................... -- 433,411 147,642 185,835
----------- ----------- -----------
156,993,809 501,363,458 479,094,605
----------- ----------- -----------
267,350,536 823,806,831 831,679,264
=========== =========== ===========
On November 7, 2000, during an Extraordinary General Stockholders' Meeting
of Vigilantes Caracas, VICASA, S.A., stockholders agreed to sell to Transporte
Valores Caribe, C.A. most of the Company's fixed assets, represented by
vehicles, equipment, weapons, as well as to transfer to said company all of the
rights and obligations related to the rendering of services. To this regard,
Corporacion
A-3-15
EDC, C.A. accrued the book value recorded as investment in VICASA of Bs. 5,233,
and the related loss is included within the "other (expenses) income, net"
caption in the consolidated statement of income for the year ended December 31,
2000.
The Company is liquidating Transformadores Caracas S.A. TRANSCASA (a
subsidiary of Grupo Industrial C.A.) The estimated liquidation value of said
company amounts to Bs. 1,545,048 (US$ 2,208,000); therefore, an accrual of Bs.
5,961,986 was recorded, and the related loss is presented as part of the "other
(expenses) income, net" caption, in the consolidated statement of income for
the year ended December 31, 2000.
A summary of the main components of the financial statements of the
affiliates for the years ended December 31, is as follows:
STOCKHOLDERS' NET
ASSETS LIABILITIES EQUITY INCOME
---------------- ------------- ----------------- ----------------
DECEMBER 31, 2000
El Salvador Energy Holdings (1) ............ 237,289,825 1,739,654 235,550,171 5,822,086
VenWorld Telecom, C.A. ..................... 2,902,089,000 80,000 2,902,009,000 (87,661,000)
------------- --------- ------------- -----------
3,139,378,825 1,819,654 3,137,559,171 (81,838,914)
============= ========= ============= ===========
DECEMBER 31, 1999
Assinett international, INC. ............... 111,530,535 -- 111,530,535 28,808,989
El Salvador Energy Holdings (1) ............ 263,808,989 1,537,899 262,271,090 24,199,765
VenWorld Telecom, C.A. ..................... 2,998,558,000 24,000 2,998,534,000 (7,978,000)
White Pearl Investment Corporation ......... 71,000 2,726,284 (2,655,284) (2,685,514)
------------- --------- ------------- -----------
3,373,968,524 4,288,183 3,369,680,341 42,345,240
============= ========= ============= ===========
DECEMBER 31, 1998
Assinett international, INC. ............... 152,738,567 -- 152,738,567 1,205,190
El Salvador Energy Holdings (1) ............ 247,771,979 -- 247,771,979 16,727,187
VenWorld Telecom, C.A. ..................... 3,149,589,156 596,333 3,148,992,823 30,080,837
White Pearl Investment Corporation ......... 20,616,052 20,616,052 -- --
------------- ---------- ------------- -----------
3,570,715,754 21,212,385 3,549,503,369 48,013,214
============= ========== ============= ===========
----------
(1) Information based on financial statements audited by other independent
public accountants
During the year ended December 31, 2000, Corporacion EDC, C.A. sold EDC
Energy Ventures-Distribucion Colombia, a subsidiary, as part of the agreement
entered into between AES Corporation and Union Fenosa Desarrollo and Accion del
exterior, S.A. (UF), on May 31, 2000, date of the shares public offering, in
which UF was able to exercise the purchase option of said subsidiary, which was
actually purchased in the last quarter of 2000. Likewise, as part of this
agreement, CEDC sold EDC Columbian Holding, Inc., a subsidiary, previously
transferred from C.A. La Electricidad de Caracas, related company. As a result
of this operation the Company recorded a loss of Bs. 221,298,249, which is
presented within the "other (expenses) income, net" caption in the consolidated
statement of income for the year ended December 31, 2000.
On June 30, 2000, White Pearl Investment Corporation was liquidated at its
book value. 48% of said company had been acquired in 1998 by Corporacion EDC,
C.A., representing a joint venture with C.A. La Electricidad de Caracas.
On June 30, 2000, Assinet International, Inc. (joint venture with C.A. La
Electricidad de Caracas), was liquidated at its book value; therefore, the
balance corresponding to translation adjustment was recorded as a loss for the
period, and is included in the "other (expenses) income, net" caption, in the
consolidated statement of income for the year ended December 31, 2000.
A-3-16
A summary of the main components of the financial statements of foreign
affiliates, audited by other independent public accountants, for the years
ended December 31, is as follows:
AS OF DECEMBER 31, 2000
CAESS EEO
---------- ----
Assets .................... 62,653,519 34,044,744
Net income ................ 11,282,622 2,836,905
AS OF DECEMBER 31, 1999 CAESS EEO ELECTROCOSTA ELECTRICARIBE
---------- ---------- ------ --------
Assets .................... 71,279,374 33,910,804 372,878,233 473,451,447
Net income (loss) ......... 21,547,186 3,413,050 3,285,721 (13,598,243)
AS OF DECEMBER 31, 1998 CAESS EEO ELECTROCOSTA ELECTRICARIBE
---------- ---------- ------------ ------------
Assets .................... 66,598,431 31,185,289 425,488,422 520,996,956
Net (loss) income ......... 19,959,615 5,248,679 (20,005,833) (15,289,958)
During the last quarter of 1999, Telematica EDC, C.A., a consolidated
subsidiary, acquired 15% of Convergence Communications, Inc for US
$ 30,525,000. During the year ended December 31, 2000, said subsidiary acquired
additionally 5% of the capital stock; therefore, the investment to that date
amounts to US $ 40,524,998.
The Company, through Inversiones Inextel C.A., a consolidated subsidiary,
owns 16% of VenWorld Telecom, C.A., represented by 18,307,136 shares with a
value of Bs. 1,000 each. As of December 31, 2000, the Company recorded a
provision to decrease its investment in VenWorld Telecom, C.A. for Bs.
351,510,338, as a result of restating to market value the investment that the
latter maintains in the stockholders' equity of Compania Anonima Nacional
Telefonos de Venezuela. Such adjustment is presented as a decrease of the
excess of the net book value over the cost of shares in the consolidated
statement of stockholders' equity for the year ended December 31, 2000. During
the years ended December 31, 2000, 1999 and 1998, VenWorld Telecom, C.A.
declared cash dividends for its stockholders. From said dividends declared,
Inversiones Inextel, C.A. received Bs. 4,122,276; Bs. 11,196,493 and Bs.
11,939,050, for 2000, 1999 and 1998, respectively.
NOTE 7 -- DEBT
SHORT-TERM DEBT
Bank loans and overdrafts presented in the consolidated balance sheets as
of December 31, include short- term loans obtained in local and foreign
financial institutions, at average market interest rates. Balances shown in the
consolidated balance sheets as of December 31, are detailed as follows:
2000 1999 1998
------------- ------------- --------------
Bank loans and overdrafts .................. 29,263,563 89,836,025 123,238,755
Current portion of long-term debt .......... 105,447,240 111,411,243 744,516
----------- ----------- -----------
134,710,803 201,247,268 123,983,271
=========== =========== ===========
A-3-17
LONG-TERM DEBT
Balances for long-term debt shown in the consolidated balance sheets as of
December 31, are represented by:
INTEREST
RATE MATURITY 2000 1999 1998
--------------- ---------- -------------- ------------- --------------
LOANS:
The Chase Manhattan Bank, quarterly
rate; 50% amortizable at the end of LIBOR +
second year and 50% at the end of 2.625 A
third year ............................ 2.175% 2001 -- 110,467,642 230,773,146
6.625%
Loan with Brown Brothers Harriman ...... Annual -- -- 661,582
Fondo de Credito Industrial (FONCREI),
variable interest rate, equivalent to Variable
75% of the asset interest rate ........ interest rate 2003 20,254 48,204 68,300
Banco Fivenez S.A.C.A. Financial Lease
Contract for US$ 5,469,012 for the
water treatment and injection plant Los
Jabillos, at a 14.50% interest rate ... 14.50% 2004 1,730,958 -- --
--------- ----------- -----------
LONG-TERM DEBT ......................... 1,751,212 110,515,846 231,503,028
--------- ----------- -----------
CURRENT PORTION ........................ 105,447,240 111,411,243 744,516
----------- ----------- -----------
TOTAL LOANS AND PROMISSORY NOTES ....... 107,198,452 221,927,089 232,247,544
=========== =========== ===========
Beginning on April 21, 1998, Corporacion EDC, C.A. is subject to
restrictive financial clauses regarding the borrowing capacity, interest
coverage and equity value ratios of the group, as a result of a three-year loan
of US$ 300,000,000, acquired by EDC Energy Ventures-El Salvador, a subsidiary.
In case that the Company fails to comply with these ratios, the situation will
be automatically considered as a noncompliance event, pursuant to the
provisions of the agreement entered into. As of December 31, 2000, 1999 and
1998, the Company has complied with said clauses.
The future debt maturity dates, from December 31, 2000, are as follows:
YEAR AMOUNT
--------------------- --------------
2001 .............. 105,447,240
2002 .............. 597,240
2003 .............. 576,986
2004 .............. 576,986
-----------
107,198,452
===========
NOTE 8 -- TAX REGIME
The provision for income taxes is estimated on the basis of an income that
differs from the book income (based on historical costs) due to nontaxable or
deductible items, which are permanent or temporary. Income tax credits for new
investments in property, plant and equipment reduce the income tax provision in
the period in which such assets are placed in service. Such credits as well as
operating losses may be carried forward up to three subsequent periods
beginning in the year in which they are generated.
The Venezuelan Income Tax Law authorizes non-compensated tax losses to be
carried forward three years or one year if they are the result of the tax
inflation adjustment. As of December 31, 2000, the Company has tax loss
carryforwards for Bs. 1,092,763, maturing in 2003.
A-3-18
Additionally, the Venezuelan tax legislation provides for a minimum asset
tax based on the inflation adjustment of net assets. As of December 31, 2000,
carryforward Corporate minimum tax credits amount to Bs. 40.219, maturing in
2003.
The main difference between the statutory income tax rate according to the
income tax law and the effective income tax rate are the result of the
application of prior years tax losses, the effect of investment tax credits and
tax inflation adjustment for the years ended December 31, presented as follows:
2000 1999 1998
----------------- -------------- --------------
Consolidated net income before income
taxes and minority interests ............... (255,183,050) 21,569,492 22,120,066
Income tax rate ............................. 34% 34% 34%
------------ ---------- ----------
Income tax expense .......................... (86,762,237) 7,333,627 7,520,822
Loss from sale of subsidiaries .............. 68,560,543 -- --
Book Inflation adjustment ................... 21,035,396 (4,907,597) 814,190
Nondeductible losses of affiliates .......... 12,327,676 6,232,532 4,396,180
Equity participaciton in affiliates ......... (7,364,330) (2,138,763) (1,909,538)
Tax adjustment for inflation ................ (5,427,068) (4,087,755) (5,029,545)
Tax losses .................................. (4,099,554) (5,056,338) (2,014,017)
Nondeductible expenses ...................... 2,323,937 4,486,495 3,032,713
Unrecognized deferred tax asset ............. 483,236 153,096 147,809
Investment tax credits ...................... (192,766) (467,740) (1,872,898)
Corporate asset minimum tax ................. 192,405 179,499 655,728
Other ....................................... 5,297,424 2,559,827 (2,799,782)
------------ ---------- ----------
INCOME TAX EXPENSE .......................... 6,374,662 4,286,883 2,941,662
============ ========== ==========
AMENDMENT TO THE INCOME TAX LAW
On October 22, 1999, the National Government published in the
Extraordinary Official Gazette N- 5390 the Amendment to the Income Tax Law. The
most significant changes effective from periods beginning after the publication
of the Law, are as follows:
1. Implementation of a price transfer regime for imports and exports of
goods and services between related companies.
2. Losses from adjustment for inflation will be carried forward up to one
period. The tax adjustment for inflation will not be applicable to
taxpayers during preoperating stage.
3. Investment tax credits in fixed assets for industrial companies will be
of 10% on the amount of investments and will be applied for five years
from the effectiveness of the Amended Law.
4. A new credit of 10% is provided on Venezuelan personnel hired from the
effectiveness of the Amended Law through December 31, 2000.
Additionally, the Amendment to the Income Tax Law includes some
regulations which will be effective January 1, 2001, as follows:
1. A new taxability regime to worldwide income, which includes taxability
applied to income obtained abroad by individuals or companies residing
or domiciled in Venezuela. It allows to credit income taxes paid abroad.
2. A proportional tax on dividends equivalent to 34%.
A-3-19
NOTE 9 -- DEFERRED CREDITS, NET
Deferred credits, net shown in the consolidated balance sheets include the
accumulated result from exposure to inflation of Generacion de Vapor GENEVAPCA,
C.A., a consolidated subsidiary, during the preoperating stage, net of other
preoperating expenses, and are represented as follows:
2000 1999 1998
---------------- ---------------- ----------------
Monetary gain, net ................... 115.285.242 115.285.242 115.285.242
Exchange loss, net ................... (35.661.433) (35.661.433) (35.661.433)
Expense interests, net ............... (16.833.994) (16.833.994) (16.833.994)
Other preoperating expenses .......... ( 3.125.921) ( 3.125.921) ( 3.125.921)
------------ ------------ ------------
59.663.894 59.663.894 59.663.894
Accumulated amortization ............. (59.663.894) (54.108.051) (42.052.955)
------------ ------------ ------------
-- 5.555.843 17.610.939
============ ============ ============
NOTE 10 -- STOCKHOLDERS' EQUITY
A) AUTHORIZED CAPITAL
During a Regular Stockholders' Meeting held on September 27, 1999,
stockholders agreed to increase the Company's authorized capital to Bs.
43,596,000 (stated in historical bolivars). Likewise, the Company has issued
22,000,000; 519,029,442 and 998,822,993 shares, during the years ended December
31, 2000, 1999 and 1998, respectively. As a result, the capital stock as of
December 31, 2000 amounts to Bs. 365,520,609.
B) DIVIDENDS DECLARED
Pursuant to the Capital Market Law, every year companies must distribute
among its stockholders an amount representing not less than 50% of the net
income for the period, before considering the share in the income or losses of
subsidiaries. Likewise, the Capital Market Law provides that not less than 25%
of said 50% must be paid as cash dividends.
C) RETAINED (DEFICIT) EARNINGS
As of December 31, 2000, 1999 and 1998, retained earnings shown in the
consolidated statements of stockholders' equity, include approximately Bs.
155,367,686; Bs. 547,384,556 and Bs. 590.974.351, provided by retained earnings
of subsidiaries and the equity share in affiliates. According to the current
legislation, these amounts are not available for distribution as dividends
until such subsidiaries and affiliates declare the related dividend.
D) LEGAL RESERVE
As provided by the Venezuelan Commercial Code, companies should separate,
annually, at least five percent (5%) of the net income determined on the basis
of historical cost in order to create the legal reserve fund, until such fund
amounts to (10%) of the capital stock. Such reserve shall not be utilized to
pay dividends.
E) AMERICAN DEPOSITARY RECEIPT (ADR)
On November 30, 1998, the U.S. Securities Exchange Commission authorized
the American Depositary Receipt (ADR) program, Level 1, for the EDC group. ADRs
are traded in the Over-the-counter market under the ticket symbol "ELDAY", and
each ADR represents 50 ordinary shares of C.A. La Electricidad de Caracas and
Corporacion EDC, C.A. the Bank of New York acts as depositary bank, while Banco
de Venezuela, S.A.C.A. as the local custodian.
A-3-20
F) EXCESS OF NET VALUE IN BOOKS OVER THE COST OF SHARES IN SUBSIDIARIES
In December 1996, the Company acquired the totality of shares of
Generacion de Vapor Genevapca, C.A.; Inversiones Inextel, C.A.; Servicios EDC,
C.A.; Telematica EDC, C.A.; Inmobiliaria EDC, C.A.; Energia EDC, C.A.; Grupo
industrial EDC, C.A. and Operaciones Internacionales EDC, C.A., subsidiary
companies, at a cost value of Bs. 104,212,770 (equivalent to Bs. 48,518,874
stated in historical values). Likewise, in 1997 the company acquired 21.20% of
Transformadores Caracas, S.A. at a cost value of Bs. 591,688 (equivalent to Bs.
370,000 stated in historical values), and for 1998, it also acquired 36.40% of
Aracoi, S.A. at a cost value of Bs. 92,250 (equivalent to Bs. 65,500 stated in
historical values).
These operations originates an excess of the net value in books over the
cost of shares of said subsidiaries of Bs. 548,687,024, which are realized as
said companies declare dividends on the retained earnings prior to the purchase
date.
During the years ended December 31, 2000, 1999 and 1998, said companies
declared dividends for Bs. 103,564,174; Bs. 53,715,796 and Bs. 24,975,160,
based on retained earnings prior to the purchase date; therefore, such amount
was reclassified in the consolidated statement of stockholders' equity, from
the account "excess of net value in books over the cost of shares in
subsidiaries" to the "retained earnings" account. Likewise, such excess value
was adjusted for Bs. 351,510,338 due to the variation of the market value of
shares of (See Note 6 -- Investments).
NOTE 11 -- FINANCING (COST) BENEFIT
Financing (cost) benefit included in the consolidated statements of income
for the years ended December 31, is represented by:
2000 1999 1998
---------------- ---------------- ----------------
Financial interest and expenses, net .......... (24,182,121) (20,829,755) (20,784,153)
Exchange gain (loss), net ..................... 3,839,983 (13,383,058) 2,705,374
Monetary gain ................................. 15,974,101 35,190,282 32,330,202
----------- ----------- -----------
(4,368,037) 977,469 14,251,423
=========== =========== ===========
A-3-21
NOTE 12 -- FINANCIAL INFORMATION PER SEGMENTS OF BUSINESS AND PER COUNTRIES
The consolidated financial statements of the Company and its subsidiaries,
as of December 31, 2000, 1999 and 1998, show the results of their operations in
the different industries and countries in which said companies operate. A
summary of assets, liabilities and results per business segment, is as follows:
ELECTRICITY TELECOM. SERVICES
2000 ---------------- -------------- ----------------
ASSETS
Current assets .................... 39,619,650 9,779,135 23,222,458
Investments ....................... 109,271,338 506,816,304 2,778,464
Prop., plant and equipment ........ 197,263,773 6,273,797 27,772,803
Long-term accounts receivable ..... 1 -- 64,716
Other assets ...................... 10,840,772 126,367 180,782
----------- ----------- ----------
TOTAL ............................. 356,995,534 522,995,603 54,019,223
=========== =========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities ............... 173,794,293 37,711,427 15,933,733
Long-term liabilities ............. 110,141,071 479 101,787
Stockholders' equity .............. 73,060,170 485,283,697 37,983,703
----------- ----------- ----------
TOTAL ............................. 356,995,534 522,995,603 54,019,223
=========== =========== ==========
Income ............................ 27,175,713 8,911,112 16,592,017
Expenses .......................... (43,219,231) (3,169,544) (14,528,353)
----------- ----------- -----------
(LOSS) INCOME ..................... (16,043,518) 5,741,568 2,063,664
=========== =========== ===========
HOLDING OTHER ELIMINATION CONSOLIDATED
2000 ----------------- --------------- ----------------- -----------------
ASSETS
Current assets .................... 192,562,155 1,438,868 (208,083,497) 58,538,769
Investments ....................... 273,454,832 (629,970,402) 267,350,536
Prop., plant and equipment ........ 83,724 2,645,302 208,783 233,830,616
Long-term accounts receivable ..... 176,000 -- 240,717
Other assets ...................... -- -- (215,200) 11,363,121
----------- --------- -----------
TOTAL ............................. 466,276,711 4,084,170 571,323,759
=========== ========= ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities ............... 179,514,436 599,793 (97,517,086) 310,036,597
Long-term liabilities ............. -- 802 (104,595,382) 5,648,757
Stockholders' equity .............. 286,762,275 3,483,575 (630,935,014) 255,638,405
----------- --------- -----------
TOTAL ............................. 466,276,711 4,084,170 571,323,759
=========== ========= ===========
Income ............................ 2,865,707 1,488,228 5,981,049 63,013,826
Expenses .......................... (595,913,204) (1,048,862) (333,832,243) (324,046,951)
------------ ---------- ------------
(LOSS) INCOME ..................... (593,047,497) 439,366 (261,033,125)
============ ========== ============
ELECTRICITY TELECOM. SERVICES
1999 ---------------- --------------- -----------------
ASSETS
Current assets .................... 107,457,413 15,769,841 18,594,493
Investments ....................... 266,587,455 499,993,035 3,931,238
Prop., plant and equipment ........ 197,480,184 1,919,783 26,141,149
Long-term accounts receivable ..... -- -- 6,291,155
Other assets ...................... 14,454,173 3,842,597 2,492,771
----------- ----------- ----------
TOTAL ............................. 585,979,225 521,525,256 57,450,807
=========== =========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities ............... 197,826,113 41,267,885 21,510,470
Long-term liabilities ............. 125,839,298 -- 1,435,677
Stockholders' equity .............. 262,313,814 480,257,371 34,504,659
----------- ----------- ----------
TOTAL ............................. 585,979,225 521,525,256 57,450,806
=========== =========== ==========
Income ............................ 71,116,675 13,563,902 495,965,928
Expenses .......................... (79,754,581) (1,382,775) (127,906,709)
----------- ----------- ------------
(LOSS) INCOME ..................... (8,637,906) 12,181,127 368,059,219
=========== =========== ============
OTHER HOLDING ELIMINATION CONSOLIDATED
1999 --------------- --------------- ----------------- ----------------
ASSETS
Current assets .................... 1,237,121 63,868,967 (128,530,271) 78,397,565
Investments ....................... -- 845,981,269 (792,686,166) 823,806,831
Prop., plant and equipment ........ 2,116,932 -- 6,106,246 233,764,292
Long-term accounts receivable ..... -- -- (5,981,047) 310,108
Other assets ...................... -- -- (15,994,831) 4,794,710
--------- ----------- -----------
TOTAL ............................. 3,354,052 909,850,236 1,141,073,506
========= =========== =============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities ............... 289,271 105,789,071 (138,890,716) 227,792,094
Long-term liabilities ............. 20,462 -- (5,750,513) 121,544,924
Stockholders' equity .............. 3,044,320 804,061,165 (792,444,841) 791,736,488
--------- ----------- -------------
TOTAL ............................. 3,354,053 909,850,236 1,141,073,506
========= =========== =============
Income ............................ 1,821,441 35,562,008 (559,393,601) 58,636,354
Expenses .......................... (1,716,698) (8,830,134) 179,377,809 (40,213,088)
---------- ----------- -------------
(LOSS) INCOME ..................... 104,743 26,731,874 18,423,266
========== =========== =============
A-3-22
ELECTRICITY TELECOM. SERVICES
1998 --------------- --------------- ----------------
ASSETS
Current assets .................... 137,924,576 12,701,808 37,740,721
Investments ....................... 251,981,551 433,653,925 3,672,148
Prop., plant and equipment ........ 191,377,971 437,061 19,444,154
Long-term accounts receivable ..... (87,216) -- 272,849
Other assets ...................... 8,590,198 101 5,438,066
----------- ----------- ----------
TOTAL ............................. 589,787,080 446,792,895 66,567,938
=========== =========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities ............... 76,211,826 11,614,075 32,623,413
Long-term liabilities ............. 235,829,969 -- 1,449,311
Stockholders' equity .............. 277,745,285 435,178,820 32,495,214
----------- ----------- ----------
TOTAL ............................. 589,787,080 446,792,895 66,567,938
=========== =========== ==========
Income ............................ 52,835,603 10,909,636 22,545,907
Expenses .......................... (34,039,329) (379,160) (23,025,955)
----------- ----------- -----------
NET (LOSS) INCOME ................. 18,796,274 10,530,476 (480,048)
=========== =========== ===========
OTHER HOLDING ELIMINATION CONSOLIDATED
1998 ------------ ---------------- ----------------- ----------------
ASSETS
Current assets .................... 414,103 54,497,944 (179,705,465) 58,549,052
Investments ....................... -- 899,809,722 (757,438,082) 831,679,264
Prop., plant and equipment ........ 2,026,870 -- 24,005,526 237,291,582
Long-term accounts receivable ..... -- -- 20,730,957 20,916,590
Other assets ...................... -- -- (9,203,119) 4,825,246
--------- ----------- -----------
TOTAL ............................. 2,440,973 954,307,666 1,153,261,734
========= =========== =============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities ............... 69,481 188,719,119 (170,728,296) 138,459,620
Long-term liabilities ............. -- -- 14,764,479 252,043,759
Stockholders' equity .............. 2,371,492 765,588,547 (750,621,003) 762,758,355
--------- ----------- -------------
TOTAL ............................. 2,440,973 954,307,666 1,153,261,734
========= =========== =============
Income ............................ 1,015,905 35,291,573 (65,317,155) 57,281,469
Expenses .......................... (889,728) (12,919,986) 33,545,152 (37,709,006)
--------- ----------- -------------
NET (LOSS) INCOME ................. 126,177 22,371,587 19,572,463
========= =========== =============
NOTE 13 -- MOBILIZATION PLAN
In August 2000, the Company began a voluntary mobilization plan for all
active employees as of June 30, 2000 in order to place a restructuring of the
organization, which was completed and fully paid in October 2000. The expense
for this concept amounted to approximately Bs. 2.373.901, included as
nonrecurring expenses in the consolidated statements of income for the year
ended December 31, 2000.
NOTE 14 -- COMMITMENTS AND CONTINGENCIES
The Company has the following commitments and contingencies:
A) LITIGATION AND CLAIMS
The Company is involved in several administrative and judicial procedures.
Management, based on the legal counsel's opinion, considers that most of these
actions will be resolved in the Company's favor. Nevertheless, management
believes that the Company has recorded adequate reserves as of December 31,
2000, 1999 and 1998 for all such matters.
B) BONDS AND GUARANTEES, GRANTED AND RECEIVED
Corporacion EDC, C.A. is the general guarantor and main payer of:
Loans obtained by Phoenix Internacional, C.A., for Bs. 1,090,000 for the
contracting of services with Banco Mercantil S.A.C.A., Banco Venezolano de
Credito and Banco de Venezuela, S.A.C.A.
Obligations contracted by Vigilantes Caracas VICASA, S.A. for Bs.
370,000,000 with Banco Exterior, C.A.
C.A. La Electricidad de Caracas is the general guarantor and main payer of
loans obtained by Corporacion EDC C.A. for Bs. 15,075,000, with Banco
Provincial S.A.C.A. and Banco Venezolano de Credito S.A.C.A.
NOTE 15 -- RECLASSIFICATION OF CONSOLIDATED FINANCIAL STATEMENTS
Certain items of the consolidated financial statements as of December 31,
1999 and 1998, have been reclassified to conform to the 2000 presentation.
A-3-23
NOTE 16 -- SUBSEQUENT EVENT
DAMAGES FROM EARTHQUAKE IN EL SALVADOR
In January 2001, a strong earthquake shook El Salvador, the country where
the Affiliates of Corporacion EDC, C.A. operate (See Note 6). The Company
counts on insurance policies covering material damages and loss of profits. To
the date of issuance of these financial statements, the Company is still
identifying and quantifying commercial damages and damages from loss of
benefits.
NOTE 17 -- EXPLANATION ADDED FOR TRANSLATION TO ENGLISH
These consolidated financial statements where originally issued in Spanish
and translated into English and are presented on the basis generally accepted
accounting principles in Venezuela.
A-3-24
ANNEX B
SPECIAL REPORT ON PURCHASER'S INTENTIONS
Tender Offer to Take Control
(the "VENEZUELAN OFFER")
for 199,968,608 outstanding Shares of
COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA (CANTV)
("CANTV" or "TARGET COMPANY")
at
US$3.4285714 per Share
by
AES COMUNICACIONES DE VENEZUELA, C.A.
(the "PURCHASER"),
a company jointly owned indirectly
by
THE AES CORPORATION ("AES")
and
CORPORACION EDC, C.A. ("CEDC")
1. IDENTIFICATION AND DESCRIPTION OF THE MAIN CHARACTERISTICS OF PURCHASER AND
PURCHASER'S GROUP, INCLUDING EXPERIENCE IN THE AREA OF TARGET COMPANY
ACTIVITIES.
The Purchaser is AES Comunicaciones de Venezuela, C.A., formerly
Inversiones D72410, C.A., a corporation (compania anonima) incorporated and
domiciled in the City of Caracas and registered at the Seventh Commercial
Registry of the Judicial Circumscription of the Capital District and State
of Miranda on April 20, 2001 under No. 31, Volume 180-A-VII.
Approximately two-thirds of the Purchaser's capital stock is indirectly
owned by AES. The remaining capital stock of the Purchaser is owned
indirectly by CEDC.
AES is a corporation organized under the laws of the State of Delaware. AES
is a global power company committed to serving the world's needs for
electricity in a socially responsible way. AES participates primarily in
two related lines of business: electricity generation and distribution. AES
operates and owns (entirely or in part) electric power plants in South
America, Europe and Asia, and distribution companies in the United States,
Venezuela, Argentina, Brazil, El Salvador, Dominican Republic and The
Republic of Georgia. AES is using its distribution infrastructure and
knowledge of various markets to develop the ability to provide wholesale
and/or retail telecommunications services. AES continually considers
business development opportunities, including acquisition opportunities
through the world. AES's revenues during 2000 were approximately US$7.58
billion and total assets were approximately US$33 billion as of December
31, 2000. Shares of AES trade on the New York Stock Exchange under the
symbol "AES."
AES is the majority owner in and controls several telecom businesses in
Latin America. These include companies that own 25,000 km of fiber
providing carrier and retail services for voice and data in Brazil and
Bolivia. AES also has other telecom investments in Latin America offering
value added services such as web hosting.
CEDC is a Venezuelan company in which AES indirectly holds 87% of the
outstanding ordinary shares. CEDC's shares are traded on the Caracas Stock
Exchange together with the shares of C.A. La Electricidad de Caracas
("EDC") under the symbol "EDC". CEDC is a holding company for
non-Venezuelan investments and for Venezuelan investments other than in
regulated electricity activities. CEDC holds interests in companies
dedicated to the production and distribution of electricity,
telecommunications and distribution of natural gas.
2. BUSINESS PLANS FOR THE NEXT THREE YEARS FOR TARGET COMPANY IN THE CASE OF A
SUCCESSFUL COMPLETION OF THE CHANGE IN CONTROL, INCLUDING SPECIAL MENTION
TO:
A. IF ITS BUSINESS STRATEGY IS TO EXPAND, LIMIT OR MAINTAIN THE BUSINESS OF
TARGET COMPANY.
B-1
As described below, following consummation of the Offers, the Purchaser
intends to seek to sell CANTV's interest in its wireless business,
currently held by its wholly-owned subsidiary Telecomunicaciones Movilnet
C.A. ("Movilnet"). If and to the extent that the Purchaser acquires
control of CANTV pursuant to the Offers, the Purchaser intends to conduct
a detailed review of CANTV and its assets, corporate structure, dividend
policy, capitalization, operations, properties, policies, management and
personnel and, subject to applicable law, to consider and determine what,
if any, changes would be desirable in light of the circumstances which
then exist. The business strategy for CANTV will depend on the results of
such review.
B. IF WITHIN SUCH PLANS FOR SUCH PERIOD IT IS CONTEMPLATED ANY MERGERS,
LIQUIDATIONS, INCREASES OR DECREASES IN CAPITAL, THE SALE OF ANY
SUBSIDIARIES OR INTEREST IN COMPANIES OR THE SALE OF MATERIAL ASSETS.
MERGER. The Purchaser intends as promptly as practicable following
consummation of the Offers, and prior to the payment of any dividends, to
consummate a merger between the Purchaser and CANTV in which the
Purchaser would be the surviving corporation. Prior to the consummation
of this merger, the Purchaser would transfer to its immediate parent,
TelCom 2, B.V. all the Shares and ADSs owned by the Purchaser (including
the Shares and ADSs purchased pursuant to the Offers). Upon the merger,
all shareholders of CANTV other than TelCom 2 will receive shares of the
Purchaser in exchange for their Shares, which would change its name to
CANTV and would continue all of the business and operations of CANTV. As
a result of the merger, Purchaser (also referred to as the surviving
corporation) would have as shareholders TelCom 2 and all other persons
who were shareholders of CANTV prior to the merger, who will hold the
same interest in the surviving corporation and the same rights granted by
the class of shares in CANTV they held immediately prior to the merger.
In accordance with the Capital Markets Law, the proposed merger would
have to be notified to the CNV 30 days prior to the shareholders meeting
that will consider the merger, so that the CNV may exercise its oversight
and control powers on the capital markets and the entities subject to its
control to protect investors, including minority shareholders.
Under CANTV's Bylaws and Venezuelan law, the merger would require the
approval of the holders of a majority of CANTV's outstanding capital
stock present at a meeting at which there was a properly constituted
quorum and the holders of a majority of CANTV's Class B Shares. In the
event the Purchaser purchases Shares and ADSs pursuant to the Offers, the
Purchaser and its Related Persons would be able to approve the merger
without the vote of any other holders of CANTV's capital stock, other
than the Venezuelan government, the holder of all Class B Shares. The
Purchaser is requesting that the holder of Class B Shares approve the
merger. The Purchaser has the right to terminate the Offers if such
shareholder has not agreed to vote in favor of the merger. See Section
6.a.iv of this Report. The Purchaser also believes that the merger is
subject to the approval of CONATEL.
Under Venezuelan law the merger could not be consummated until the
expiration of a three month period following shareholder approval and
publication of notice of the merger, unless the merger was approved by
all creditors of CANTV. If after the expiration of such three month
period, no CANTV creditor has opposed the merger or if any such CANTV
creditor who has opposed the merger has withdrawn such objection, the
merger could be consummated. If any creditor opposes the merger during
such three month period, the merger could not be consummated until such
opposition was withdrawn or until a Venezuelan court ruled that the
merger can proceed.
As a result of the merger, the surviving corporation will have the same
general capital structure, financial condition and operations and will
have the same tangible or intangible assets, rights and obligations that
CANTV had before the merger. Following the merger, shareholders of CANTV
will continue as shareholders of the surviving corporation, holding the
same class of shares held in CANTV prior to the merger, and the Bylaws of
the surviving corporation will be amended to be consistent with the
Bylaws and capital structure of CANTV, including the maintenance of the
B-2
rights of holders of Class B and Class C Shares. The shares of the
surviving corporation will be registered with the National Securities
Registry in accordance with the Capital Markets Laws and regulations
thereunder and the class D shares of the surviving corporation will be
listed on the Caracas Stock Exchange (as the Class D Shares of CANTV are
currently listed) and, subject to the matters set forth below, the
American Depositary Shares representing the surviving corporation's class
D shares will trade on the New York Stock Exchange. Based upon its review
to date of public information, the Purchaser is not aware of any third
party consents under CANTV's contracts, other than under a loan
agreement, that would be required to effect the merger. The Purchaser
currently intends to either cause CANTV to obtain the consent of the
lender under the loan agreement or refinance the loan. In addition, to
the extent any additional consents were required, the Purchaser currently
intends to seek to obtain such consents. In addition, following the
merger, the Purchaser intends to transfer some of the assets of CANTV to
a wholly owned subsidiary of CANTV.
SEE ANNEX G FOR A DESCRIPTION OF CERTAIN U.S. TAX CONSIDERATIONS RELATED
TO THE MERGER AND SUBSEQUENT CASH DISTRIBUTIONS APPLICABLE TO U.S.
HOLDERS OF SHARES.
POTENTIAL SALE OF MOVILNET. Following consummation of the Offers, the
Purchaser intends to seek to sell CANTV's interest in its wireless
business, currently held by its wholly-owned subsidiary
Telecomunicaciones Movilnet C.A. ("MOVILNET"). The Purchaser is
considering a variety of mechanisms for effecting such sale, including a
negotiated transaction with a third party and/or a public offering of
Movilnet shares through a capital markets transaction. In this regard,
representatives of the Purchaser have held negotiations with a third
party regarding a possible sale of Movilnet. The Purchaser believes that
Movilnet would be a very attractive asset for international
telecommunications operators and that the sale of Movilnet would create
proceeds which could be distributed to all shareholders of CANTV's
capital stock while increasing competition in the Venezuelan
telecommunications market. However, there can be no assurance that a sale
of Movilnet could be effected, the price thereof or the amount, if any,
that could be distributed to shareholders as a result of any such sale.
The sale of Movilnet is subject to the approval of CONATEL.
The sale of Movilnet would reduce the consolidated assets of CANTV in an
amount equal to the value of Movilnet's assets sold. However, such sale
would also increase the consolidated assets of CANTV in an amount equal
to the cash or the market value of any other asset which CANTV receives
as proceeds of such sale. As a result of the sale of Movilnet, CANTV
would cease to render mobile phone services through Movilnet. Purchaser
contemplates that the proceeds and any control premium derived from the
sale of Movilnet would result in funds that could be distributed to all
holders of CANTV shares in proportion to their Share ownership in CANTV.
Except as otherwise disclosed in this Report, the Purchaser does not have
any other present plans or proposals that relate to or would result in
any extraordinary corporate transaction, such as a merger, reorganization
or liquidation, involving CANTV or any of its subsidiaries, a sale or
transfer of a material amount of assets of CANTV or any of its
subsidiaries or any material changes in CANTV's capitalization or
dividend policy or any other material changes in CANTV's corporate
structure or business.
C. IF PURCHASER PLANS TO MODIFY TARGET COMPANY DIVIDEND POLICY.
DIVIDENDS. Following the successful completion of the Offers, the
Purchaser intends to cause CANTV to distribute to all shareholders of
CANTV cash currently held by CANTV determined to be in excess of CANTV's
current or anticipated needs. Based on its review to date of publicly
available information with respect to CANTV, the Purchaser believes CANTV
is in a position to distribute additional dividends to its shareholders.
The Purchaser believes that any such dividends would benefit all
shareholders of CANTV without adversely affecting CANTV's operations or
investment requirements. The actual amounts to be distributed to
shareholders of CANTV will be determined by, among other things,
applicable legal requirements, the results of Purchaser's review of CANTV
described above, the financial condition of CANTV, the
B-3
availability of sufficient retained earnings and funds to effect such
distributions and requirements under loan and other agreements to which
CANTV is a party which restrict CANTV's ability to pay dividends. Based
upon its review to date of the loan and other agreements to which CANTV
is a party which are publicly available, the Purchaser believes CANTV is
in a position to distribute additional dividends without any third party
consents. To the extent the Purchaser determines that third party
consents under such agreements are required, the Purchaser intends to
seek any such consents. However, the Purchaser believes that certain of
CANTV's debt instruments would, in the future, restrict the payment of
dividends by CANTV. The Purchaser intends to cause CANTV to seek to
obtain consents from the lenders and/or refinance such indebtedness which
could prevent the payment of such dividends. At this time, the Purchaser
is unable to determine the actual amounts that may be in excess of
CANTV's current or future needs and that could be distributed or the
timing thereof and would not expect to be in a position to make any
determination with respect thereto until the completion of the
Purchaser's review described above.
D. IF PURCHASER INTENDS TO ENTER INTO STRATEGIC ALLIANCES OF ANY KIND WITH
OTHER COMPANIES.
At the present time, Purchaser does not have plans to enter into
strategic alliances.
3. PLANS RELATED TO THE CONTINUATION OF STOCK LISTING.
LISTING OF THE SHARES ON THE CARACAS STOCK EXCHANGE. The Class D Shares of
CANTV (being the only class of shares underlying the ADSs) are listed on
the Caracas Stock Exchange. The Purchaser recognizes that the existence of
a liquid trading market for Class D Shares in Venezuela is important to the
shareholders of CANTV. Consequently, the current strategy of AES is to
cause CANTV to maintain the listing of those Shares on the Caracas Stock
Exchange, and to cause the listing of the class D shares of the surviving
entity of the merger described above.
The purchase of Shares pursuant to the Venezuelan Offer will substantially
reduce the number of Class D Shares of CANTV that might otherwise trade
publicly and may also reduce the number of holders of Shares. In view of
the number of the Shares that would remain outstanding after completion of
the Offers, the Purchaser believes that there will continue to be a market
for the Class D Shares. However, the reduction in publicly traded Class D
Shares will likely adversely affect the liquidity, marketability and market
value of the Class D Shares.
LISTING OF THE ADSS ON THE NEW YORK STOCK EXCHANGE AND REGISTRATION OF THE
ADSS UNDER THE U.S. EXCHANGE ACT. The ADSs are currently listed on the New
York Stock Exchange. The Purchaser intends to cause CANTV (subject to
applicable listing requirements) to maintain the listing of ADSs on the New
York Stock Exchange following the purchase of ADSs pursuant to the U.S.
Offer and to request the listing of the American Depositary Shares of the
surviving corporation in the merger on the New York Stock Exchange.
However, it is possible that, due to decreases in the number of ADS
holders, trading volume and the potential reduction of the market value of
the ADSs following the consummation of the U.S. Offer, the ADSs will no
longer meet the continued listing requirements of the New York Stock
Exchange. In the event that ADSs fail to meet its continued listing
requirements, the New York Stock Exchange may choose, at its discretion, to
delist the ADSs.
The ADSs are currently "margin securities" under the regulations of the
Board of Governors of the U.S. Federal Reserve System, Federal Reserve
Board, which has the effect, among other things, of allowing brokers to
extend credit on the collateral of such securities. If the New York Stock
Exchange listing for the ADSs is terminated following the purchase of ADSs
pursuant to the U.S. Offer, the ADSs will no longer constitute margin
securities for the purposes of the Federal Reserve Board's margin
regulations and, therefore, could no longer be used as collateral for loans
made by brokers.
The ADSs are currently registered under the U.S. Securities Exchange Act of
1934 (the "U.S. EXCHANGE ACT"). Although the Purchaser has no current plans
to de-register the ADSs, such registration may be terminated upon
application of CANTV to the U.S. Securities and Exchange Commission ("SEC")
if the ADSs are not listed on a national securities exchange and there are
fewer than 300 record holders of ADSs resident in the United States.
Termination of the registration of the
B-4
ADSs under the U.S. Exchange Act would substantially reduce the information
required to be furnished by CANTV to holders of ADSs and to the SEC and
would make certain of the provisions of the U.S. Exchange Act, such as the
requirements of Rules 13e-3 and 13e-4 under the U.S. Exchange Act with
respect to "going private" transactions, no longer applicable to the ADSs.
Furthermore, "affiliates" of CANTV and persons holding restricted
securities of CANTV may be deprived of the ability to dispose of such
securities pursuant to Rule 144 promulgated under the U.S. Securities Act
of 1933, as amended.
The purchase of ADSs pursuant to the U.S. Offer will reduce substantially
the number of ADSs that might otherwise trade publicly and will reduce the
number of holders of ADSs. In view of the number of ADSs that would remain
outstanding after completion of the Offers, Purchaser believes that there
will continue to be a market for the ADSs. However, the reduction in
publicly traded ADSs will likely adversely affect the liquidity,
marketability and market value of the ADSs.
4. DESCRIPTION OF ANY OTHER BUSINESS PLAN THAT MAY AFFECT THE NON-SELLING
SHAREHOLDERS POSITIVELY OR NEGATIVELY.
Except as described above, Purchaser has no business plan that may affect
the non-selling shareholders positively or negatively.
For assistance in connection with the Venezuelan Offer and additional copies of
this Venezuelan Offer to Purchase contact the Receiving Agent at the address
and telephone number shown below.
THE VENEZUELAN OFFER REPORT (INCLUDING ITS ANNEXES) CONTAINS IMPORTANT
INFORMATION THAT SHOULD BE READ BY YOU IN FULL BEFORE ANY DECISION IS MADE IN
CONNECTION WITH THE VENEZUELAN OFFER.
B-5
COMISION NACIONAL DE VALORES CERTIFICATION:
"THIS SPECIAL REPORT ON THE INTENTIONS OF THE PURCHASER RELATES TO A TENDER
OFFER TO TAKE CONTROL OF CANTV. THE COMISION NACIONAL DE VALORES DE VENEZUELA
CERTIFIES THAT THE PROVISIONS OF THE CAPITAL MARKETS LAW AND THE PUBLIC TENDER
OFFER RULES ON THE ACQUISITION, EXCHANGE AND TAKEOVER OF COMPANIES THAT MAKE
PUBLIC OFFERINGS OF SHARES AND OTHER RIGHTS THEREON HAVE BEEN COMPLIED WITH.
THE COMISION NACIONAL DE VALORES DE VENEZUELA DOES NOT CERTIFY THE QUALITY OF
THE BUSINESS TRANSACTIONS HEREIN PROPOSED. ADVERTISEMENT AUTHORIZED BY THE
COMISION NACIONAL DE VALORES DE VENEZUELA."
The publication of this Summary was authorized by Comision Nacional de Valores
de Venezuela Resolution 205-2001 dated September 21, 2001.
THE COORDINATOR FOR THE VENEZUELAN OFFER IS:
[ACTI VALORES LOGO]
SOCIEDAD DE CORRETAJE
Calle Los Chaguaramos
Centro Gerencial Mohedano PH-A
La Castellana
Caracas, Venezuela
Tel: (0212)201-7511
www.activalores.com
consult@activalores.com
THE RECEIVING AGENT, TRUSTEE OF THE CLASS C SHARES AND PAYING AGENT OF THE
VENEZUELAN OFFER IS:
[UNIBANCA LOGO]
Avenida Universidad, Esquina El Chorro
Torre Unibanca
Caracas, Venezuela
Tel: (0212)-501-7942
Fax: (0212)-501-8485
THE FACILITATING AGENT FOR THE CLASS C SHARES IS:
[GRAPHIC OMITTED] INVERUNION S.A.
CASA DE BOLSA
Avenida Universidad, Esquina El Chorro
Torre Unibanca
Caracas, Venezuela
Tel: (0212)-501-7942
Fax: (0212)-501-8485
THE LEGAL ADVISOR OF THE VENEZUELAN OFFER IS:
D'EMPAIRE REYNA BERMuDEZ ABOGADOS
Edificio Bancaracas, P.H.
Plaza La Castellana
Caracas 1160, Venezuela
Tel: (0212)264-6244
Fax: (0212)264-7543
www.drbalegal.com
THE FINANCIAL ADVISORS FOR THE VENEZUELAN OFFER ARE:
[JP MORGAN LOGO]
[CREDIT SUISSE FIRST BOSTON LOGO]
[BANC OF AMERICA SECURITIES LOGO]
September 25, 2001
B-6
ANNEX C
JOINT GUARANTEE (FIANZA) OF THE AES CORPORATION
Richard Bulger, an American citizen, of legal age, domiciled in Caracas and
bearer of the Venezuelan identity card number 82.282.571, acting in my capacity
as Vice President of THE AES CORPORATION, a company organized and existing
under the laws of the State of Delaware, United States of America, ("GUARANTOR"
or "THE AES CORPORATION"), which headquarters are located in 1001 North 19th
Street, Arlington, Virginia, United States of America, duly authorized as
evidenced by minutes of the meeting of the board of directors of the Guarantor
held on June 28, 2001 and the certificate issued by the Assistant Secretary of
the Guarantor as of September 10, 2001, hereby declares:
ONE: AES Comunicaciones de Venezuela, C.A., formerly Inversiones D72410, C.A.,
a compania anonima organized and domiciled in Caracas and registered with the
Seventh Commercial Registry Office of the Judicial Circuit of the Capital
District and State of Miranda on April 20, 2001, under N degrees 31, Volume 180
A-VII., ("AES COMUNICACIONES" or "PURCHASER") will initiate (i) a public tender
offer for 199,968,608 shares ("SHARES") of COMPANIA ANONIMA TELEFONOS DE
VENEZUELA (CANTV) ("CANTV" or "TARGET"), a compania anonima organized and
domiciled in Caracas and originally registered with the Commercial Registry
kept by the Commercial Court of the Federal District on June 20, 1930, under N
degrees 2, Volume 387 (the "VENEZUELAN OFFER"), and (ii) a public tender offer
in the United States of America to acquire 28,566,944 American Depositary
Shares of CANTV ("ADSS"), representing 199,968,608 Class D Shares of CANTV (the
"U.S. OFFER" and, together with the Venezuelan Offer, the "OFFERS").
TWO: By this document, The AES Corporation is instituted as joint and several
guarantor (fiador solidario) of Purchaser up to the amount of
US$1,371,213,306.29 to guarantee the payment of the purchase price of Shares
purchased pursuant to the Venezuelan Offer and ADSs purchased pursuant to the
U.S. Offer, in the time and upon the terms and conditions set forth in the
Venezuelan Offer to Purchase and the U.S. Offer to Purchase. For the sole
purpose of complying with Article 95 of the Venezuelan Central Bank Law, it is
stated that US$1,371,213,306.29 is equivalent to Bs. 1,022,925,126,492.34, at
the exchange rate of Bs. 746 per US$.
THREE: The Guarantor expressly waives the benefits of excusion and division
contemplated in the Venezuelan Civil Code.
FOUR: For purposes of this guarantee, any notice to the Guarantor shall be
deemed validly made through the delivery of written notices to the following
address: Avenida Vollmer, Edificio Electricidad de Caracas, Piso 16, Caracas,
Venezuela, to the attention of Julian Nebreda.
FIVE: This guarantee shall be governed by the laws of the Bolivarian Republic
of Venezuela.
SIX: All rights and actions before the Guarantor shall lapse if after three (3)
months from the date on which an event occurs which gives rise to a claim
pursuant to this guarantee, an enforcement proceeding has not been initiated.
SEVENTH: The effectiveness of this guarantee shall be subject to the
commencement of the Venezuelan Offer and shall only be effective from the
Commencement Date of the Venezuelan Offer.
Caracas, on this date of execution before a Notary Public.
C-1
ANNEX D
SHARE LETTER OF TRANSMITTAL OF THE TENDERED OFFER OF SHARES ISSUED BY COMPANIA
ANONIMA NACIONAL DE TELEFONOS DE VENEZUELA (CANTV) (HEREINAFTER CANTV) BY AES
COMUNICACIONES DE VENEZUELA, C.A. (HEREINAFTER "AES COMUNICACIONES DE VENEZUELA"
OR "THE PURCHASER")
NO
------------------------------------------------------------------------------------------------------------------
(1) RECEIVING OFFICE / BROKER/BROKERAGE HOUSE: (2) CODE: (3) DATE OF RECEIPT:
------------------------------------------------------------------------------------------------------------------
(4) FIRST AND LAST NAME OR FIRM NAME OR CORPORATE NAME OF THE SEX: M [ ]
SHAREHOLDER (HEREINAFTER "TENDERING SHAREHOLDER"): F [ ]
------------------------------------------------------------------------------------------------------------------
(5) IDENTITY CARD / PASSPORT / (6) DATE OF BIRTH: (7) LEGAL STATUS:
R.I.F. NUMBER:
V [ ]
E [ ] [ ] SINGLE [ ] MARRIED [ ] DIVORCED [ ] WIDOW(ER) [ ] OTHER [ ]
------------------------------------------------------------------------------------------------------------------
(8) FIRST AND LAST NAME OF SPOUSE: (9) IDENTITY CARD / PASSPORT:
V [ ]
F [ ]
------------------------------------------------------------------------------------------------------------------
(10) DOES SEPARATION OF MARITAL ESTATE OR (11) DOCUMENT INFORMATION: (12) DATE (13) NUMBER (14) VOLUME:
PRENUPTIAL AGREEMENT EXIST:
YES [ ] NO [ ]
------------------------------------------------------------------------------------------------------------------
LEGAL (15) COMMERCIAL REGISTRY WITH WHICH IT IS REGISTERED (16) DATE (17) NUMBER (18) VOLUME:
ENTITY
------------------------------------------------------------------------------------------------------------------
POWER OF (19) REGISTRY OR NOTARY'S OFFICE WITH WHICH IT IS (20) DATE (21) NUMBER (22) VOLUME:
ATTORNEY REGISTERED OR NOTARIZED:
------------------------------------------------------------------------------------------------------------------
(23) ADRESS OF AVENUE / STREET / CORNER / LINE / ROAD/ SECTOR: (24) HOUSE / BUILDING / TOWER / FLOOR /
THE SHAREHOLDER: APARTMENT / OFFICE / DEPARTMENT:
------------------------------------------------------------------------------------------------------------------
(25) SECTOR / MUNICIPALITY: (26) CITY: (27) STATE:
------------------------------------------------------------------------------------------------------------------
(28) TELEPHONE NUMBER: (29) MOBILE PHONE NUMBER: (30) E - MAIL:
------------------------------------------------------------------------------------------------------------------
INSTRUCTIONS FOR PAYMENT OF DIVIDENDS
(DATA HEREIN REFERRED SHALL BE USED ONLY BY THE TRANSFER AGENT AND/OR CVV CAJA VENEZOLANA DE VALORES)
------------------------------------------------------------------------------------------------------------------
(31) NAME OF BANK: (32) ACCOUNT NUMBER: (33) TYPE OF ACCOUNT:
CHECKING [ ] SAVINGS [ ] FAL [ ]
------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SALE ORDER AND/OR TRANSFER IN TRUST
--------------------------------------------------------------------------------
(34) AMOUNT AND CLASS OF SHARES TENDERED:
ALL [ ] OR NUMBER [ ][ ][ ][ ][ ][ ][ ][ ][ ] AMOUNT IN WORDS:______________
IF THE ALL BOX IS CHECKED, THE NUMBER BOX SHALL BE LEFT BLANK
(35) CLASS(3): A [ ] B [ ] D [ ] C [ ] TRANCHE: 9% [ ] 11% [ ]
ONLY A SINGLE FORM SHALL BE FILLED FOR EACH CLASS OF SHARES
(36) THE TENDERED SHARES ARE (37) FORM OF PAYMENT: Bs.(1) [ ] US$. [ ]
REGISTERED IN:
[ ] TRANSFER AGENT
[ ] CAJA VENEZOLANA DE VALORES. DEPOSITARY: ____________________________________
(38) FORM OF PAYMENT [ ] CHECK
[ ] DEPOSIT IN UNIBANCA ACCOUNT NUMBER ______________(2)
THE TENDERING SHAREHOLDER AUTHORIZES ACTIVALORES SOCIEDAD DE CORRETAJE S.A. OR
THE FACILITATING AGENT FOR THE CLASS C SHARES, AS THE CASE MAY BE, TO PROCESS
BEFORE THE TRANSFER AGENT AND/OR BEFORE CVV CAJA VENEZOLANA DE VALORES THE
TRANSFER, ASSIGNMENT OR DEPOSIT OF THE SHARES TO THE SPECIAL ACCOUNT OF
ACTIVALORES SOCIEDAD DE CORRETAJE S.A. IN THE CVV CAJA VENEZOLANA DE VALORES OR
IN THE NAME OF UNIBANCA, BANCO UNIVERSAL, C.A. AS TRUSTEE.
--------------------------------------------------------------------------------
IF THE AMOUNT OF SHARES HEREIN INDICATED IS GREATER THAN THE AMOUNT ACTUALLY
REGISTERED IN THE BOOKS OF THE COMPANY AND/OR IN THE CVV CAJA VENEZOLANA DE
VALORES, IT SHALL BE CONSIDERED THAT THE AMOUNT ACTUALLY REGISTERED IN THE BOOKS
OF THE COMPANY AND/OR IN THE CVV CAJA VENEZOLANA DE VALORES IS THAT FOR WHICH
THE TENDER IS MADE OR THE TRANSFER IN TRUST IS MADE, PROVIDED THEY ARE AVAILABLE
AND FREE OF ENCUMBRANCES, EXCEPT FOR THE PLEDGE GRANTED IN FAVOR OF THE ORIGINAL
TRUSTS IN THE CASE OF THE CLASS C SHARES. IN CASE THAT THE AMOUNT OF SHARES IS
FEWER THAN THE AMOUNT SO REGISTERED, IT SHALL BE TAKEN AS TENDERED THE AMOUNT
HEREIN INDICATED. IF THE "ALL" BOX IS CHECKED, IT SHALL BE UNDERSTOOD THAT THE
TENDERING SHAREHOLDER HAS EXPRESSED HIS/HER INDICATION TO TENDER, WITH OR
WITHOUT PRIOR TRANSFERS TO THE TRUST, AS THE CASE MAY BE, WITH RESPECT TO ALL
SHARES REGISTERED UNDER HIS/HER NAME A IN THE BOOKS OF THE COMPANY AND/OR IN THE
CVV CAJA VENEZOLANA DE VALORES.
--------------------------------------------------------------------------------
THE TENDERING SHAREHOLDER AUTHORIZES ACTIVALORES SOCIEDAD DE CORRETAJE S.A., THE
PERSON DESIGNATED BY IT OR THE FACILITATING AGENT FOR THE CLASS C SHARES, AS THE
CASE MAY BE, TO SIGN IN HIS/HER NAME AND ON HIS/HER BEHALF THE ASSIGNMENT
ENTRIES IN THE STOCK CERTIFICATES AND THE BOOKS OF COMPANIA ANONIMA TELEFONOS DE
VENEZUELA (CANTV)
--------------------------------------------------------------------------------
ONLY TO BE FILLED IN BY THE CLASS C SHAREHOLDERS WHO HAVE BALANCES DUE WITH THE
ORIGINAL TRUSTS
--------------------------------------------------------------------------------
(39) ORIGINAL TRUSTEE:
(40) NUMBER OF PLEDGED SHARES: [ ][ ][ ][ ][ ][ ][ ][ ][ ]
--------------------------------------------------------------------------------
THE TENDERING SHAREHOLDER REPRESENTS HAVING RECEIVED, KNOWN, UNDERSTOOD AND
ACCEPTED (I) THE VENEZUELAN OFFER TO PURCHASE WITH ALL ITS ANNEXES; (II) THE
SINGLE TEXT CONTAINING (a) THE REPRESENTATIONS AND WARRANTIES OF THE TENDERING
SHAREHOLDERS OF THE VENEZUELAN OFFER OF CANTV BY THE TENDERING SHAREHOLDER, AND
(b) THE POWER OF ATTORNEY GRANTED IN FAVOR OF THE COORDINATOR OF THE VENEZUELAN
OFFER OR THE FACILITATING AGENT FOR THE CLASS C SHARES, AS THE CASE MAY BE ("THE
SINGLE TEXT OF THE REPRESENTATIONS, WARRANTIES AND POWER OF ATTORNEY"), THAT WAS
GRANTED BEFORE THE THIRD NOTARY PUBLIC, OF CHACAO ON SEPTEMBER 14, 2001, BEING
REGISTERED UNDER NUMBER 1, VOLUME 127 OF THE AUTHENTICATION LEDGERS KEPT BY SUCH
NOTARY PUBLIC.
ADDITIONALLY, IN THE CASE OF A TENDERING SHAREHOLDER THAT IS A HOLDER CLASS C
SHARES, THE TENDERING SHAREHOLDER DECLARES HAVING RECEIVED, KNOWN, UNDERSTOOD
AND ACCEPTS ENTERING INTO THE TRUST AGREEMENT WHICH WAS EXECUTED BEFORE THE
THIRD NOTARY PUBLIC OF CHACAO ON SEPTEMBER 14, 2001, BEING REGISTERED UNDER
NUMBER 2, VOLUME 127 OF THE AUTHENTICATION LEDGERS KEPT BY SUCH NOTARY PUBLIC
("THE TRUST AGREEMENT").
THE TENDERING SHAREHOLDER, UPON SIGNING AT THE BOTTOM OF THIS DOCUMENT (I) JOINS
AND RATIFIES ALL CLAUSES OF THE "SINGLE TEXT OF REPRESENTATIONS, WARRANTIES AND
POWER OF ATTORNEY", (II) EXPRESSLY GRANTS A POWER OF ATTORNEY TO THE COORDINATOR
OF THE VENEZUELAN OFFER OR TO THE FACILITATING AGENT FOR THE CLASS C SHARES, AS
THE CASE MAY BE UNDER THE TERMS AND CONDITIONS INDICATED IN THE SINGLE TEXT OF
REPRESENTATIONS, WARRANTIES AND POWER OF ATTORNEY AND (III) IF THE TENDERING
SHAREHOLDER IS A HOLDER OF CLASS C SHARES, JOINS THE TRUST AGREEMENT AND
DECLARES THAT HE/SHE HAS RECEIVED A COPY OF THIS FORM.
THE TENDERING SHAREHOLDER DECLARES UNDER OATH THAT ALL DATA AND INFORMATION
CONTAINED IN THIS FORM IS TRUE.
--------------------------------------------------------------------------------
(41) S I G N A T U R E S
--------------------------------------------------------------------------------
HOLDER [ ] REPRESENTATIVE [ ] AGENT [ ]
NAME: __________________________________________________________________________
IDENTITY CARD OR PASSPORT NUMBER: ______________________________________________
SIGNATURE: _____________________________________________________________________
SPOUSE [ ] REPRESENTATIVE [ ] AGENT [ ]
NAME: __________________________________________________________________________
IDENTITY CARD OR PASSPORT NUMBER: ______________________________________________
SIGNATURE: _____________________________________________________________________
--------------------------------------------------------------------------------
(DO NOT FILL IN THIS SPACE)
THE DEPOSITARY, BROKER OR BROKERAGE HOUSE CERTIFIES THAT THE INFORMATION
FURNISHED AND THE ABOVE REGISTERED FIRMS ARE TRUE AND ARE RESPONSIBLE PURSUANT
TO ARTICLE 68 OF THE COMMERCIAL CODE AND ARTICLE 88 OF THE INTERNAL REGULATIONS
OF THE CARACAS STOCK EXCHANGE
SEAL AND SIGNATURE
--------------------------------------------------------------------------------
(1) SUBJECT TO THE PROVISIONS OF THE VENEZUELAN OFFER TO PURCHASE.
(2) THIS OPTION OF PAYMENT IS AVAILABLE ONLY TO TENDERING SHAREHOLDERS WHO HAVE
AN ACCOUNT WITH UNIBANCA, BANCO UNIVERSAL, C.A. AND WHO RECEIVED PAYMENT IN
BOLIVARS, SUBJECT TO THE TERMS OF THE VENEZUELAN OFFER TO PURCHASE.
(3) A SEPARATE SHARE LETTER OF TRANSMITTAL MUST BE COMPLETED FOR EACH CLASS.
--------------------------------------------------------------------------------
The undersigned, Julian J. Nebreda Marquez, a Venezuelan citizen, domiciled in
Caracas, married and bearer of the identity card number 6.911.647, acting on
behalf of AES COMUNICACIONES DE VENEZUELA, C.A., (the "Purchaser") a company
domiciled in Caracas and incorporated by document filed with the Seventh
Commercial Registry Office of the Judicial Circuit of the Federal District and
State of Miranda on April 20, 2001 under N degrees 31, Volume 180-A-VII, duly
authorized by the Articles of Incorporation and By-laws of the Purchaser,
hereby declares that the text contained herein below are the only
representations and warranties that shall be made by the Tendering Shareholders
under the Tender Offer (the "Venezuelan Offer") commenced by the Purchaser to
acquire 199,968,608 shares of Compania Anonima Nacional Telefonos de Venezuela
(CANTV) ("CANTV"), as well as the text of the power of attorney to be granted
by the Tendering Shareholders in favor of Activalores Sociedad de Corretaje,
S.A., ("Coordinator of the Venezuelan Offer") or in favor of Inverunion, S.A.
Casa de Bolsa ("Facilitating Agent for the Class C Shares"):
SINGLE TEXT OF THE REPRESENTATIONS AND WARRANTIES MADE BY THE TENDERING
SHAREHOLDERS UNDER THE VENEZUELAN OFFER COMMENCED BY THE PURCHASER AND POWER OF
ATTONEY GRANTED IN FAVOR OF THE COORDINATOR OF THE VENEZUELAN OFFER OR IN FAVOR
OF THE FACILITATING AGENT FOR THE CLASS C SHARES.
The Tendering Shareholder identified in the Share Letter of Transmittal of the
Venezuelan Offer declares the following:
FIRST. Definitions: For purposes of this document and the Share Letter of
Transmittal of the Venezuelan Offer, the following terms and phrases shall have
the following meanings:
1.1) Shares: shall be the term used to identify the shares of CANTV, regardless
of their class, that are tendered in the Venezuelan Offer by the Tendering
Shareholder as set forth in the Share Letter of Transmittal of the Venezuelan
Offer.
1.2) Class A, B and/or D Shares: shall be the term used to identify the class
A, B, and/or D shares of CANTV that are tendered in the Venezuelan Offer by the
Tendering Shareholder.
1.3) Class C Shares: shall be the term used to identify the class C shares of
CANTV that must be transferred by the Facilitating Agent for the Class C Shares
to the Special Trust for purposes of being tendered in the Venezuelan Offer
pursuant to this document.
1.4) Not Released Class C Shares: shall be the term used to identify the Class
C Shares with respect to which there is no evidence of release of the
Preferential Right to the satisfaction of the Facilitating Agent for the Class
C Shares.
1.5) Trust Shares: shall be the term used to identify the Class C Shares
released of the Preferential Right and Pledge that are transferred to the
Special Trust by the Facilitating Agent for the Class C Shares as a mechanism
to be sold to Purchaser pursuant to the Venezuelan Offer.
1.6) Tendering Shareholder: shall be the term used to identify any holder of
Class A, B, C or D shares of CANTV that tenders CANTV shares pursuant to the
Venezuelan Offer.
1.7) AES Comunicaciones de Venezuela or Purchaser: shall be the terms
alternatively used to identify AES Comunicaciones de Venezuela, C.A. a company
organized and domiciled in Caracas and registered with the Seventh Commercial
Registry Office of the Judicial Circuit of the Federal District and State of
Miranda on April 20, 2001, under N degrees31, Volume 180-A-VII, in its capacity
as purchaser pursuant to the Venezuelan Offer.
1.8) Facilitating Agent for the Class C Shares: shall be the term used to
identify Inverunion, S.A. Casa de Bolsa (formerly Inversiones Y Valores Union,
Inverunion, S.A.) a corporation domiciled in Avenida Universidad, esquina El
Chorro, Torre Unibanca, Piso 19, Caracas, Venezuela, and registered with the
Second Commercial Registry of the Judicial Circuit of the Federal District and
State of Miranda on June 13, 1990, under N degrees51, Volume 98-A-Second, which
by-laws were amended pursuant to the document registered with the said
Commercial Registry, on July 20, 2001, under N degrees47, Volume 140-A-Second,
which corporate name was amended as currently in the Extraordinary Shareholders
Meeting, held on June 4,
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2001, which Minutes were registered with said Commercial Registry, on July 25,
2001, under N degrees48, Volume 143-A-Second, duly authorized to act as
BROKERAGE HOUSE by the National Securities Commission under Resolution Number
387, of October 3, 1990, as evidenced in the communication of October 30, 1990,
N degrees 293-90, which is in charge of presenting Class C Shares in the
Internal Market to be released of the Preferential Right and/or transfer the
Class C Shares to the Special Trust, as the case may be, through duly
authorized officers.
1.9) BANDES: shall be the term used to identify the Banco de Desarrollo
Economico y Social de Venezuela.
1.10) CANTV: shall be used to identify Compania Anonima Nacional Telefonos de
Venezuela (CANTV), a company organized and domiciled in Caracas and originally
registered with the Commercial Registry kept by the Commercial Court of the
Federal District on June 30, 1930, under N degrees 2, Volume 387.
1.11) Trust Agreement: shall be the term used to identify the special
administration and guarantee trust agreement entered into among (i) Unibanca,
Banco Universal, C.A. (as Trustee) and Inverunion, S.A. Casa de Bolsa, (ii)
Purchaser (as initial settlor), as evidenced in the document executed before
the Third Notary Public of Chacao, on September 14, 2001, under number 2,
Volume 127 of the authentication ledgers kept by such Notary Public and (iii)
the Tendering Shareholders holding Class C Shares, whose Class C Shares shall
be transferred from time to time to the Trustee pursuant to the terms and
conditions set forth in the Trust Agreement.
1.12) Coordinator of the Venezuelan Offer: shall be the term used to identify
Activalores Sociedad de Corretaje, S.A., a company organized and domiciled in
Caracas, and registered with the Commercial Registry Office of the Judicial
Circuit of the Federal District and State of Miranda, on May 22, 1991, under N
degrees 80, Volume 86-A-Second, appointed as coordinator of the Venezuelan
Offer by Purchaser and domiciled in Centro Gerencial Mohedano, PH, Calle
Chaguaramos con avenida Mohedano, La Castellana, Caracas, Venezuela.
1.13) Preferential Right: shall be the term used to identify the preferential
right in favor of holders of Class C Shares, as contemplated in article 5(e) of
the bylaws of CANTV.
1.14) Special Trust: shall be the term used to identify the special
administration and guarantee trust created pursuant to the Trust Agreement.
1.15) Original Trusts: shall be the term used to identify the trusts originally
established by the Fondo de Inversiones de Venezuela, with Unibanca, Banco
Universal, C.A., (formerly Banco Union), Banco Provincial, Banco de Venezuela,
Banco Consolidado (now Corp Banca), Citibank, Banco de Maracaibo and Banco
Latino and their successors, as amended as of the date hereof, to sell the
Class C Shares pursuant to the Labor Participation Plans derived from the
privatization of CANTV and to guarantee the payment of the total amount of the
purchase price of such Class C Shares to BANDES as successor of Fondo de
Inversiones de Venezuela (FIV) and in whose favor the Class C Shares are
pledged.
1.16) Trustee: shall be the term used to identify Unibanca, Banco Universal,
C.A., banking institute domiciled in Caracas and filed with the Commercial
Registry of the Judicial Circuit of the Federal District and State of Miranda
on January18, 1946 under number 93, Volume 6-B and which transformation into
Universal Bank is evidence in the Extraordinary Shareholders Meeting Minutes
dated August 28, 2000 filed with the First Commercial Registry Office of the
Judicial Circuit of the Federal District and State of Miranda on February 9,
2001 under Nro. 47, Volume 23-A-Pro and which name was changed to its current
one in the Extraordinary Shareholders Meeting of February 11, 2001, which
minutes were filed before the mentioned registry office on February 23, 2001,
under Nro. 12, Volume 33-A Pro., in its capacity as trustee under the Trust
Agreement.
1.17) Share Letter of Transmittal of the Venezuelan Offer: shall be the term
used to identify the form to be executed by the Tendering Shareholder to tender
in the Venezuelan Offer, which together with this document constitutes
of the Venezuelan Offer to Purchase.
1.18) Venezuelan Offer to Purchase: shall be the term used to identify the
Venezuelan Offer to Purchase, which contains the terms and conditions of the
Venezuelan Offer, including all its annexes, as amended or supplemented.
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1.19) Internal Market: shall be the term used to identify the internal market
for the purchase and sale of Class C Shares as contemplated in article 5(e) of
the Bylaws of CANTV.
1.20) Tender Offer Rules: shall be the term used hereinafter to identify the
Venezuelan tender offer rules issued by the Venezuelan National Securities
Commission ("CNV").
1.21) Venezuelan Offer: shall be the term used to identify the public tender
offer that is being made by the Purchaser for shares of CANTV pursuant to the
terms and conditions set forth in the Venezuelan Offer to Purchase.
1.22) Pledge: shall be the term used to identify the existing pledge in favor
of the Original Trusts on certain Class C Shares to guarantee the payment of
the original purchase price of such shares to the Original Trusts.
All capitalized terms used herein in and not otherwise defined shall have the
meaning ascribed to them in the Trust Agreement and/or in the Venezuelan Offer
to Purchase.
SECOND. Representations and Warranties: The "Tendering Shareholder" hereby
represents and warrants the following:
a) That he/she has received and reviewed the Venezuelan Offer to Purchase
(including the Annexes thereto) and hereby accepts all its terms and
conditions, including the proration rules.
b) That he/she recognizes and accepts that the Purchaser may amend, extend,
withdraw or terminate the Venezuelan offer, or waive the terms and
conditions set forth therein, pursuant to the Venezuelan Offer.
c) If the Tendering Shareholder holds Class C Shares that (i) he/she has read,
knows and fully understands, accepts and agrees with all and each of the
terms, conditions and provisions of the Trust Agreement; (ii) his/her
signature on the Share Letter of Transmittal grants a power of attorney to
the Facilitating Agent for the Class C Shares in his/her name and on
his/her behalf (a) to tender the Not Released Class C Shares in the
Internal Market, performing all applicable actions in case that a holder of
Class C Shares exercises the Preferential Right; (b) to join the Special
Trust and (c) to transfer to the Trustee the Class C Shares indicated in
the Share Letter of Transmittal of the Venezuelan Offer after their release
of the Preferential Right, and for the Trustee to tender those Class C
Shares in the Venezuelan Offer.
d) That he/she accepts the Venezuelan Offer with respect to the Class A, B
and/or D Shares on the terms and conditions contained in the Venezuelan
Offer to Purchase, and therefore grants power of attorney to the
Coordinator of the Venezuelan Offer to, among other, formalize such tender.
In case of Tendering Shareholders holding Class C Shares, the tender
pursuant to the Venezuelan Offer is subject to the condition that such
shares are released from the Preferential Right. In case of Tendering
Shareholders holding Class C Shares, such tender shall be made by the
Trustee once they are transferred to the Trustee and with the prior release
of the Pledge and the Preferential Right.
e) That if the number of Shares owned by the Tendering Shareholder pursuant to
the Shareholders Book of CANTV and/or the records maintained by Caja de
Valores de Venezuela, are less than the amount of Shares indicated on the
Share Letter of Transmittal of the Venezuelan Offer, the transfer to the
Special Trust, if applicable, and the tender pursuant to the Venezuelan
Offer shall only be deemed validly made with respect to the number of
Shares that are actually owned by the Tendering Shareholder pursuant to
such Book and/or Caja de Valores de Venezuela. In the event that the
Tendering Shareholder has checked the "All" box in the Share Letter of
Transmittal of the Venezuelan Offer, it shall be understood that the tender
in the Venezuelan Offer shall be effective with respect to all and any
Shares of the class indicated in the Share Letter of Transmittal that are
registered as owned by the Tendering Shareholder pursuant to the
Shareholders Book of CANTV and/or the records maintained by Caja de Valores
de Venezuela. The Shares which pursuant to the Book of Shareholders of
CANTV show any kind of lien, different from the Pledge, or prohibitions to
sell or encumber, shall be excluded from the transfer to the Trustee, if
applicable, and from the tender in the Venezuelan Offer, since the transfer
to the Special Trust, if applicable, and tender in the
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Venezuelan Offer shall only be accepted for the number of Shares which are
freely transferable. In the event of Class C Shares subject to the Pledge,
the Class C Shares shall be released from the Pledge by the Original
Trusts, with the authorization of BANDES prior to their transfer to the
Trustee.
f) That he/she recognizes and accepts that his/her signature on the Share
Letter of Transmittal of the Venezuelan Offer is authentic evidence that
this document constitutes a binding agreement between him/her, on the one
hand, and Purchaser and the Coordinator of the Venezuelan Offer, on the
other hand; and, in addition, with respect to the holders of the Class C
Shares, that the Trust Agreement constitutes a binding agreement between
him/her, on the one hand, and the Facilitating Agent for the Class C Shares
and the Trustee, on the other hand, all in accordance with the terms and
conditions set forth in the Venezuelan Offer to Purchase, in this document
and in the Trust Agreement, if applicable.
g) That Tendering Shareholders holding Not Released Class C Shares recognize
and accept that once the Not Released Class C Shares are in the Internal
Market, such Class C Shares must conclude such process even if the power of
attorney granted with the execution of the Share Letter of Transmittal of
the Venezuelan Offer is revoked under the terms and conditions provided in
this document, and that it is possible that such Not Released Class C
Shares will be sold in the Internal Market pursuant to the provisions of
the by-laws of CANTV and the applicable resolutions of the Board of
Directors if other Class C Shareholders exercise the Preferential Right. In
such case the Class C Shares so purchased will not be tendered in the
Venezuelan Offer, and therefore the holder thereof will have no claim
against the Purchaser, the Facilitating Agent for the Class C Shares, the
Trustee, the Coordinator of the Venezuelan Offer, or to any other person
related to the Venezuelan Offer with respect to such Class C Shares.
h) That he/she accepts that the Coordinator of the Venezuelan Offer, the
Facilitating Agent for the Class C Shares or the Trustee, acting on her/his
behalf or as trustee, as the case may be, and in exercise of the power of
attorney granted upon execution of the Share Letter of Transmittal of the
Venezuelan Offer, upon the terms and conditions of the Venezuelan Offer to
Purchase, the Trust Agreement and this document, shall sell the Shares to
Purchaser and shall process payment for such sale in the form contemplated
in the Venezuelan Offer or in the Trust Agreement, as the case may be.
i) That he/she accepts that if as a consequence of the proration rules or the
termination of the Venezuelan Offer the Purchaser has not purchased all or
any of the Shares, the same shall be transferred to the Tendering
Shareholder, and the same shall have the Pledge in favor of the Original
Trust in the case of the return of Class C Shares that at the time of the
execution of the Share Letter of Transmittal were encumbered with the
Pledge.
j) That, by execution of this document he/she hereby revokes and/or substitutes
(as the case may be) any power of attorney or mandate previously granted by
the Tendering Shareholder in connection with the Shares. Likewise, in case
of revocation the Tendering Shareholder shall notify the corresponding
representatives or agents of the revocation and shall not grant any power
of attorney or mandate to any third party other than the Coordinator of the
Venezuelan Offer or the Facilitating Agent for the Class C Shares, as the
case may be, in connection with the Shares while the Venezuelan Offer is
open and while the tender of the Shares in the Venezuelan Offer has not
been withdrawn or the Class C Shares have not been withdrawn from the
Trust, in accordance with the Venezuelan Offer to Purchase or the Trust
Agreement.
k) Additionally the Tendering Shareholder expressly represents: (a) that he/she
is the legitimate owner of the Shares; (b) that he/she is sufficiently
empowered and has the legal capacity to execute the Share Letter of
Transmittal of the Venezuelan Offer and tender in the Venezuelan Offer, and
in case of Tendering Shareholders holding Class C Shares that he/she is
additionally empowered and has the legal capacity to have the Facilitating
Agent for the Class C Shares previously tender the Not Released Class C
Shares in the Internal Market and to join and enter into the Trust
Agreement and to transfer the Class C Shares to the Trustee; (c) that the
signature that appears in the Share Letter of Transmittal is his/her
signature, and consequently, this document, as well as the Trust Agreement,
are completely binding on him/her and enforceable in accordance with their
terms and conditions;
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(d) that no person other than the Tendering Shareholder may claim any right
on the Shares, that the Shares are free and clear of prohibitions to sell
or encumbrances, pledges, security assignments, privileges, preferential
rights or other liens, interests or rights which may affect their full use,
enjoyment and transferability, except for the Pledge over certain Class C
Shares which, if that is the case, shall be released concurrently with the
transfer of the Class C Shares to the Trustee; (e) that if the Shares are
transferred to the Purchaser, the Purchaser will acquire ownership of the
Shares, free and clear of prohibitions to sell or encumbrances, pledges,
security assignments, privileges, preferential rights or other liens,
interests or rights which may affect their complete use, enjoyment of
transferability, together with their voting rights and with rights to all
dividends, subscription rights and other distributions; (f) that the Shares
do not constitute treasury shares nor qualify as reciprocal participation
under the terms of the Capital Markets Law and the rules issued by the CNV;
(g) the tender of the Shares under the Venezuelan Offer by the Tendering
Shareholder or by the Trustee, as the case may be, complies with the
applicable legislation and (h) that when the Class C Shares are transferred
to the Trustee, the Trustee shall acquire ownership and possession in its
capacity as Trustee and all Distributions which correspond to them, free
and clear of prohibitions to sell or encumber, pledges, security
assignments, privileges, preferential rights or other liens, interests or
rights (except for the Pledge, which at that time shall be released by the
Original Trusts), for the sole purposes of complying with the Trust
Agreement, and not the Class C Shares nor the Distributions which
correspond to them shall be subject to actions and adverse claims.
l) In the event that he/she qualifies as a U.S. Holder, as defined in Annex G
to the Venezuelan Offer to Purchase, that he/she is the owner of the Shares
within the meaning of Rule 14e-4 issued under the United States Securities
Exchange Act of 1934 and the tender of the Shares pursuant to the
Venezuelan Offer through the Coordinator of the Venezuelan Offer or the
Trustee, as the case may be, complies with such rule.
THIRD. Power of Attorney to the Facilitating Agent for the Class C Shares:
Notwithstanding the provision of item 3.6) of this section, the Tendering
Shareholder holding Not Released Class C Shares by executing the Share Letter
of Transmittal of the Venezuelan Offer grants an irrevocable special power of
attorney, ample and sufficient as necessary and as required by law, to the
Facilitating Agent for the Class C Shares, to perform the following activities
as soon as possible on his/her behalf and in accordance with the terms and
conditions contained in the Trust Agreement, in this document and in the
Venezuelan Offer to Purchase. This power of attorney shall be effective while
the activities set forth therein are performed or until January 31, 2002, which
ever occurs first:
3.1) To request from the Transfer Agent, the CVV Caja Venezolana de Valores
and/or CANTV a statement of the Shares registered in the name of the Tendering
Shareholder and a list of the Not Released Class C Shares, as well as those
released from the Preferential Right, and, if possible, to review the share
registry books and other relevant registries. Likewise to request from the CVV
Caja Venezolana de Valores the name of the person under whose name the Class C
Shares of the Tendering Shareholder are deposited.
3.2) To offer any Not Released Class C Shares in the Internal Market at the
maximum price in accordance with the Bylaws of CANTV. In case the Not Released
Class C Shares are sold in the Internal Market as indicated above, to execute
all documents related to the sale of such shares in the Internal Market and to
collect the proceeds of the sale; make the payment which corresponds to the
Original Trusts and to release the Pledge, as the case may be. Also, the
Facilitating Agent for the Class C Shares shall proceed to pay the balance of
the sales price to the Tendering Shareholder within the five (5) days following
receipt of the proceeds of the sale. Payment shall be deemed made when the
check or the funds in case of a deposit to an account is available at the
offices of the Trustee. To use the Distribution in the manner indicated in the
Venezuelan Offer to Purchase.
3.3) To transfer the Class C Shares to the Trustee once they are released from
the Preferential Right and the Pledge, executing all documents which are
necessary to become a party to the Trust Agreement.
3.4) In any case, taking into account that the Tendering Shareholder holding
Class C Shares may have acquired such shares from the portion corresponding to
the 11% of the Employee Participation Plan of
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1991 (the First PPL) and/or from the portion corresponding to the 9% of the
Employee Participation Plan of 1996 (the Second PPL); he/she instructs the
Facilitating Agent for the Class C Shares and/or the Trustee, as the case may
be, to sell in the Internal Market or through the Trust, first the Class C
Shares corresponding to the Second PPL, and if such shares are not sufficient,
the Class C Shares corresponding to the First PPL. In any event, the sale of
Class C Shares subject to the Pledge shall be given priority.
3.5) In general, by granting this power of attorney, the Facilitating Agent for
the Class C Shares is empowered to perform on behalf of the Tendering
Shareholder holding Class C Shares all the necessary and/or convenient acts to
complete the Internal Market process, as well as the transfer of Class C Shares
to the Special Trust, including, without limitation, the execution of any
required document, registry books and/or registries, and to complete the
mentioned transfers In this sense, the Facilitating Agent for the Class C
Shares acting as agent of the Tendering Shareholder holding Class C Shares may
perform, among others, without limitation, the following acts: (a) to request
from the Transfer Agent, the CVV Caja Venezolana de Valores and/or CANTV a
statement of the Shares registered to the name of the Tendering Shareholder and
a list of Class C Shares released from the Preferential Right, and the name of
the person under whose name the Shares of the the Tendering Shareholder are
deposited, and the ability to review the share registry books and other
relevant registries, (b) to complete and execute all transfer requests and any
other documents required to transfer ownership of such shares as a result of
the exercise of the Preferential Right or the transfer or the Special Trust in
accordance with the Trust Agreement and this document; (c) to deposit and/or
withdraw such shares from the Caja de Valores de Venezuela; (d) in case the
Tendering Shareholder holding Class C Shares requests the withdrawal of his/her
shares from the Special Trust, to proceed to revoke the tender in the
Venezuelan Offer in accordance with the terms and conditions of the Venezuelan
Offer to Purchase or in case of termination of the Venezuelan Offer without the
purchase of the Shares, to transfer the applicable Class C Shares to the
Tendering Shareholder with the prior encumbrance of the shares with the Pledge
in favor of the Original Trusts if at the moment of execution of the Share
Letter of Transmittal of the Venezuelan Offer a Pledge over such shares existed
and (e) if, as a consequence of the proration rules or the termination of the
Venezuelan Offer some of the Class C Shares are not purchased, to transfer such
shares to the Tendering Shareholder with the prior Pledge in favor of the
Original Trusts in the case of the return of Class C Shares that at the moment
of execution of the Share Letter of Transmittal of the Venezuelan Offer were
encumbered with the Pledge.
3.6) Notwithstanding the above, and only if the procedure to tender Class C
Shares in the Venezuelan Offer through the Special Trust is changed, the
Facilitating Agent for the Class C Shares may also take any steps and actions
necessary to tender the Class C Shares through any other procedure contemplated
in the Venezuelan Offer. Accordingly, the Facilitating Agent for Class C Shares
will be expressly authorized to (i) tender the Class C Shares in the Venezuelan
Offer and (ii) take any steps and actions necessary to pay the balance of the
debt to the Original Trusts and release the Pledge, if applicable, all in
accordance with the mechanisms and procedures previously agreed between the
Initial Settlor and the Facilitating Agent for the Class C Shares.
3.7) This power of attorney may be revoked, provided that the Facilitating
Agent for the Class C Shares receives on or before the Expiration Date, a
revocation notice granted by the person who executed the Share Letter of
Transmittal of the Venezuelan Offer in the places designated by the Receiving
Agent of the Venezuelan Offer, being deemed revoked only in the case that a
valid withdrawal of the tender in the Venezuelan Offer occurs in the terms
contemplated in the Venezuelan Offer to Purchase. The notice must indicate the
number of Class C Shares to which the revocation refers. This revocation does
not prevent the shareholder from granting a new power of attorney with the same
effect on or before the Expiration Date in favor of the Facilitating Agent for
the Class C Shares.
3.8) It is expressly understood that neither the Trustee nor the Facilitating
Agent for the Class C Shares will have any responsibility in case the transfer
to the Special Trust does not occur as a consequence of the exercise of the
Preferential Right in the Internal Market or for lack of the corresponding
authorization to release the Pledge by the Original Trustees.
FOURTH. Power of Attorney to the Coordinator of the Venezuelan Offer:
Notwithstanding the provision of item 4.6) of this section, the Tendering
Shareholder holding Class A, B and/or D Shares as well as the
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Trustee for acceptance of the Venezuelan Offer with respect to Trust Shares,
hereby grants an irrevocable special power of attorney, ample and sufficient as
necessary and as required by law, to the Coordinator of the Venezuelan Offer,
to perform the following activities as soon as possible on his/her behalf and
in accordance to the terms and conditions contained in the Trust Agreement, in
this document and in the Venezuelan Offer to Purchase. This power of attorney
shall be effective while the activities set forth therein are performed or
until January 31, 2002, which ever occurs first:
4.1) To request from the Transfer Agent, the CVV Caja Venezolana de Valores
and/or CANTV a statement of the Shares registered in the name of the Tendering
Shareholder, and the ability to review the share registry books and other
relevant registries. Likewise to request from the CVV Caja Venezolana de
Valores the name of the person under whose name the Shares of the Tendering
Shareholder are deposited.
4.2) To exercise the voting right of the Shares in accordance with the terms
and conditions of the Venezuelan Offer to Purchase and in accordance with the
Trust Agreement with respect to Class C Shares.
4.3) To sell the Shares to Purchaser, on the terms and conditions described in
the Venezuelan Offer to Purchase. For such purposes the agent herein designated
is sufficiently empowered to sign as a transferor on behalf of the Tendering
Shareholder, the transfers corresponding to the Shares in the stock
certificates representing the shares as well as in the Shareholders Book of
CANTV and any other documents required by the Caja de Venezolana de Valores.
4.4) Receive on behalf and in the name of the Tendering Shareholder, the
payment of the purchase price for the Shares by the Purchaser and to make
available to the Tendering Shareholder such payment in accordance with the
terms and conditions established in the Venezuelan Offer to Purchase and to
grant the corresponding releases. To use the Distributions in the manner
indicated in the Venezuelan Offer to Purchase.
4.5) In general, by granting this power of attorney, the Coordinator of the
Venezuelan Offer is empowered to perform on behalf of the Tendering Shareholder
all the necessary and/or convenient acts to complete the above mentioned
transfers of the Shares, including, without limitation, the execution of any
required document, registry books and/or registries, and to complete the tender
of the Shares on the terms and conditions of the Venezuelan Offer to Purchase
and of this document, as well as to effect when legally possible, the
withdrawal of the acceptance of the offer. In this sense, the Coordinator of
the Venezuelan Offer acting as agent of the Tendering Shareholder may perform,
among others, without limitation, the following acts: (a) to request from the
Transfer Agent, the CVV Caja Venezolana de Valores and/or CANTV a statement of
the Shares registered to the name of the Tendering Shareholder and the name of
the person under whose name the Shares of the Tendering Shareholder are
deposited, and the ability to review the share registry books and other
relevant registries, (b) to complete and execute all transfer requests and any
other documents required to transfer ownership of the Shares, (c) to file any
transfer requests and other required documents and effect and formalize the
transfer of the Shares before the Transfer Agent, the CVV Caja Venezolana de
Valores, the Caracas Stock Exchange and any other entity nominee for the Shares
to effect and formalize the transfer of the Shares; (d) to deposit and/or
withdraw the Shares from the CVV Caja Venezolana de Valores; (e) to open a
sub-account in the CVV Caja de Venezolana de Valores on behalf of the Tendering
Shareholder and transfer the Shares to said sub-account; (f) in case of
withdrawal of the tender pursuant to the Venezuelan Offer in accordance with
the terms and conditions of the Venezuelan Offer to Purchase or in case of
termination of the Venezuelan Offer without the purchase of the Shares, to
transfer the Shares to the Tendering Shareholders and (g) if as a consequence
of the proration rules some of the Shares are not purchased, to transfer such
shares to the Tendering Shareholder.
4.6) This power of attorney shall be deemed revoked only in case of a valid
withdrawal of the tender of the Venezuelan Offer on the terms and conditions
contemplated in the Venezuelan Offer to Purchase.
FIFTH. Simultaneous Representation: The Coordinator of the Venezuelan Offer and
the Facilitating Agent for the Class C Shares are expressly authorized by the
Tendering Shareholder pursuant to article
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1.171 of the Venezuelan Civil Code, to effect the transfer in trust of the
Class C Shares and/or to execute the purchase transactions of the Shares
contemplated in this document, as a representative and agent of the Tendering
Shareholder, as well as a representative and agent of the Trustee and/or the
Purchaser.
SIXTH: Accurate Information: The Tendering Shareholder hereby declares under
oath the true and exactness of all the information and data contained in this
document.
SEVENTH: Domicile: For all the effects resulting from and as a consequence of
this document, the city of Caracas is the special domicile to the jurisdiction
of which Courts the Tendering Shareholder agrees to be subject.
AES Comunicaciones de Venezuela, C.A.
/s/ Julian Jose Nebreda Marquez,
--------------------------------
Name: Julian Jose Nebreda Marquez
Title: Administrator
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ANNEX E
DOCUMENTS TO BE ATTACHED TO THE SHARE LETTER OF
TRANSMITTAL
INDIVIDUAL
[ ]Copy of the identity card currently in effect or the passport of the holder
of the shares and his/her representative or agent
[ ]Copy of the identity card currently in effect or the passport of his/her
spouse and his/her representative or agent
[ ]Copy of the power authorizing the signature of the representative or agent,
if applicable
[ ]Copy of the documents of separation of marital property or prenuptial
agreement or power of the spouse, if applicable
[ ]Copy of the divorce decision or death certificate, if applicable
[ ]Copy of the birth certificate of the minor holding no identity card and of
the corresponding judicial authorization, if applicable
[ ]If the shareholder has a certificate evidencing the shares, he/she must
deliver the original certificate
LEGAL ENTITY
[ ]Complete copy of the publication of the articles of incorporation and bylaws
of the company currently in effect
[ ]Copy of the identity card of the authorized person(s), legal
representative(s), agent(s)
[ ]Copy of the document(s) evidencing the authority of the signatory(ies)
[ ]Copy of the tax payer registration number (RIF)
[ ]If the shareholder has a certificate evidencing the shares, he/she must
deliver the original certificate
THE COPY OF THE MENTIONED DOCUMENTS MUST BE
CLEAR AND COMPLETE
E-1
ANNEX F
SPECIAL INSTRUCTIONS FOR THE PARTICIPATION OF
HOLDERS OF CLASS C SHARES IN THE VENEZUELAN OFFER
Instructions to holders of Class C Shares who wish to tender their Class C
Shares in the public tender offer (the "Venezuelan Offer") for 199,968,608
shares of capital stock of Compania Anonima Nacional Telefonos de Venezuela
(CANTV) ("CANTV") by AES Comunicaciones de Venezuela C.A. (the "Purchaser") in
accordance with the the terms and conditions of the Venezuelan Offer set forth
in the Venezuelan Offer to Purchase, dated September 25, 2001, as amended or
supplemented (the "Report").
1. Shareholders who wish to tender their Class C Shares in the Venezuelan
Offer or their agents, including (i) those who have not offered their Class C
shares in the Internal Market; and (ii) those who have not paid the original
purchase price of their Class C Shares and whose Class C Shares are subject to
a pledge in favor of the Original Trusts, shall go to any of the branches of
Unibanca, Banco Universal, C.A. ("Unibanca") designated to such effect,
complete the Share Letter of Transmittal which will be handed to the Class C
Shareholders in such branches and file the following documents (currently
required by CANTV):
o Photocopy of the share purchase agreement executed between the Trustee
Banks and the shareholders for the purchase of the Class C Shares
corresponding to the 9% and 11% tranches (Pink Form) of the Employee
Participation Plans. In case the shareholder does not have the Pink Form
the shareholder shall request a copy from the Original Trusts that sold
such holders the Class C Shares.
o If the Class C Shares were received as a Prize par Excellence, an
original and a photocopy of the letter of award of such shares as a Prize
par Excellence.
o Evidence issued by CANTV, if any, that his/her Class C Shares have been
cleared of the preferential rights provided in Article 5(e) of the
by-laws of CANTV in favor of the other holders of Class C Shares (the
"Preferential Right").
o Power of attorney: If the Class C Shares are tendered by an agent of the
holder of such Shares, a notarized power of attorney granted by such
holder in favor of the agent shall be delivered.
o Identification:
Single: o Photocopy of the valid laminated Identity Card or substitute card with no more than
6 months of issue (*).
Married: o Photocopy of the valid laminated Identity Card or substitute card with no more than
6 months of issue (*) of the holder and his/her spouse (in case the legal status that
appears in the identity card is not married, the copy of the marriage certificate shall
be attached).
o Photocopy of the power of attorney granted by the spouse, if any.
o Photocopy of the registered prenuptial agreement, if any.
o In the case of common-law union, provide evidence.
Divorced: o Photocopy of the valid laminated Identity Card or substitute card with no more than
6 months of issue (*) (in case the legal status that appears in the identity card is not
divorced, the copy of the divorce decision shall be attached).
o Photocopy of the divorce decision.
o Photocopy of the liquidation or division of the marital patrimony (in case the
divorce occurred after the acquisition of the shares).
o Photocopy of power of attorney granted by ex-spouse to sell the Class C Shares, if
any.
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Widower: o Photocopy of the valid laminated Identity Card of the holder(*) or substitute card
with no more than 6 months of issue (*) (in case the legal status that appears in the
identity card is not widower, the copy of the death certificate shall be attached).
o Inheritance tax return with clearance that evidences payment of inheritance duties.
o Notarized power of attorney granted by each of the member of the estate, with
express power to sell the shares.
Estates: o Photocopy of the laminated identity card of all members of the estate (*).
o Inheritance tax return with clearance that evidences payment of inheritance duties.
o Notarized power of attorney granted by each of the member of the estate, with
express power to sell the shares.
o Division of estate, if any, duly authenticated. If no division exists all members of
the estate must sign.
Agent: o Photocopy of the valid laminated identity card of the agent and the holder (*).
o Power of attorney granted by the holder with express authority to sell and that does
not prohibit the substitution of any person (if the holders is married it shall contain
the consent of the spouse).
Minors: o Authorization granted by the judge of minors.
2. With the execution of the Share Letter of Transmittal that must be signed
by all Class C Shareholders that wish to participate in the Venezuelan Offer,
or their agents, the Class C Shareholders will be granting a power of attorney
to Inverunion S.A. Casa de Bolsa to, if the Shares are not released from
Preferential Right, offer without any cost to the shareholder the number of
Class C Shares indicated in the Share Letter of Transmittal in the internal
market of shareholders of CANTV in accordance with Article 5(e) of the by-laws
of CANTV (the "Internal Market"). Also they are joining the Special Management
and Guarantee Trust Agreement with Unibanca as trustee to whom the Class C
Shares will be transferred for their tender in the Venezuelan Offer.
3. Alternatively, the Class C Shareholder may conduct the process of the
Internal Market directly or through duly authorized brokers of securities, in
which case the Class C Shareholders shall bear any cost arising from such
process and thereafter go to the branches designated by Unibanca and complete
the Share Letter of Transmittal to join the Special Management and Guarantee
Trust Agreement and transfer his/her Class C Shares to Unibanca as Trustee of
such Trust.
4. Currently (and unless the Board Of Directors of CANTV reduces such terms
in the future) the process of the Internal Market takes approximately 8
business days and is only open twice a month. Additionally, CANTV requires 16
days to review the powers of attorney submitted by the representatives of the
Class C Shareholders. Therefore Class C Shareholders who wish to participate in
the Venezuelan Offer shall follow the instructions herein contained as soon as
possible to have time to tender their Class C Shares in the Venezuelan Offer.
5. The Class C Shareholder may withdraw his/her Class C Shares from the
Venezuelan offer at any time prior to the expiration of the Venezuelan Offer,
through a Letter of Withdrawal delivered in any of the designated branches of
Unibanca. However, if at the time of requesting such withdrawal the Class C
Shares have been published as offered in the Internal Market, such process must
be followed with respect to those Shares. If any or all of such Shares are
acquired in the Internal Market, the Class C Shareholder shall be bound by such
transaction.
6. After the Class C Shares are withdrawn from the Venezuelan Offer, the
Class C Shareholder may tender again the Class C Shares in the Venezuelan
Offer, provided that he/she completes again the Share Letter of Transmittal
with enough time to tender the Class C Shares before the Expiration Date of the
Venezuelan Offer.
7. The Class C Shareholders may tender all or part of their Class C Shares;
however, the Venezuelan Offer is subject to proration in the case that there
are more validly tendered Shares than those offered to
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be purchased by Purchaser under the Venezuelan Offer and more validly tendered
ADSs than those offered to be purchased by Purchaser under the concurrent U.S.
offer. Therefore, it is possible that not all the Shares tendered in the
Venezuelan Offer will be purchased. In such case, the Trustee shall return the
shares not purchased to the Class C Shareholders.
8. If a shareholder meeting of CANTV is held while the Venezuelan Offer is
open, but before the Class C Shares are purchased by Purchaser, the Trustee
will grant Class C Shareholders a general authorization to attend the meeting
and cast their votes with regard to the Class C Shares transferred to the
Special Trust by them.
9. None of the Trustee, the Purchaser, the Facilitating Agent for the Class C
Shares, the Coordinator of the Venezuelan Offer, or any other person related
with the Venezuelan Offer shall be liable if the transfer of the Class C Shares
to the Trustee cannot be closed because (i) the Class C Shares are sold in the
Internal Market or (ii) the Original Trustees do not lift the Pledge and/or do
not authorize the transfer in trust of the Class C Shares to the Special Trust.
IMPORTANT (*) If the laminated identity card is not valid at the time of
the transaction, the Class C Shareholder may show a substitute card with no
more than 6 months of issue. Those holders who do not hold identification
documents due to the events of the State of Vargas, shall go directly to the
Shareholder's Attention Center of CANTV. Additionally, photocopies of documents
considered necessary if the current legal status of the holder differs from
his/her legal status at the time of the purchase of the Shares may be
requested.
ADVERTISEMENT AUTHORIZED BY THE COMISIoN NACIONAL DE VALORES.
F-3
ANNEX G
INFORMATION SUPPLEMENT
This Information Supplement provides certain additional information
relating to the Tender Offer to Take Control (the "VENEZUELAN OFFER") of
199,968,608 outstanding shares of common stock ("SHARES") of Compania Anonima
Nacional Telefonos de Venezuela (CANTV)("CANTV") at US$3.4285714 per Share by
AES Comunicaciones de Venezuela, C.A. (the "PURCHASER"), a company jointly
owned indirectly by The AES Corporation ("AES") and Corporacion EDC,
C.A.("CEDC").
1. PRICE RANGE OF CLASS D SHARES AND ADSS; DIVIDENDS
Class D Shares are traded on the Caracas Stock Exchange under the symbol
"TDV.D." Each American Depositary Share of CANTV ("ADSS") represents seven
Class D Shares and trades on the New York Stock Exchange. The ADSs are
represented by American Depositary Receipts ("ADRs") and CANTV's trading symbol
on the New York Stock Exchange is "VNT."
The following table sets forth, for the periods indicated, (1) the high
and low closing sales prices of Class D Shares, in Bolivars, as reported on the
Caracas Stock Exchange and (2) the high and low closing sales prices of ADSs,
in U.S. dollars, on the New York Stock Exchange, as disclosed in CANTV's public
filings and for the second and third quarters of 2001, as published by the Dow
Jones Interactive Quotes & Market Data.
CARACAS STOCK
EXCHANGE
PER CLASS D SHARE NYSE PER ADS
----------------- -----------------------
BS. $
LOW HIGH LOW HIGH
------- ------- ---------- ----------
1999
First Quarter ...................................... 1,200 1,600 14 3/4 18 1/5
Second Quarter ..................................... 1,400 2,640 17 31
Third Quarter ...................................... 1,700 2,505 19 15/16 28
Fourth Quarter ..................................... 1,935 2,501 21 3/4 27 3/16
2000
First Quarter ...................................... 2,260 3,620 24 3/16 39
Second Quarter ..................................... 2,260 3,100 23 1/4 32 1/2
Third Quarter ...................................... 2,050 2,750 20 3/4 28 5/16
Fourth Quarter ..................................... 1,571 2,485 15 9/16 25 1/4
2001
First Quarter ...................................... 1,925 2,700 18 7/8 26 11/16
Second Quarter ..................................... 2,160 2,900 18 1/4 28 5/32
Third Quarter (through September 24, 2001) ......... 2,060 2,703 19 19/32 26 21/32
On August 28, 2001, the last full day of trading on the Caracas Stock
Exchange prior to the announcement by the Purchaser and its affiliates of the
intent to commence the Offers, the reported closing sales price of the Class D
Shares on the Caracas Stock Exchange and the ADSs on the New York Stock
Exchange were Bs. 2,080 per Class D Share and $19.81 per ADS, respectively.
On September 24, 2001, the last trading day before the commencement of the
Offers, the reported closing sales price of the Class D Shares on the Caracas
Stock Exchange and the ADSs on the New York Stock Exchange were Bs. 2,467 per
Class D Share and US$23.70 per ADS, respectively.
Holders of Shares are urged to obtain current market quotations.
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The table below sets forth the amounts of annual dividends, on a per share
and per ADS basis in constant Bolivars and U.S. dollars, for each of the
calendar years indicated, as reported in CANTV's public filings.
PER SHARE PER ADS
---------------------- -----------------------
(BS.) ($) (BS.) ($)
1999 ......... 55.33 0.09 387.31 0.63
2000 ......... 60.00 0.09 420.00 0.60
On March 27, 2001, an ordinary meeting of CANTV shareholders declared a
cash dividend of Bs.63.00 per share to shareholders of record as of April 6,
2001. This dividend was paid on April 24, 2001.
2. ADDITIONAL INFORMATION CONCERNING CANTV
The following information is taken from publicly available reports and
documents concerning CANTV. Such reports and documents may be examined and
copies may be obtained at the places and in the manner set forth under
"Available Information" at the end of this Section 2. Although none of the
Purchaser, AES or CEDC has any knowledge that would indicate that any
statements contained in this Section 2, or financial information set forth
below under the caption "Financial Information" which is based upon such
reports and documents, are untrue, none of the Purchaser, AES or CEDC takes any
responsibility for the accuracy or completeness of the information contained in
such reports and other documents or for any failure by CANTV to disclose events
that may have occurred and may affect the significance or accuracy of any such
information but that are unknown to the Purchaser, AES or CEDC.
GENERAL
CANTV is the primary provider of fixed telecommunications services in
Venezuela. CANTV provides substantially all of its services within Venezuela
and substantially all of its operating income is derived from Venezuelan
domiciled customers and from settlements with foreign carriers for calls
completed in Venezuela. CANTV is the proprietor of the only basic
telecommunications network with nationwide coverage in Venezuela. Through this
network, CANTV provides local, national and international telecommunications
services. In addition, CANTV provides private network, data, public telephone,
rural telephone and telex services. Through its subsidiaries, CANTV provides
other telecommunications-related services including wireless communications,
Internet access and telephone directories.
CANTV operates under a concession agreement (the "CONCESSION") granted by
the Venezuelan Government in October 1991. Under the Concession, CANTV was the
exclusive provider of switched, fixed, local, domestic and international
telephone services in Venezuela until November 27, 2000. On that date, CANTV's
switched, fixed, local and domestic and international long distance services
were opened to competition. The Concession provides that, without prior
authorization of the Venezuelan National Telecommunications Commission
(Comision Nacional de Telecomunicaciones) ("CONATEL"), CANTV may not transfer
or assign, in whole or in part, the Concession or the obligation to fulfill the
Concession. It also provides that the control of CANTV may not be assigned or
transferred without the approval of CONATEL.
CANTV has its principal executive offices at Avenida Libertador, Centro
Nacional de Telecomunicaciones, Nuevo Edificio Administrativo, Piso. 1,
Apartado Postal 1226 Caracas, Venezuela 1010 (telephone number
58-212-500-6800).
CAPITAL STOCK OF CANTV
According to publicly available information concerning CANTV, as of June
30, 2001, CANTV had 926,037,385 shares of capital stock outstanding. The
capital stock of CANTV is divided into four classes of shares of common voting
stock: Class A Shares, Class B Shares, Class C Shares and Class D Shares. A
brief description of these different classes follows.
G-2
Class A Shares
According to publicly available information, VenWorld Telecom, C.A.
("VENWORLD"), a Venezuelan company formed in 1991 by GTE Corporation (now
Verizon Communications Inc. ("VERIZON")), TI Telefonica Internacional de
Espana, S.A., ("TELEFoNICA"), C.A. La Electricidad de Caracas ("EDC"), AT&T
International Inc. ("AT&T") and Consorcio Inversionista Mercantil Cima, C.A. to
acquire Class A Shares in connection with the privatization of CANTV by the
Government of Venezuela, owned, as of April 30, 2001, 400,000,000 Class A
Shares representing all of the Class A Shares and approximately 43.2% of
CANTV's outstanding capital stock. As of such date, the shareholders of
VenWorld also included certain other minority shareholders. According to
CANTV's Bylaws, any transfer of Class A Shares to any person other than
VenWorld, the original consortium participants of VenWorld or their controlled
affiliates will cause such transferred shares to be automatically converted
into an equal number of Class D Shares.
The shareholders of VenWorld are parties to an association agreement,
dated as of August 1, 1991, as amended (the "ASSOCIATION AGREEMENT"). Under the
terms of the Association Agreement, any shareholder of VenWorld may require
that VenWorld convert all or part of the VenWorld shares held by such
shareholder into its pro rata interest in the Class A Shares held by VenWorld,
provided that the Class A Shares so converted must first be irrevocably offered
for sale to the other shareholders of VenWorld at a price per share equal to
95% of the average market price of the ADSs during a period specified in the
Association Agreement.
The Association Agreement also provides that any shareholder of VenWorld
who wishes to sell, transfer or assign any shares of VenWorld must first offer
the shares it wishes to transfer to the other VenWorld shareholders at a price
per share specified by the offering shareholder and in accordance with a
procedure set forth in the Association Agreement.
Between April 2001 and July 13, 2001, the Purchaser believes that the
following conversions of VenWorld shares occurred:
o Inversiones Inextel, C.A., a wholly owned subsidiary of CEDC
("INVERSIONES INEXTEL"), converted substantially all of its interest in
VenWorld into 63,999,524 Class A Shares held by VenWorld, representing
approximately 6.9% of the outstanding capital stock of CANTV. The
Purchaser believes that on receipt, such Class A Shares automatically
converted into an equal number of Class D Shares. However, to date, CANTV
has been unwilling to reflect such conversions in accordance with the
provisions of CANTV's Bylaws on the CANTV shareholder records. In
addition, in August 2001 Inversiones Inextel requested that VenWorld
convert its remaining interest in VenWorld into 476 Class A Shares (or
Class D Shares on their receipt by Inversiones Inextel).
o A wholly owned subsidiary of AT&T converted all of its interest in
VenWorld into 20,000,000 Class A Shares held by VenWorld, representing
2.2% of the outstanding capital stock of CANTV. The Purchaser does not
know whether AT&T still owns these shares.
o Other minority shareholders of VenWorld converted their interests in
VenWorld into 3,913,917 Class A Shares. The Purchaser believes that on
receipt, such Class A Shares automatically converted into an equal number
of Class D Shares.
As a result of these conversions and after giving effect to the automatic
conversion of the Class A Shares received by Inversiones Inextel and other
converting VenWorld shareholders (except AT&T) into Class D Shares in
accordance with the By-laws of CANTV, the Purchaser estimates that as of July
13, 2001, there were approximately 332,086,559 Class A Shares outstanding,
representing approximately 35.9% of the outstanding capital stock of CANTV. The
Purchaser does not know if other shareholders of VenWorld have exercised their
conversion rights and received shares of CANTV common stock since July 13,
2001.
Based on publicly available information, and after giving effect to the
conversions and assumptions described above, of these 332,086,559 Class A
Shares, the Purchaser believes that VenWorld owns
G-3
312,086,559 Class A Shares representing approximately 33.7% of CANTV's
outstanding capital stock. The principal remaining shareholders of VenWorld are
GTE Venholdings B.V., a wholly owned subsidiary of Verizon whom the Purchaser
estimates beneficially owns 74.0% of VenWorld's outstanding capital stock, and
Telefonica, whom the Purchaser estimates beneficially owns 20.5% of VenWorld's
outstanding capital stock.
Class B Shares
Based on publicly available information, and assuming there have been no
changes in the number of outstanding Class B Shares since June 30, 2001, there
are 51,900,000 Class B Shares outstanding, representing approximately 5.6% of
the capital stock of CANTV. Class B Shares may be owned only by the Government
of Venezuela and other Venezuelan public sector entities. The transfer of Class
B Shares to an individual or a non-public sector entity will cause such
transferred shares to be automatically converted into an equal number of Class
D Shares, except that transfers to employees, retirees and certain other
employee-related vehicles of CANTV causes such transferred shares to be
automatically converted into an equal number of Class C Shares.
Class C Shares
Based on publicly available information, and assuming there have been no
changes in the number of outstanding Class C Shares since June 30, 2001, there
are approximately 99,318,876 Class C Shares outstanding, representing
approximately 10.7% of the capital stock of CANTV.
Class C Shares may only be owned by: (i) current employees of CANTV; (ii)
retirees of CANTV; (iii) companies whose capital is 100% owned by current and
retired CANTV employees and whose sole corporate purpose is the acquisition and
ownership of the shares of CANTV; (iv) trust and benefit plans established for
the benefit of the employees or retirees of CANTV; (v) former employees of
CANTV who have retained Class C Shares; (vi) successors of Class C shareholders
who have received their shares by inheritance or legacy; (vii) ex-spouses of
Class C shareholders that are holders of such shares by reason of distribution
of marital property; and (viii) current employees and retirees of subsidiaries
of CANTV.
The transfer of any Class C Shares to any person or entity, other than the
persons and entities listed above, will cause such transferred shares to be
automatically converted into an equal number of Class D Shares.
According to the Bylaws of CANTV, any of the following persons or entities
who wish to transfer any Class C Shares must first give notice to CANTV of
their intention to transfer their Class C Shares: (i) active employees or
retirees; (ii) employees of CANTV's subsidiaries; (iii) former employees of
CANTV; (iv) holders of the Class C Shares as a result of inheritance; and (v)
holders of Class C Shares as a result of liquidation of marital property.
Other active employees and retirees, as well as benefit plans and workers
companies, hold a preferential right to acquire any or all of such Class C
Shares offered for transfer pursuant to certain procedures. Under these
procedures, twice a month, the persons or entities listed above who wish to
transfer their Class C Shares can provide written notice to CANTV indicating
the number of Class C Shares sought to be sold and the lowest price at which
the shares may be sold. The maximum price at which the shares will be sold is
then determined and CANTV is required to publish advertisements in internal
publications giving notice to all employees, retirees, benefit plans and
workers companies of the offers to sell Class C Shares. Employees, retirees,
benefit plans and workers companies may exercise their preferential right by
stating the number of Class C Shares they intend to purchase and the price they
intend to pay. The Class C Shares are sold in the order in which offers are
received. If offered shares are not purchased within the designated period, the
holder of the Class C Shares can transfer such shares to employees, retirees,
workers companies, benefit plans or to any third parties. The Bylaws of CANTV
provide that upon such transfer of such shares, any debt that such holder may
have with a governmental entity called BANDES (previously Fondo de Inversiones
de Venezuela or Venezuelan Investment fund) must be repaid. The procedures
described in this paragraph may be modified by the board of directors of CANTV.
The Purchaser understands that holders of Class C Shares have requested changes
to these
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procedures so that they can participate on the same basis as holders of other
classes of Shares in tenders pursuant to tender offers and in sales in the
public market.
Class D Shares
Based upon publicly available information, and after giving effect to the
conversions of interests in VenWorld and the assumptions described above in
this Section 2 under the heading "Class A Shares", and assuming no conversions
of Class B Shares or Class C Shares since June 30, 2001 it is estimated that
there are 442,731,950 Class D Shares outstanding (including Class D Shares
represented by ADSs), representing approximately 47.8% of the outstanding
capital stock of CANTV, including the 64,000,524 Class D Shares and 1,000 ADSs
beneficially owned by AES and CEDC. In addition, based on publicly available
information, the Purchaser understands that Verizon beneficially owns, in
addition to its interest in VenWorld, 32,945,829 Class D Shares, representing
approximately 3.6% of the outstanding capital stock of CANTV.
The Class D Shares are listed on the Caracas Stock Exchange. Class D
Shares are the only class of stock of CANTV underlying the ADSs. The ADSs are
listed on the New York Stock Exchange.
DIRECTORS OF CANTV
CANTV's Bylaws provide that CANTV's directors, other than the directors to
be elected by the holders of Class B Shares or Class C Shares voting as
separate classes, are appointed by a majority of the votes cast in a
shareholders meeting where directors are being elected. Holders of Class B
Shares have the right to elect one principal director and his/her alternate,
regardless of the number of Class B Shares outstanding. Holders of Class C
Shares have the right to elect two principal directors and their alternates so
long as all Class C Shares outstanding represent at least 8% of the outstanding
shares of CANTV, and one principal director and his/her alternate so long as
all Class C Shares outstanding represent between 3% and 8% of the outstanding
stock of CANTV.
Pursuant to Venezuelan Capital Markets Law, a shareholder or group of
minority shareholders holding 20% or more of the outstanding shares of CANTV is
entitled to elect a number of members of the board of directors of CANTV that
is proportional to the holding of such shareholders or group of shareholders
(excluding for purposes of such calculation the directors appointed by Class B
and Class C shareholders).
The Association Agreement contains provisions providing for the election
of directors of VenWorld and CANTV. Pursuant to these provisions,
representatives of CEDC currently serve as a director and such director's
alternate on the Board of Directors of CANTV.
FINANCIAL INFORMATION
The following selected consolidated financial information relating to
CANTV and its subsidiaries has been taken or derived from the audited
consolidated financial statements contained in publicly available information.
Additional financial information is available in documents which have been
filed by CANTV with the Venezuelan Comision Nacional de Valores (the "CNV") and
the United States Securities and Exchange Commission (the "SEC"). The financial
statements of CANTV are prepared in accordance with generally accepted
accounting principles in Venezuela, which differ in certain important respects
from generally accepted accounting principles in the United States. The
financial information of CANTV as of December 31, 2000 and December 31, 1999 is
presented in constant Bolivars currency based upon the Bolivars purchasing
power as of December 31, 2000. The financial information of CANTV as of
December 31, 2000 is also presented in U.S. dollars translated from constant
Bolivars as of December 31, 2000, at an exchange rate of Bs. 700 to $1.00.
G-5
CANTV SELECTED CONSOLIDATED FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 2000 AND 1999
(ADJUSTED FOR INFLATION AND EXPRESSED IN MILLIONS OF CONSTANT BOLIVARS AS
OF DECEMBER 31, 2000, AND MILLIONS OF U.S. DOLLARS)
2000 2000 1999
U.S.$ BS. BS.
------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and temporary investments .................................. 827 578,657 366,478
Accounts receivable, net ........................................ 496 347,496 460,833
Accounts receivable from Venezuelan Government entities ......... 147 102,775 137,483
Inventories and supplies, net ................................... 48 33,302 49,229
Other current assets ............................................ 19 13,981 14,062
--- ------- -------
Total current assets .......................................... 1,537 1,076,211 1,028,085
Property, plant and equipment, net .............................. 4,648 3,253,902 3,535,274
Cellular concession, net ........................................ 136 95,333 98,367
Other assets .................................................... 311 216,637 255,120
----- --------- ---------
Total assets .................................................. 6,632 4,642,083 4,916,846
===== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt ................................................. 79 55,490 60,709
Accounts payable ................................................ 394 275,447 296,423
Employee severance benefits, net ................................ 13 8,850 10,040
Accrued employee benefits ....................................... 220 154,129 38,200
Other current liabilities ....................................... 409 286,143 211,534
----- --------- ---------
Total current liabilities ..................................... 1,115 780,059 616,906
LONG-TERM LIABILITIES:
Long-term debt .................................................. 488 341,370 387,476
Pension and postretirement benefit obligations .................. 494 345,886 371,293
----- --------- ---------
Total liabilities ............................................. 2,097 1,467,315 1,375,675
STOCKHOLDERS' EQUITY ............................................. 4,535 3,174,768 3,541,171
----- --------- ---------
Total liabilities and stockholders' equity .................... 6,632 4,642,083 4,916,846
===== ========= =========
G-6
CANTV CONSOLIDATED INCOME STATEMENT
AS AT DECEMBER 31, 2000 AND 1999
(ADJUSTED FOR INFLATION AND EXPRESSED IN MILLIONS OF CONSTANT BOLIVARS AS
OF DECEMBER 31, 2000, AND MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AND PER
ADS AMOUNTS)
2000 2000 1999
U.S.$ BS. BS.
----------- ------------ ------------
OPERATING REVENUES:
Local and domestic long distance usage ............................ 884 618,917 614,502
Basic rent ........................................................ 452 316,152 362,673
Public telephones ................................................. 155 108,655 119,680
---- ------- -------
Local and domestic long distance ................................ 1,491 1,043,724 1,096,855
International long distance ....................................... 142 99,107 151,027
Net settlements ................................................... 42 29,373 31,780
------ --------- ---------
International long distance ..................................... 184 128,480 182,807
Other wireline-related services ................................... 199 139,749 162,450
------ --------- ---------
Total wireline services ......................................... 1,874 1,311,953 1,442,112
Wireless services ................................................. 667 466,993 460,714
Other telecommunications-related Services ......................... 66 46,186 43,856
------ --------- ---------
Total operation revenues .......................................... 2,607 1,825,132 1,946,682
------ --------- ---------
OPERATING EXPENSES:
Operations, maintenance, repairs and Administration ............... 1,340 938,074 977,142
Depreciation and amortization ..................................... 881 616,714 666,635
Concession and other taxes ........................................ 197 138,394 140,193
Special charge .................................................... 158 110,390 --
Nonrecurring charges .............................................. 1 632 4,085
------ --------- ---------
Total operating expenses .......................................... 2,577 1,804,204 1,788,055
------ --------- ---------
Operating income .................................................. 30 20,928 158,627
------ --------- ---------
OTHER (EXPENSE) INCOME, NET:
Financing cost, net ............................................... (45) (31,348) (48,281)
Other income (expense), net ....................................... (5) (3,827) 6,331
-------- --------- ---------
Total other expense, net .......................................... (50) (35,175) (41,950)
------- --------- ---------
Income (loss) before income tax effect of account change, net
of tax .......................................................... (20) (14,247) 116,677
INCOME TAX: 51 35,428 15,487
------- --------- ---------
Income (loss) before cumulative effect of accounting change,
net of tax ...................................................... (71) (49,675) 101,190
CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX: (58) (40,518) --
------- --------- ---------
Net income (loss) ................................................. (129) (90,193) 101,190
======= ========= =========
Earnings (loss) per share beforecumulative effect, net of tax ..... (0.08) (52) 101
Cumulative effect of accounting change, net of tax per share ...... (0.06) (43) --
------- --------- ---------
Earnings (loss) per share ......................................... (0.14) (95) 101
------- --------- ---------
Earnings (loss) per ADS (based on 7 Class D Shares per
ADS) ............................................................ (0.95) (663) 709
======= ========= =========
Average shares outstanding (in millions) .......................... 952 952 999
======= ========= =========
G-7
EXCHANGE RATES
The following table sets forth information relating to the Bolivar:
US$ exchange rates for the periods indicated.
END OF
YEAR HIGH(1) LOW(1) PERIOD (2)
---------------------------------------- ----------- ------------- -----------
(BOLIVAR PER
US$)
1995 ................................... 290.00 167.00 290.00
1996 ................................... 499.50 290.00 472.50
1997 ................................... 504.80 468.60 504.80
1998 ................................... 589.25 503.63 565.00
1999 ................................... 649.25 565.51 649.25
2000 ................................... 700.50 649.75 700.50
2001 (through August 29, 2001) ......... 738.01 698.75 737.00
----------
(1) The highest and lowest of exchange rates as reported by the Federal
Reserve in the relevant period.
(2) The exchange rate as reported by the Federal Reserve on the last day of
each relevant period.
From 1989 until June 1994, the Bolivar was permitted to trade freely with
respect to the U.S. dollar. On June 27, 1994, the Venezuelan Government imposed
controls on foreign exchange transactions and fixed the official exchange rate.
The rate was originally fixed at Bs.170.00 per U.S. dollar, and was adjusted to
Bs.290.00 per U.S. dollar in December 1995. These controls were removed on
April 22, 1996. The Venezuelan Central Bank, in order to keep the exchange rate
within certain limits, currently intervenes to maintain the exchange rate
between 7.5% above and 7.5% below a reference rate set by the Venezuelan
Central Bank.
AVAILABLE INFORMATION
CANTV is subject to Venezuelan reporting requirements and, in accordance
therewith, files reports and other information with the CNV, in Spanish. Such
reports and other information may be inspected and copies may be obtained at
the offices of the CNV at Avenida Francisco Solano Lopez entre Calles San
Geronimo y Los Jabillos, Edificio LepaDirectosn P.B., Sabana Grande, Caracas,
Venezuela.
In addition, the ADSs are registered under the United States Exchange Act
of 1934, as amended (the "U.S. EXCHANGE ACT") Accordingly, CANTV is subject to
the informational requirements of the U.S. Exchange Act applicable to foreign
private issuers and, in accordance with such requirements, files reports and
other information with the SEC relating to its business, financial condition
and other matters. Such reports, statements and other information may be
inspected at the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the regional office of the SEC in
Chicago (Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661). Copies of such materials should be obtainable by mail, upon
payment of the SEC's customary charges, by writing to the SEC's principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of such materials may also be available for inspection at the library of
the NYSE, 20 Broad Street, New York, New York 10005, on which the ADSs are
traded. CANTV's SEC filings are also available to the public through commercial
document retrieval services and, in the case of documents filed electronically,
at the web site maintained by the SEC at http://www.sec.gov.
3. ADDITIONAL INFORMATION CONCERNING AES AND CEDC
AES is subject to the informational requirements of the U.S. Exchange Act
and, in accordance with such requirements, files reports and other information
with the SEC relating to its business, financial condition and other matters.
Such reports, statements and other information may be inspected at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional office of the SEC in Chicago
(Citicorp Center, 500 West Madison Street, Suite 1400,
G-8
Chicago, Illinois 60661). Copies of such materials should be obtainable by
mail, upon payment of the SEC's customary charges, by writing to the SEC's
principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Copies of such materials may also be available for inspection at the
library of the NYSE, 20 Broad Street, New York, New York 10005. AES's SEC
filings are also available to the public through commercial document retrieval
services and, in the case of documents filed electronically, at the web site
maintained by the SEC at http://www.sec.gov.
In connection with the establishment of its American Depositary Shares,
which are not registered under the U.S. Exchange Act, CEDC has established
exemptions from the reporting requirements of Section 12(g) of the U.S.
Exchange Act. Pursuant to the exemption obtained by CEDC under Rule 12g3-2(b)
of the U.S. Exchange Act which exempts the American Depositary Shares of CEDC
from registration under Section 12 of the U.S. Exchange Act, CEDC has agreed to
furnish the SEC materials that CEDC has made or is required to make public
pursuant to Venezuelan law, has filed or is required to file with the Caracas
Stock Exchange and which were made public by such exchange or has distributed
or is required to distribute to its security holders. Such reports, statements
and other information may be inspected at the public reference facilities
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional office of the SEC located at 500 West Madison
Street, Suite 1400, Chicago, IL 60661. Copies of such materials should be
obtainable by mail, upon payment of the SEC's customary charges, by writing to
the SEC's principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
EXECUTIVE OFFICERS OF AES
The name, business address, business telephone number, present principal
occupation or employment and five-year employment history of each executive
officer of AES and certain other information are set forth below. The principal
business address and business telephone number of AES and, unless otherwise
indicated, the business address and business telephone number of each person
identified below is 1001 North 19th Street, Arlington, Virginia, 22209,
telephone number: (703) 522-1315. Where no date is shown, the individual has
occupied the position indicated for the past five years. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
employment with AES. All executive officers listed below are United States
citizens.
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
------------------------------ ----------------------------------------------------------------------
Michael N. Armstrong ......... Vice President of AES since January 2001. He has served as the
Group Manager for AES Electric since 1999. Mr. Armstrong leads
the group responsible for AES businesses and development activities
in England, Spain, Italy and other countries in Western Europe. Prior
to assuming the group manager's position, Mr. Armstrong was a
project director and business leader in England and Europe. Prior to
joining AES in 1990, Mr. Armstrong was a metallurgist and engineer
for BOC plc.
Dennis W. Bakke .............. He has been President of AES since 1987 and Chief ExecutiveOfficer
since January 1, 1994. From 1987 to 1993, he served as Chief
Operating Officer of AES; from 1982 to 1986, he served as Executive
Vice President of AES; and from 1985 to 1986, he also served as
Treasurer of AES.
Richard A. Bulger ............ Vice President of AES since January 2001. He has served as the
President of EDC and CEDC, a Venezuelan subsidiary of AES since
June 2000. Prior to his appointment he served as President of AES
Sul from October 1998 to June 2000. Mr. Bulger joined AES in
December of 1997 and before that he was a director with Price
Waterhouse LLP. Mr. Bulger is a certified public accountant. Mr.
Bulger also serves as a director of CANTV since January 2001.
G-9
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
----------------------------- ----------------------------------------------------------------------
Mark S. Fitzpatrick ......... Appointed Executive Vice President of AES in February 2000, was
Senior Vice President of AES until February 2000, and was appointed
Vice President of AES in 1987. Mr. Fitzpatrick became Managing
Director of Applied Energy Services Electric Limited for the United
Kingdom and Western Europe operations in 1990.
Paul T. Hanrahan ............ Executive Vice President of AES since January 2001 and, prior to
that, Senior Vice President of AES since 1997. He was appointed
Vice President of AES effective January 1994. Since May 1, 1998,
Mr. Hanrahan has been Managing Director of AES Americas, a
business group within AES responsible for all of AES's activities in
South America. From February 1995 until 1998 he was 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.
Lenny M. Lee ................ Vice President of AES since February 2000 and is President of AES
Great Plains. As Great Plains President, he is responsible for AES's
businesses in the US Midwest, including the AES CILCO and AES
IPALCO businesses. He has also served as Managing Director of
AES Transpower Private LTD, Singapore, where he was responsible
for AES' businesses in Korea, Southeast Asia, Australia, New
Zealand, and Hawaii. Prior to AES Transpower, he was the General
Manager of Central Termica San Nicolas, a 650 MW power plant in
Argentina and spent five years doing business development for AES
from Arlington, VA. Mr. Lee began his career at AES in 1988 and
was involved in numerous project development assignments. Prior to
joining AES, he spent 8 years with the Exxon Corporation in the
U.S.A.
Garry K. Levesley ........... Vice President of AES since January 2001. He has served as President
of AES Silk Road since May 1999. Mr. Levesley leads the AES group
responsible for all of AES business, including project development
and plant operations, in all the countries of the former Soviet bloc,
Central Asia and Israel. Prior to his appointment as leader of this
group he worked as a leader in the Medway Power plant in the UK
before moving to lead AES businesses in Hungary and the former
Altaienergo Utility in Eastern Kazakhstan. Prior to joining AES in
1994, Mr. Levesley was the Utilities Manager at a large Chemical
complex in Northern England.
William R. Luraschi ......... Vice President of AES since January 1998, Secretary since
February 1996 and General Counsel of AES since January 1994.
Prior to that, Mr. Luraschi was an attorney with the law firm of
Chadbourne & Parke L.L.P.
Ann D. Murtlow .............. Vice President of AES since January 2001. She has served as
Managing Director of AES Horizons since May 1999. Ms. Murtlow
leads the AES group responsible for all of AES's business, including
project development and plant operations, in Ireland, Wales, and
most of Northern, Central and Eastern Europe. Prior to her
appointment, Ms. Murtlow served as project director for projects
elsewhere in the region and in the U.S. Prior to joining AES in 1987,
Ms. Murtlow was with Bechtel Power Corporation.
G-10
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
--------------------------- -----------------------------------------------------------------------
Roger F. Naill ............ Senior Vice President of AES since February 2001. He has been Vice
President for Planning at AES since 1981. Prior to joining AES,
Dr. Naill was Director of the Office of Analytical Services at the
Department of Energy.
Shahazad S. Qasim ......... Vice President of AES since February 2000 and has served as
Managing Director of AES Oasis since April 1998. As Managing
Director of AES Oasis, Mr. Qasim leads the AES group responsible
for all of AES's business, including project development and plant
operations, in Pakistan, India, portions of South Asia and the Middle
East. Prior to his appointment, Mr. Qasim had been developing
various projects within the same geographical region for AES.
Mr. Qasim has been with AES since November 1992.
Dan Rothaupt .............. Vice President of AES since January 2001. He has served as President
of AES Endeavor since May 1999. Mr. Rothaupt leads the AES
group responsible for all of AES business, including project
development, power marketing and plant operations, in New York,
New England and Eastern Canada. Prior to his appointment,
Mr. Rothaupt served as Plant Manager of AES Hawaii and AES
Thames facilities. Prior to joining AES in 1988, Mr. Rothaupt was
employed by Pfizer Inc and the US Coast Guard in a variety of
engineering positions.
William Ruccius ........... Vice President of AES since February 2000. He has served as
Managing Director of AES Orient since June 1998. As Managing
Director of AES Orient, Mr. Ruccius leads the AES group responsible
for all of AES's business, including project development and plant
operations, in Northern China and most of North and East Asia
including the Philippines. From June 1996 until his appointment as
Managing Director, he was President and CEO of AES Lal Pir and
AES Pak Gen, AES's dual Pakistani generating facilities. Prior to that
Mr. Ruccius was Plant Manager at AES Hawaii from April 1995 to
June 1996 and worked at AES Deepwater from June 1993 to
April 1995.
John Ruggirello ........... Executive Vice President of AES since February 2000, was Senior
Vice President until February 2000 and was appointed Vice President
in January 1997. Mr. Ruggirello heads an AES group responsible for
project development, construction and plant operations in much of
the United States and Canada. He served as President of AES Beaver
Valley from 1990 to 1996.
J. Stuart Ryan ............ Executive Vice President of AES since February 2000, was Senior
Vice President until February 2000 and is Managing Director of the
AES Pacific group which is responsible for AES's business in the
western United States. Between 1994 and 1998, Mr. Ryan led the
AES Transpower group responsible for AES's activities in Asia
(excluding China). From 1994 through 1997, he served as Vice
President of AES.
G-11
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
----------------------------- --------------------------------------------------------------------------
Roger W. Sant ............... Co-founder of AES with Dennis Bakke in 1981. He has been
Chairman of the Board and a director of AES since its inception, and
he held the office of Chief Executive Officer through December 31,
1993. He currently is Chairman of the Boards of Directors of The
Summit Foundation and The World Wildlife Fund U.S., and serves on
the Boards of Directors of The World Resources Institute, the World
Wide Fund for Nature and Marriott International, Inc.
Barry J. Sharp .............. Executive Vice President of AES since February 2001. Mr. Sharp was
appointed Senior Vice President and Chief Financial Officer effective
January 1998 and had been Vice President and Chief Financial
Officer since 1987. He also served as Secretary of AES until
February 1996. From 1986 to 1987, he served as the AES Director of
Finance and Administration. Mr. Sharp is a certified public accountant.
Sarah Slusser ............... Vice President of AES since January 1999, was appointed President
of AES Aurora, Inc., effective April 1997. AES Aurora is a wholly
owned subsidiary of AES and a group of AES which is responsible
for business development, construction and operations of facilities
and projects in Mexico, Central America, the Caribbean and the Gulf
States in the United States. Prior to that, Ms. Slusser served as Project
Director for various AES projects in the same region from 1993 to
1997.
Paul D. Stinson ............. Vice President of AES since January 1998. After returning from a
personal leave of absence in June of 2001, Mr. Stinson has been
assigned to the AES Endeavor Group to support both operations and
business development. From July 1999 until January, 2001, Mr. Stinson
was President of AES Great Plains, Ltd., a wholly owned subsidiary
of AES, which is a group of AES responsible for business
development, construction and operations of facilities and projects in
the U.S. Mid-West. From April 1997 to July 1999, Mr. Stinson served
as Managing Director of AES Silk Road, Ltd. Mr. Stinson served as
Managing Director of Medway Power Ltd. from 1994 until 1997 and
was Plant Manager of the Medway Power Station owned by Medway
Power Ltd. from 1992 to 1997.
David Luis Travesso ......... Vice President of AES since February 2000. He has served as Group
Manager of AES Sao Paolo since February 2000. Prior to this
appointment, Mr. Travesso served as Chairman of Light-Servicos de
Electricade S.A.
Thomas A. Tribone ........... Executive Vice President of AES since January 1998, and Senior Vice
President of AES from 1990 to January 1998. Mr. Tribone leads AES
Think, a group involved in energy, telecom and internet businesses in
South America and the U.S.
Kenneth R. Woodcock ......... Senior Vice President of AES since 1987. Mr. Woodcock is responsible
for coordinating AES's relationships with the investment community,
and he provides support for AES's business development activities
worldwide.
G-12
EXECUTIVE OFFICERS OF CEDC
The name, business address, business telephone number, present principal
occupation or employment and five-year employment history of each executive
officer of CEDC and certain other information are set forth below. The
principal business address and business telephone number of CEDC and, unless
otherwise indicated, the business address and business telephone number of each
person identified below is Av. Vollmer, San Bernadino, Edificio La Electricidad
de Caracas, Torre Central, Caracas, Venezuela (telephone number:
011-58-212-502-2111). Where no date is shown, the individual has occupied the
position indicated for the past five years. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with
CEDC. All executive officers listed below are United States citizens, except as
specified below.
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
------------------------------------- -----------------------------------------------------------------------
Richard A. Bulger ................... Director of CEDC since 2000 and President of CEDC and EDC since
2000. Vice President of AES since January 2001. He has served as the
President of CEDC, a Venezuelan subsidiary of AES since June 2000.
Prior to his appointment he served as President of AES Sul from
October 1998 to June 2000. Mr. Bulger joined AES in December of
1997 and before that he was a director with Price Waterhouse LLP.
Mr. Bulger is a certified public accountant. Mr. Bulger also serves as
a director of CANTV since January 2001.
Julian Jose Nebreda Marquez ......... Legal Counsel and Secretary of the Board of Directors of CEDC and
EDC since 2000. Mr. Nebreda joined CEDC's Legal Department in
1999. He is a Member of the Board of Directors of the Caracas
Chamber of Commerce and SERDECO and he is also Alternate
Director of Caja de Valores de Venezuela. Between 1993 and 1999
Mr. Nebreda was Counsel to the Executive Director for Panama and
Venezuela at the Inter-American Development Bank in Washington
D.C. Mr. Nebreda is a Venezuelan citizen.
Roger W. Sant ....................... Director of CEDC since 2000, and Chairman of the Board of
Directors since 2000. Co-founder of AES with Dennis Bakke in 1981.
He has been Chairman of the Board of AES and a director of AES
since its inception, and he held the office of Chief Executive Officer
of AES through December 31, 1993. He currently is Chairman of the
Boards of Directors of The Summit Foundation and The World
Wildlife Fund U.S., and serves on the Boards of Directors of The
World Resources Institute, the World Wide Fund for Nature and
Marriott International, Inc. Mr. Sant's principal business address and
phone number is the address and phone number of AES.
During the past five years, none of AES, CEDC nor the Purchaser, nor to
the best of their knowledge, any of their directors and executive officers, (1)
has been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (2) has been a party to any judicial or administrative
proceeding (except for matters that were dismissed without sanction or
settlement) that resulted in a judgment, decree or final order enjoining such
person or entity from future violations of, or prohibiting activities subject
to, United States federal or state securities laws or a finding of any
violation with respect to such laws.
4. BACKGROUND TO THE OFFERS; PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND
AGREEMENTS
In May 2001, CEDC, through its wholly owned subsidiary, Inversiones
Inextel, delivered a written notice to VenWorld requesting the conversion of
substantially all of Inversiones Inextel's interest in VenWorld into its pro
rata interest in CANTV held by VenWorld.
G-13
On May 28, 2001, the CNV issued an order to the effect that acquisitions
of shares of CANTV pursuant to the conversion provisions of the Association
Agreement are subject to Venezuelan tender offer regulations. Among other
things, these regulations specify that acquisitions of 10% or more of the
capital of a listed company in Venezuela (such as CANTV) must be made through a
public tender offer and that a controlling shareholder of a listed company in
Venezuela may only acquire additional shares of such company pursuant to a
public tender for at least 75% of the capital of such company.
On June 4, 2001, Verizon appealed this order of the CNV to the Venezuelan
First Court on Administrative Matters (Corte Primera de la Contencioso
Administrativo) and requested the issuance of a preliminary injunction to
suspend all conversions pending under the Association Agreement. On June 6,
2001, this preliminary injunction request was rejected by the Venezuelan First
Court on Administrative Matters.
Also on June 4, 2001, Verizon commenced an arbitration against, among
others, EDC and Telefonica under the Association Agreement alleging, among
other things, breaches by EDC of its obligations under the Association
Agreement, including breaches relating to Inversiones Inextel's conversion of
substantially all of its interest in VenWorld. On June 5, 2001, Verizon
petitioned the U.S. District Court for the Southern District of Florida for a
temporary restraining order and preliminary injunction to enjoin EDC,
Telefonica, AT&T and others from (a) exercising any rights of first refusal to
buy Class A Shares in CANTV received or to be received as a result of
conversions of shares by other shareholders in VenWorld, (b) converting or
closing on the conversion of their own shares of VenWorld into Class A Shares
in CANTV and (c) disposing of any CANTV shares they have received or may
receive from VenWorld, pending resolution of the arbitration. On June 7, 2001,
this petition was denied by the U.S. District Court for the Southern District
of Florida.
In early June 2001, a holder of Class C Shares filed an extraordinary
constitutional action (an amparo) with the Venezuelan First Court on
Administrative Matters requesting the nullity and suspension of the CNV order,
alleging violation of constitutional rights. The Venezuelan First Court on
Administrative Matters denied this amparo.
Pursuant to its conversion request, on June 21, 2001, Inversiones Inextel
received 63,999,524 Class A Shares previously held by VenWorld in exchange for
the shares in VenWorld converted by Inversiones Inextel. The Purchaser believes
that, in accordance with the Bylaws of CANTV, on receipt, such Class A Shares
automatically converted into an equal number of Class D Shares. However, to
date, CANTV has been unwilling to reflect such conversion in accordance with
the provisions of the CANTV Bylaws on the CANTV shareholder records. In August
2001, CEDC requested that VenWorld convert its remaining interest in VenWorld
into 476 shares of CANTV.
On August 29, 2001, the Purchaser announced its intention to make the U.S.
Offer (as defined below) and the Venezuelan Offer. On September 25, 2001, the
Purchaser commenced the Offers.
Except as described in the Venezuelan Offer to Purchase (including this
Information Supplement):
o none of the Purchaser, AES, or CEDC, nor, to the best of their
knowledge, any of the directors, executive officers or any associate or
majority-owned subsidiary of the Purchaser, AES, or CEDC beneficially
owns or has any right to acquire, directly or indirectly, any shares of
common stock of CANTV or ADSs, and
o none of the Purchaser, AES, or CEDC, nor, to the best of their
knowledge, any of the persons or entities referred to above nor any
director, executive officer or subsidiary of any of the foregoing has
effected any transaction in any shares of common stock of CANTV or ADSs
during the past 60 days.
Except as set forth in the Venezuelan Offer to Purchase, since September
1, 1999:
o there have been no transactions between the Purchaser, AES, or CEDC,
nor, to the best of their knowledge, any of their directors and executive
officers, on the one hand, and CANTV or any of its executive officers,
directors, or affiliates, on the other hand, that would be required to be
reported under the rules and regulations of the SEC applicable to a
tender offer in the U.S. , and
G-14
o there have been no negotiations, transactions or material contacts
between the Purchaser, CEDC, AES or any of their respective subsidiaries
or, to the best knowledge of the Purchaser, AES and CEDC, any of their
directors or executive officers, on the one hand, and CANTV or its
affiliates, on the other hand, concerning any merger, consolidation or
acquisition, tender offer or other acquisition of securities, an election
of directors or a sale or other transfer of a material amount of assets
of CANTV.
5. ADDITIONAL GENERAL TENDER OFFER INFORMATION
Holders of Shares or ADSs do not have appraisal rights in connection with
the Venezuelan Offer or the concurrent U.S. tender offer (the "U.S. OFFER," and
together with the Venezuelan Offer, the "OFFERS") for 28,566,944 ADSs.
Although the terms and conditions of the U.S. Offer and the Venezuelan
Offer are substantially similar, because of differences in law and market
practice between the United States and Venezuela, the rights of tendering
security holders pursuant to the two offers are not identical. The most
significant difference is that Venezuelan law provides for tender offers to be
kept open for between 20 and 30 Venezuelan stock exchange trading days, with a
possible aggregate of 30 Venezuelan stock exchange trading days of extensions
of the offering period after the initial expiration date being available under
certain circumstances. U.S. law, on the other hand, may require under certain
circumstances that the U.S. Offer be kept open longer than the maximum 60
Venezuelan stock exchange trading days potentially available for the Venezuelan
Offer. While the Purchaser presently intends to make the offer periods for the
Venezuelan Offer and the U.S. Offer the same, it is possible that, due to
requirements of applicable law or market practice, holders tendering in the
Venezuelan Offer will be paid either before or after holders tendering in the
U.S. Offer, although the price paid per share (after adjusting for the fact
that each ADS represents seven Class D Shares) will be the same in both Offers.
Pursuant to Venezuelan law, CANTV is required to file a statement with the
CNV within five Venezuelan trading days from commencement of the Venezuelan
Offer. In this filing, CANTV must state whether it supports, rejects or does
not take a position on the Venezuelan Offer. Pursuant to U.S. law, CANTV is
required to file a statement with the SEC within ten business days of
commencement of the U.S. Offer, stating whether it supports, rejects or does
not take a position on the U.S. Offer.
A request is being made to CANTV to inspect CANTV's shareholder registry
books maintained by Banco Venezolano de Credito , S.A.C.A., CANTV's transfer
agent, to obtain the names of the holders of Shares for the purpose of
disseminating the Venezuelan Offer to Purchase and related materials to holders
of Shares. Under Venezuelan law, a company is required to permit a holder of
its shares to inspect its shareholders registry books. In addition, the
Purchaser is making various requests to CANTV and The Bank of New York (the
"DEPOSITARY OF ADSS") under U.S. law and the Amended and Restated Deposit
Agreement (the "DEPOSIT AGREEMENT") dated September 10, 2000, among CANTV, the
Depositary of ADSs and holders from time to time of ADRs issued thereunder for
the purpose of disseminating the U.S. Offer to Purchase and related materials
to holders of ADSs.
Upon the occurrence of any of the events that give the Purchaser the right
to withdraw the Venezuelan Offer, the Purchaser may request that the CNV permit
extension of the period of time during which the Venezuelan Offer is open. The
Purchaser will give notice of any such extension to the Receiving Agent and by
making a public announcement of such extension. There can be no assurance that
the Purchaser will exercise its right to extend the Venezuelan Offer, or that
the CNV would grant any request for such extension. If the Purchaser is granted
permission by the CNV to, and does, extend the period of time during which the
Venezuelan Offer is open for any reason, then, without prejudice to the
Purchaser's rights under the Venezuelan Offer, the Receiving Agent may, on
behalf of the Purchaser, retain all Shares tendered, and such Shares may not be
withdrawn except as otherwise provided in the Venezuelan Offer to Purchase.
If the Purchaser makes a material change to the terms of the Venezuelan
Offer or the information concerning the Venezuelan Offer, or if it waives a
material condition of the Venezuelan Offer, the Purchaser will disseminate
additional tender offer materials.
G-15
Any extension, termination or amendment of the Venezuelan Offer will be
followed as promptly as practicable by a public announcement thereof. Without
limiting the manner in which the Purchaser may choose to make any public
announcement, the Purchaser will have no obligation (except as otherwise
required by applicable law) to publish, advertise or otherwise communicate any
such public announcement other than by issuing a press release to the
Venezuelan press and the Dow Jones News Service. In the case of an extension of
the Venezuelan Offer, the Purchaser will make a public announcement of such
extension no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
EXEMPTION REQUESTED FROM THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
In order to facilitate the making of the Offers, AES has requested that
the SEC grant certain exemptive relief from the provisions of Rule 14d-10(a)(1)
and Rule 14e-5 under the U.S. Exchange Act, and that the staff of the SEC
confirm that it will not recommend that the SEC take any enforcement action
pursuant to Rules 14d-4(d), 14d-6(c), 14e-1(b) and 14e-1(c) under the U.S.
Exchange Act in connection with the Offers.
Rule 14d-10(a)(1) provides that no person shall make a tender offer unless
the offer is open to all security holders of the class of securities subject to
the tender offer. The U.S. Offer is open to all holders of ADSs and excludes
holders of Shares, while the Venezuelan Offer is open to all holders of Shares
and excludes holders of ADSs. Accordingly, in the absence of exemptive relief,
the application of Rule 14d-10(a)(1) could potentially be construed to prohibit
the Purchaser from proceeding with the dual structure of the Offers. The
exemption from Rule 14d-10(a)(1) being requested would permit the Purchaser to
purchase pursuant to the Venezuelan Offer only Shares and to purchase pursuant
to the U.S. Offer only ADSs.
Among other things, Rule 14e-5 generally prohibits a person making a
tender offer for an equity security registered under Section 12 of the U.S.
Exchange Act from directly or indirectly purchasing or making any arrangement
to purchase such security or any security convertible into, or exchangeable
for, such security, other than pursuant to the tender offer. This prohibition
applies from the time the offer is publicly announced until its expiration.
Accordingly, in the absence of exemptive relief, on the announcement of the
U.S. Offer, Rule 14e-5 could be construed to prohibit the Purchaser from
purchasing Shares in the Venezuelan Offer. The exemption from Rule 14e-5 being
requested would permit the Purchaser: (1) to purchase Shares pursuant to the
Venezuelan Offer during, but outside, the U.S. Offer; and (2) to enter into
such arrangements and agreements and to take such other steps as may be
necessary or advisable to effect the Venezuelan Offer.
Rule 14d-4(d) and Rule 14d-6(c) require, in the event that a person who
makes an offer makes a material change to the terms or conditions of a tender
offer, that the offeror extend the tender offer (in certain circumstances) and
disseminate the material change to security holders. Under Venezuelan law,
however, any extension of the period during which a tender offer is open is at
the discretion of the CNV. The "no action" position being requested of the
staff of the SEC with respect to enforcement of Rule 14d-4(d) and Rule 14d-6(c)
would allow the Purchaser to make material changes to the Venezuelan Offer and
only make those extensions to the period that the Venezuelan Offer is open as
are authorized by the CNV. Notwithstanding this relief, in the event that the
Purchaser makes material changes to the Venezuelan Offer, the Purchaser intends
to request that the CNV permit an extension of the Venezuelan Offer to the
extent necessary to be consistent with the terms of Rule 14d-4(d) and Rule
14d-6(c).
Rule 14e-1(b) provides, among other things, that a person who makes a
tender offer for an equity security may not increase or decrease the percentage
of the class of securities sought or the consideration offered unless the
tender offer remains open for at least 10 business days from the date that
notice of such increase or decrease is first published or sent or given to
security holders. Under Venezuelan law, however, any extension of the period
during which a tender offer is open is at the discretion of the CNV. The "no
action" position being requested of the staff of the SEC with respect to
enforcement of Rule 14e-1(b) would allow the Purchaser to make such increases
or decreases and only make those extensions to the period that the Venezuelan
Offer is open as are authorized by the CNV. Notwithstanding this relief, in the
event that the Purchaser makes any such increases or decreases pursuant to the
Venezuelan Offer, the
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Purchaser intends to request that the CNV permit an extension of the Venezuelan
Offer to the extent necessary to be consistent with the terms of Rule 14e-1(b).
Rule 14e-1(c) provides that a person who makes a tender offer for a class
of equity securities may not fail to pay the consideration offered or return
the securities deposited by or on behalf of the security holders promptly after
the termination or withdrawal of the tender offer. Venezuelan law and practice,
on the other hand, provide that an offeror must pay for securities tendered
into an offer within five Venezuelan stock exchange trading days following the
settlement of the purchase of the securities on the Caracas Stock Exchange.
Such settlement is effected through a special session of the Caracas Stock
Exchange and must be made pursuant to the rules and regulations thereof. Such
settlement typically occurs on or before the fifth Venezuelan stock exchange
trading day following the expiration date of an offer. Consequently, Venezuelan
market practice could be in direct conflict with Rule 14e-1(c). The relief
being requested with respect to Rule 14e-1(c) would permit the Purchaser to pay
for securities tendered pursuant to the Venezuelan Offer pursuant to Venezuelan
law and market practice.
In connection with receiving this relief, AES, CEDC and their affiliates,
including the Purchaser, will agree:
o that, prior to the expiration of the U.S. Offer, they will not purchase
ADSs or Shares except: (i) ADSs pursuant to the U.S. Offer, (ii) Shares
pursuant to the Venezuelan Offer, (iii) for the contribution of the
interest in CANTV held by Inversiones Inextel to the immediate parent of
the Purchaser and (iv) the conversion of the remaining interest held by
Inversiones Inextel in VenWorld Telecom, C.A.;
o that if the price paid in the Venezuelan Offer for Shares is increased,
a corresponding increase in the price paid for ADSs in the U.S. Offer
will be made; and
o to other customary conditions.
The Purchaser believes the SEC has granted similar relief to other people
in transactions in Venezuela and the United States similar to the Offers.
6. ADDITIONAL INFORMATION CONCERNING LEGAL MATTERS AND REGULATORY APPROVALS
Based on its examination of publicly available information filed by CANTV
and other publicly available information concerning CANTV, except as set forth
in this Venezuelan Offer to Purchase, the Purchaser is not aware of:
o any governmental license or regulatory permit that appears to be
material to CANTV's business that might be adversely affected by the
Purchaser's purchase of Shares or ADSs as contemplated in the Offers,
o any approval or other action by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign,
that would be required for the acquisition or ownership of Shares or ADSs
by the Purchaser as contemplated in the Offers, or
o any approval or other action by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, or
any consent, waiver or other approval, that would be required as a result
of or in connection with the Offers, including, but not limited to, any
consents or other approvals under any licenses, concessions, permits and
agreements to which CANTV or the Purchaser or any of their respective
subsidiaries or affiliates is a party.
Should any such approval or other action be required, the Purchaser will
determine in its sole discretion whether such approval or other action will be
sought. Any such approval may delay the acceptance for payment of or payment
for Shares tendered pursuant to the Venezuelan Offer. There can be no assurance
that any such approval or other action, if needed, would be obtained or would
be obtained without substantial conditions or that if such approvals were not
obtained or such other actions were not taken adverse consequences might not
result to CANTV's business or certain parts of CANTV's business might not have
to be disposed of, any of which could cause the Purchaser, subject to the terms
of the Venezuelan Offer to Purchase, to elect to withdraw the Venezuelan Offer
without the purchase of
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Shares thereunder. The Purchaser's obligation under the Venezuelan Offer to
accept for payment and pay for Shares is subject to the Purchaser's right to
withdraw.
Under the Venezuelan tender offer regulations, any person or group of
persons intending to take control of a publicly traded Venezuelan company must
file with the CNV a report describing the offer. On September 3, 2001, the
Purchaser filed such report. In accordance with the Venezuelan tender offer
regulations, the Purchaser must report the results of the Offers to the CNV,
the Caracas Stock Exchange and the general public within two days following the
closing of each of the U.S. Offer and the Venezuelan Offer through a notice
published in two newspapers with a nationwide circulation.
Under U.S. antitrust laws, some acquisitions may not be consummated unless
information has been furnished to the appropriate governmental authorities and
the applicable waiting period requirements have been satisfied. The acquisition
of Shares and ADSs pursuant to the Offers is not subject to these requirements.
7. U.S. FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS OF SHARES
The following is a summary of certain U.S. federal income tax consequences
of the Venezuelan Offer to U.S. Holders (as defined below) of Shares whose
Shares are tendered and accepted for payment in U.S. dollars pursuant to the
Venezuelan Offer. The discussion is for general information only and does not
purport to consider all aspects of U.S. federal income taxation that might be
relevant to holders of Shares. The discussion is based on current law which is
subject to change, possibly with retroactive effect. The discussion applies
only to persons who hold Shares as capital assets and have the U.S. dollar as
their functional currency. The discussion is not intended to address the U.S.
federal income tax consequences of the Venezuelan Offer to certain categories
of investors (such as banks, insurance companies, dealers in securities or
foreign currency, tax exempt organizations, persons holding a Share as part of
a straddle, hedging or conversion transaction, persons that own (or are deemed
to own for U.S. tax purposes) during the past five years Shares or ADSs
representing 10% or more of the voting stock of CANTV and certain expatriates
or former long-term residents of the United States) that may be subject to
special treatment under the U.S. federal income tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD
CONSULT SUCH HOLDER'S TAX ADVISOR REGARDING THE APPLICABILITY OF THE RULES
DISCUSSED BELOW TO SUCH HOLDER AND THE PARTICULAR TAX EFFECTS TO SUCH HOLDER OF
THE VENEZUELAN OFFER, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE
MINIMUM TAX, STATE, LOCAL AND FOREIGN TAX LAWS AND SUCH HOLDER'S ABILITY TO
CLAIM FOREIGN TAX CREDITS, IF ANY.
As used herein, the term "U.S. HOLDER" means a beneficial owner of Shares
that is:
(a) a U.S. resident or citizen for U.S. federal income tax purposes;
(b) a corporation (including an entity that is treated as a corporation
for U.S. federal income tax purposes) organized or created under the laws of
the United States or any political subdivision thereof;
(c) a trust, if a court within the United States is able to exercise
primary jurisdiction over its administration and one or more U.S. persons have
the authority to control all of its substantial decisions; and
(d) an estate, the income of which is subject to U.S. federal income
taxation regardless of its source.
The tax treatment of persons who hold their Shares through a partnership
(including an entity treated as a partnership for U.S. federal income tax
purposes) will generally depend on the status of the partner. Partners in a
partnership holding Shares should consult their U.S. tax advisor.
U.S. Holders will recognize gain or loss upon the sale of Shares for cash
pursuant to the Venezuelan Offer. Such gain or loss will generally be equal to
the difference between the amount of cash received by the U.S. Holder and the
U.S. Holder's tax basis in the Shares exchanged therefor. Any gain or loss
recognized upon the sale of Shares pursuant to the Venezuelan Offer will
generally be treated as long term capital gain or loss if the Shares have been
held by the holder for more than one year and otherwise as short term capital
gain or loss.
G-18
U.S. Holders of Shares should consult their tax advisors with respect to
determining their gain, loss, amount realized, tax basis and holding period in
connection with Shares tendered and accepted for payment pursuant to the
Venezuelan Offer.
Foreign tax credit. A U.S. Holder who sells Shares pursuant to the
Venezuelan offer may be subject to Venezuelan tax on the amount realized (see
Section 6 of the Venezuelan Offer to Purchase). Gain recognized by a U.S.
Holder generally will be treated as U.S. source income. Consequently, a U.S.
holder may not be able to use the foreign tax credit for Venezuelan tax imposed
on the gain from the sale of Shares unless it can apply the credit against U.S.
tax due on other income from foreign sources in the appropriate foreign tax
credit category, or, alternatively, such holder may take a deduction for such
Venezuelan tax.
Backup Withholding Tax. A U.S. Holder may be subject to backup withholding
on the proceeds from the sale of Shares pursuant to the Venezuelan Offer. To
prevent backup withholding, each U.S. Holder who accepts the Venezuelan Offer
must provide the Receiving Agent with the holder's correct taxpayer
identification number (which, for individuals, will be their social security
number) and certify that such holder is exempt from or otherwise not subject to
backup withholding by completing a Substitute Form W-9 prior to the receipt of
any payment.
8. CERTAIN ANTICIPATED U.S. TAX CONSEQUENCES OF THE PROPOSED PLANS CONCERNING
CANTV
Certain Anticipated U.S. Federal Income Tax Considerations Related to the
Proposed Merger and Subsequent Cash Distributions by the Purchaser. The
following is a general summary of certain anticipated U.S. federal income tax
considerations applicable to U.S. Holders of Shares related to the proposed
merger of CANTV with and into the Purchaser described in Annex B to the
Venezuelan Offer to Purchase (the "MERGER") and subsequent cash distributions
by the Purchaser. The summary is for general information only, does not discuss
all aspects of U.S. federal income taxation that might be relevant to U.S.
Holders or their affiliates, and is subject to the actual facts and
circumstances related to the proposed Merger and subsequent cash distributions,
which facts and circumstances are currently subject to significant uncertainty.
The summary is based on current law which is subject to change, possibly with
retroactive effect. The summary is not intended to address the anticipated U.S.
federal income tax consequences of the proposed Merger and subsequent cash
distributions to U.S. Holders that may be subject to special treatment under
the U.S. federal income tax laws and applies only to U.S. Holders who hold
Shares as capital assets and have the U.S. dollar as their functional currency.
No ruling has been or will be requested from the U.S. Internal Revenue
Service (the "SERVICE") with respect to the U.S. federal income tax treatment
of the Merger or any subsequent cash distributions. Accordingly, no assurance
can be given that the Service will not assert, or a court in the U.S. will not
sustain, positions or conclusions contrary to those discussed below.
U.S. HOLDERS OF SHARES SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE
ACTUAL U.S. FEDERAL INCOME TAX AND OTHER TAX CONSEQUENCES OF THE PROPOSED
MERGER AND SUBSEQUENT CASH DISTRIBUTIONS.
Anticipated U.S. Federal Income Treatment of the Merger. The Merger is
intended to be a taxable transaction for U.S. federal income tax purposes.
Consequently, a U.S. Holder of Shares who receives the surviving corporation's
shares in exchange for Shares pursuant to the Merger should recognize gain or
loss equal to the difference between the fair market value of the surviving
corporation's shares received and the adjusted tax basis in the Shares
surrendered. Generally, such gain or loss should be long-term capital gain or
loss if such holder's Shares were held by the holder for more than one year.
For U.S. Holders that own, directly or indirectly, shares representing 10% or
more of CANTV's total combined voting power, it is possible that all or a
portion of any gain recognized by such U.S. Holder will be taxable as a
dividend, subject to ordinary income tax rates.
U.S. Shareholders in a Controlled Foreign Corporation. After completion of
the Offers, CANTV should be a "controlled foreign corporation" ("CFC") for U.S.
federal income tax purposes as a result of the purchase of Shares and ADSs
pursuant to the Offers. It is possible that, as a result of the Merger, CANTV
will recognize a significant amount of "subpart F income" under the CFC rules.
A pro rata share of such subpart F income should be treated as a dividend
received by U.S. Holders that own directly or
G-19
indirectly shares representing 10% or more of CANTV's total combined voting
power. In general, the tax basis of such U.S. Holder's stock in CANTV should
increase by the amount of any subpart F income included in taxable income and
should decrease by amounts actually distributed that constitute previously
taxed earnings. Such basis increase may impact the amount of any gain or loss
recognized by such U.S. Holder as a result of the exchange of Shares for the
surviving corporation shares.
Post Merger Dividend Distributions. As discussed in Annex B to the
Venezuelan Offer to Purchase, following the Merger, the Purchaser intends to
make cash distributions to its shareholders. The Purchaser believes that, as a
result of the Merger, the cash distributions to a U.S. Holder should, for the
most part, be treated as tax-free returns of capital to the extent of the U.S.
Holder's tax basis in the surviving corporation shares. Any such cash
distributions in excess of the U.S. Holder's tax basis in the surviving
corporation shares should result in the U.S. Holder recognizing capital gain.
THE ABOVE IS A GENERAL SUMMARY AND IS NOT INTENDED TO ADDRESS ALL OF THE
TAX CONSEQUENCES OF THE MERGER AND SUBSEQUENT CASH DISTRIBUTIONS THAT MAY BE
RELEVANT TO A U.S. HOLDER OF SHARES. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS
REGARDING THE UNITED STATES FEDERAL INCOME AND OTHER TAX CONSEQUENCES OF THE
MERGER AND SUBSEQUENT CASH DISTRIBUTIONS.
G-20
THE COORDINATOR FOR THE VENEZUELAN OFFER IS:
[ACTI VALORES LOGO]
SOCIEDAD DE CORRETAJE
Calle Los Chaguaramos
Centro Gerencial Mohedano PH-A
La Castellana
Caracas, Venezuela
Tel: (0212)201-7511
www.activalores.com
consult@activalores.com
THE RECEIVING AGENT, TRUSTEE OF THE CLASS C SHARES AND PAYING AGENT OF THE
VENEZUELAN OFFER IS:
[UNIBANCA LOGO]
Avenida Universidad, Esquina El Chorro
Torre Unibanca
Caracas, Venezuela
Tel: (0212)-501-7942
Fax: (0212)-501-8485
THE FACILITATING AGENT FOR THE CLASS C SHARES IS:
[GRAPHIC OMITTED] INVERUNION S.A.
CASA DE BOLSA
Avenida Universidad, Esquina El Chorro
Torre Unibanca
Caracas, Venezuela
Tel: (0212)-501-7942
Fax: (0212)-501-8485
THE LEGAL ADVISOR OF THE VENEZUELAN OFFER IS:
D'EMPAIRE REYNA BERMuDEZ ABOGADOS
Edificio Bancaracas, P.H.
Plaza La Castellana
Caracas 1160, Venezuela
Tel: (0212)264-6244
Fax: (0212)264-7543
www.drbalegal.com
THE FINANCIAL ADVISORS FOR THE VENEZUELAN OFFER ARE:
[JP MORGAN LOGO]
[CREDIT SUISSE FIRST BOSTON LOGO]
[BANC OF AMERICA SECURITIES LOGO]
EX-99.(A)(1)(B)
4
file003.txt
SUMMARY TERM SHEET
Exhibit (a)(1)(B)
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
AES Corporacion EDC
SUMMARY TERM SHEET -- VENEZUELAN OFFER TO PURCHASE
TENDER OFFER TO TAKE CONTROL
(the "VENEZUELAN OFFER")
FOR 199,968,608 OUTSTANDING SHARES OF
COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA (CANTV)
at
US$3.4285714 per Share
by
AES COMUNICACIONES DE VENEZUELA, C.A.,
a company jointly owned indirectly
by
THE AES CORPORATION
and
CORPORACION EDC, C.A.
THE VENEZUELAN OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 6:00 P.M., CARACAS TIME (5:00 P.M., NEW YORK CITY TIME),
ON MONDAY, OCTOBER 29, 2001 UNLESS THE VENEZUELAN OFFER IS EXTENDED
This Summary Term Sheet to the Venezuelan Offer to Purchase, dated
September 25, 2001 ("Venezuelan Offer to Purchase"), relates to the offer (the
"Venezuelan Offer") by AES Comunicaciones de Venezuela, C.A. (the "Purchaser"),
a company jointly owned indirectly by The AES Corporation ("AES") and
Corporacion EDC, C.A. ("CEDC"), to purchase 199,968,608 outstanding shares of
common stock ("Shares") of Compania Anonima Nacional Telefonos de Venezuela
(CANTV) ("CANTV") at a price of US$3.4285714 per Share.
The purpose of this Summary Term Sheet is to provide additional disclosure
information to U.S. persons who receive the Venezuelan Offer to Purchase. This
Summary Term Sheet is complementary to, and should be read in conjunction with,
the Venezuelan Offer to Purchase. This Summary Term Sheet is being distributed
to all holder of Shares who are U.S. persons.
The Venezuelan Offer is being made in conjunction with a concurrent offer
in the United States (the "U.S. Offer") by the Purchaser to purchase 28,566,944
American Depositary Shares ("ADSs") of CANTV (each ADS representing seven Class
D shares of CANTV) at US$24.00 per ADS (the same price being paid pursuant to
the Venezuelan Offer, taking into account the number of Class D Shares
represented by each ADS). If the price to be paid per ADS pursuant to the U.S.
Offer is increased, the Purchaser intends to make a corresponding increase to
the price to be paid per Share pursuant to the Venezuelan Offer (taking into
account the number of Class D Shares represented by each ADS).
SUMMARY TERM SHEET
AES Comunicaciones de Venezuela, C.A., the purchaser (Purchaser) in this
Venezuelan offer, is offering to purchase for cash pursuant to this Venezuelan
offer an aggregate of 199,968,608 shares of common stock of Compania Anonima
Nacional Telefonos de Venezuela (CANTV). The Purchaser is a company jointly
owned indirectly by The AES Corporation (AES) and Corporacion EDC, C.A. (CEDC).
AES owns approximately 87% of the outstanding ordinary shares of CEDC. The
Purchaser is also offering pursuant to a concurrent offer in the United States
to purchase an aggregate of 28,566,944 American Depositary Shares, or ADSs, of
CANTV.
The capital stock of CANTV is divided into four classes of shares of
common voting stock: Class A shares, Class B shares, Class C shares and Class D
shares. Class D shares are publicly traded on the Caracas Stock Exchange and
are the only class of shares of CANTV underlying the ADSs. The ADSs are
publicly traded on the New York Stock Exchange. Class A shares, Class B shares
and Class C shares are not publicly traded on any stock exchange. In general,
on a transfer of Class A shares, Class B shares or Class C shares to a person
not specified in CANTV's Bylaws as eligible to hold such shares, the
transferred Class A, Class B or Class C shares automatically convert into Class
D shares.
Based on CANTV's public filings, the CANTV shares and ADSs sought in this
Venezuelan offer and the U.S. offer, together with the Class D shares and ADSs
currently owned by AES through CEDC, represent a majority of the outstanding
shares of all classes of capital stock of CANTV.
The following are some of the questions that you as a holder of CANTV
shares may have and answers to those questions. The purpose of this Summary
Term Sheet is to provide additional disclosure information to U.S. persons who
receive the Venezuelan offer to purchase
The information in this summary is not complete and we urge you to read
carefully the Venezuelan offer to purchase (including all the annexes to the
Venezuelan offer to purchase) and the accompanying Share Letter of Transmittal.
WHO IS OFFERING TO BUY MY CANTV SHARES?
The purchaser in this Venezuelan offer is AES Comunicaciones de Venezuela,
C.A. The Purchaser is a corporation (compania anonima) incorporated and
domiciled in the City of Caracas. Approximately two-thirds of the Purchaser's
capital stock is indirectly owned by AES. The remaining capital stock of the
Purchaser (approximately one-third) is owned indirectly by CEDC. The Purchaser
currently owns 1,000 Class D shares and 1,000 ADSs, representing less than 0.1%
of the outstanding capital stock of CANTV. In addition, AES, through CEDC,
currently owns Class D shares representing approximately 6.9% of the
outstanding capital stock of CANTV. See Sections 1 and 2 of the Venezuelan
offer to purchase.
AES is a corporation incorporated under the laws of the State of Delaware.
AES is a global power company committed to serving the world's needs for
electricity and other services in a socially responsible way. AES participates
primarily in two related lines of business: electricity generation and
electricity distribution. AES operates and owns (entirely or in part) electric
power plants in North America, South America, Europe and Asia, and distribution
companies in the United States, Venezuela, Argentina, Brazil, El Salvador,
Dominican Republic and The Republic of Georgia. AES is using its distribution
infrastructure and knowledge of various markets to develop the ability to
provide wholesale and/or retail telecommunications services. AES continually
considers business development opportunities, including acquisition
opportunities throughout the world. AES's revenues during 2000 were
approximately $7.58 billion and total assets were approximately $33 billion as
of December 31, 2000. Shares of AES trade on the New York Stock Exchange under
the symbol "AES". See Sections 1 and 2 of the Venezuelan offer to purchase.
CEDC is a Venezuelan company in which AES indirectly holds 87% of the
outstanding ordinary shares. CEDC's shares are traded on the Caracas Stock
Exchange, together with the shares of C.A. La Electricidad de Caracas, under
the symbol "EDC." CEDC is a holding company for non-Venezuelan
1
investments and for Venezuelan investments other than in regulated electricity
activities. CEDC holds interests in companies dedicated to the production and
distribution of electricity, telecommunications and distribution of natural
gas. See Sections 1 and 2 of the Venezuelan offer to purchase.
AES is subject to the informational requirements of the United States
Securities Exchange Act of 1934 and files reports and other information with
the Securities and Exchange Commission, the SEC, relating to its business,
financial condition and other matters. CEDC is subject to the informational
requirements of the applicable securities laws in Venezuela and files reports
and other information with the Venezuelan Comision Nacional de Valores, the
CNV, relating to its business, financial condition and other matters. CEDC also
files certain documents with the SEC. See Annex G to the Venezuelan offer to
purchase for a description of how you can inspect or obtain copies of AES's and
CEDC's reports, statements and other information.
WHAT IS THE PURPOSE OF THE OFFERS?
The purpose of this Venezuelan offer and the U.S. offer is to enable the
Purchaser and its affiliates to acquire control of CANTV. The Purchaser
intends, as soon as practicable after consummation of the offers, to seek
majority representation on CANTV's board of directors. Among other things, the
Purchaser intends to seek to increase the value of CANTV to its shareholders
and enhance the quality of service in order to benefit shareholders, customers
and the communities they serve. See Sections 1 and 3 of the Venezuelan offer to
purchase.
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THIS VENEZUELAN OFFER?
The Purchaser is seeking to purchase an aggregate of 199,968,608 CANTV
shares. The number of CANTV shares available for tender into this Venezuelan
offer is subject to change on a daily basis as a result of deposits of Class D
shares (being the only class of shares underlying the ADSs) into the ADS
deposit facility in exchange for ADSs and withdrawals of Class D shares from
the ADS deposit facility. See Section 1 of the Venezuelan offer to purchase.
This Venezuelan offer is open to all holders of CANTV shares. This
Venezuelan offer is not open to holders of ADSs. Tenders of ADSs are being
accepted in the U.S. offer but not in this Venezuelan offer. See Section 1 of
the Venezuelan offer to purchase.
HOW MUCH ARE YOU OFFERING TO PAY FOR MY CANTV SHARES? WHAT IS THE FORM OF
PAYMENT?
We are offering to pay US$3.4285714 per share, payable in United States
Dollars (US$) or, at the option of the tendering holders of CANTV shares, in
Bolivares. See Cover page and Section 6 of the Venezuelan offer to purchase.
WILL I HAVE TO PAY ANY FEES OR COMMISSIONS?
Tendering holders of CANTV shares will not be obligated to pay transfer
taxes on the sale of their CANTV shares pursuant to this Venezuelan offer,
except possibly for the 1% withholding tax described below. The Purchaser will
pay a commission equal to 0.2% of the price paid for the CANTV shares (other
than Class C shares) of a shareholder accepting this Venezuelan offer and whose
CANTV shares (other than Class C shares) are acquired by the Purchaser to any
broker duly authorized in Venezuela, including to the coordinator of the
Venezuelan Offer, that has assisted the shareholder in the acceptance of this
Venezuelan offer, provided that such broker is identified in the Share Letter
of Transmittal completed by such tendering holder of CANTV shares. With respect
to Class C shares, this commission will be received by the facilitating agent
for the Class C shares (see "How do I tender CANTV shares in this Venezuelan
offer?" below). See Section 7 of the Venezuelan offer to purchase.
The Caracas Stock Exchange may be required to withhold tax at a rate of 1%
on the gross amount of the payments made to those shareholders whose tendered
CANTV shares are accepted for payment in this Venezuelan offer. See Section 6
of the Venezuelan offer to purchase.
2
ARE YOU MAKING A CONCURRENT OFFER FOR AMERICAN DEPOSITARY SHARES IN THE UNITED
STATES?
Yes. Concurrently with this Venezuelan offer, the Purchaser is making a
U.S. offer to purchase 28,566,944 ADSs representing 199,968,608 Class D shares
of common stock of CANTV. See Section 1 of the Venezuelan offer to purchase.
HOW MUCH ARE YOU OFFERING TO PAY FOR ADSS IN THE U.S. OFFER?
In the U.S. offer we are offering to pay US$24.00 per ADS in cash, payable
in U.S. dollars (the same offer price under this Venezuelan offer taking into
account the number of Class D shares represented by each ADS). See Section 1 of
the Venezuelan offer to purchase.
If a holder of CANTV shares tendering into this Venezuelan offer is paid
in Bolivares, the fluctuation of exchange rates could result in the purchase
price received by a tendering holder in this Venezuelan offer for CANTV shares
being more or less than the purchase price paid in the U.S. offer. See Section
6 of the Venezuelan offer to purchase.
WHY IS THERE A SEPARATE U.S. OFFER?
U.S. and Venezuelan law each require that tender offers comply with the
rules and regulations of the home country. Since the U.S. and Venezuelan laws
relating to tender offers are different and inconsistent in certain ways, we
are making two separate offers. The terms and conditions of the two offers will
be substantially similar and generally will differ only to the extent required
by local customary market practice or Venezuelan or U.S. laws. See Annex G to
the Venezuelan offer to purchase.
WHAT ARE THE PRINCIPLE DIFFERENCES IN THE RIGHTS OF HOLDERS OF ADSS AND CANTV
SHARES UNDER THE TWO OFFERS?
The most significant difference is that Venezuelan law provides for tender
offers to be open for between 20 and 30 Venezuelan stock exchange trading days,
with a possible aggregate of 30 Venezuelan stock exchange trading days of
extensions of the offering period available under certain circumstances. U.S.
law, on the other hand, may require under certain circumstances that the offer
be kept open longer than the maximum 60 Venezuelan stock exchange trading days
potentially available for this Venezuelan offer. While we presently intend to
make the offer periods for the two offers the same, it is possible that, due to
requirements of applicable law or market practice, holders tendering in this
Venezuelan offer will be paid either before or after holders tendering in the
U.S. offer, although the price paid per share in U.S. dollars (after adjusting
for the fact that each ADS represents seven Class D shares) will be the same in
both offers. See Annex G to the Venezuelan offer to purchase.
IS IT POSSIBLE TO TENDER CANTV SHARES INTO THE U.S. OFFER, OR ADSS INTO THIS
VENEZUELAN OFFER?
No. Holders of ADSs who wish to tender their ADSs into this Venezuelan
offer may do so by withdrawing the Class D shares underlying such ADSs from the
ADS deposit facility and tendering such Class D shares into this Venezuelan
offer. Holders of Class D shares who wish to tender their CANTV shares into the
U.S. offer may do so by depositing their shares into the ADS deposit facility.
The ADSs received on such deposit may then be tendered into the U.S. offer.
Please contact the coordinator of this Venezuelan offer at the telephone number
and address set forth on the back cover page of the Venezuelan offer to
purchase, or The Bank of New York, the depositary of the ADSs, if you need any
assistance in converting your Class D shares into ADSs or your ADSs into Class
D shares. Costs associated with the conversion will be borne by the party
requesting the conversion. See Sections 1 and 7 of the Venezuelan offer to
purchase.
IF THE VENEZUELAN OFFER IS ACCEPTED, WHEN WILL PAYMENT BE MADE?
If the Venezuelan offer is accepted, we are required pursuant to
Venezuelan law to pay the purchase price with respect to the CANTV shares
purchased to each CANTV shareholder who has duly tendered into this Venezuelan
offer no later than five trading days after the settlement date of this
Venezuelan offer on the Caracas Stock Exchange. See Sections 1 and 6 of the
Venezuelan offer to purchase.
3
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
The Purchaser is pursuing various sources for the funds required to
purchase the CANTV shares and ADSs pursuant to the offers, including limited
recourse financing, internal resources, corporate borrowings, sales of
securities and other sources. In this regard, the Purchaser has held
negotiations with affiliates of its financial advisors relating to a limited
recourse credit facility. In addition, an agreement to which AES and CEDC are
parties contemplates that AES will contribute $500 million in connection with
the offers. The Purchaser believes that the funds required to purchase tendered
CANTV shares and ADSs pursuant to the offers can be obtained on a timely basis.
Neither this Venezuelan offer nor the U.S. offer is conditioned on the
completion of any financing arrangements. See Section 3 of the Venezuelan offer
to purchase.
IS AES'S OR CEDC'S FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN
THIS VENEZUELAN OFFER?
We do not think AES's or CEDC's financial condition is relevant to your
decision whether to tender in this Venezuelan offer because the form of payment
consists solely of cash and this Venezuelan offer is not subject to any
financing condition. See Section 3 of the Venezuelan offer to purchase.
DOES CANTV SUPPORT THE OFFERS?
Pursuant to Venezuelan law, CANTV is required to file a statement with the
Venezuelan National Securities Commission (Comision Nacional de Valores, or
CNV) within five Venezuelan trading days from commencement of this Venezuelan
offer. In this filing, CANTV must state whether it supports, rejects or does
not take a position on this Venezuelan offer. Pursuant to U.S. law, CANTV is
required to file a statement with the United States Securities and Exchange
Commission within ten business days of the commencement of the U.S. offer,
stating whether it supports, rejects or does not take a position on the U.S.
offer. See Annex G to the Venezuelan offer to purchase.
WILL YOU BUY ALL MY CANTV SHARES IF I TENDER THEM?
Upon the terms of this Venezuelan offer, the Purchaser will accept up to
199,968,608 CANTV shares validly tendered in this Venezuelan offer. If valid
tenders of CANTV shares are received in this Venezuelan offer from CANTV
shareholders exceeding 199,968,608 CANTV shares and more than 28,566,944 ADSs
are validly tendered in the U.S. offer, proration rules will apply in this
Venezuelan offer. See Section 6 of the Venezuelan offer to purchase.
CAN YOU INCREASE OR DECREASE THE NUMBER OF CANTV SHARES AND/OR ADSS YOU ARE
OFFERING TO PURCHASE UNDER THE OFFERS?
If (i) the coordinator of this Venezuelan offer fails to receive valid
tenders that allow the Purchaser to purchase a number of CANTV shares that,
together with the Class D shares represented by ADSs to be purchased pursuant
the U.S. offer, constitute at least 43.19% of the outstanding shares of capital
stock of CANTV, or (ii) fewer than 199,968,608 CANTV shares are validly
tendered in this Venezuelan offer, or (iii) fewer than 28,566,944 ADSs are
validly tendered in the U.S. offer, or (iv) an event takes place thereby giving
the Purchaser the right to withdraw this Venezuelan offer, then the Purchaser
reserves the right to, among other things:
o increase the number of CANTV shares sought in this Venezuelan offer and
decrease the number of ADSs sought in the U.S. offer and if applicable,
extend the term of the offers, provided that the aggregate number of
CANTV shares and ADSs sought in the offers shall always represent at
least 43.19% of the outstanding capital stock of CANTV in accordance with
Article 16 of the CNV Tender Offer Regulations, upon prior authorization
of the CNV, or
o increase the number of ADSs sought in the U.S. offer and decrease the
number of CANTV shares sought in this Venezuelan offer and if applicable,
extend the term of the offers, provided that (i) the aggregate number of
CANTV shares and ADSs sought in the offers shall always represent at
least 43.19% of the outstanding capital stock of CANTV, and (ii) the
adjusted number of
4
CANTV shares sought in this Venezuelan offer will not be lower than the
number of CANTV shares validly tendered in this Venezuelan offer and not
withdrawn in accordance with Article 16 of the CNV Tender Offer
Regulations, upon prior authorization of the CNV.
See Sections 1 and 6 of the Venezuelan offer to purchase.
DO YOU CURRENTLY OWN ANY CANTV SHARES?
AES and CEDC beneficially own 64,000,524 Class D shares and 1,000 ADSs,
representing approximately 6.9% of the outstanding capital stock of CANTV. This
includes 63,999,524 Class D shares owned by Inversiones Inextel, C.A., a wholly
owned subsidiary of CEDC, received upon the conversion of substantially all of
Inversiones Inextel's interest in VenWorld Telecom, C.A. (see "Who are CANTV's
other major shareholders?," below), and 1,000 Class D shares and 1,000 ADSs
owned by the Purchaser. In addition, Inversiones Inextel has requested, under
the terms of an association agreement with respect to VenWorld, that its
remaining interest in VenWorld be converted into 476 Class D shares. See
Section 4 of the Venezuelan offer to purchase.
WHO ARE CANTV'S OTHER MAJOR SHAREHOLDERS?
According to CANTV's public filings, VenWorld Telecom, C.A., a Venezuelan
company formed in 1991 to acquire Class A shares of CANTV in connection with
the privatization of CANTV by the Government of Venezuela, owned, as of April
30, 2001, 400,000,000 Class A shares, representing approximately 43.2% of
CANTV's outstanding capital stock. See Annex G to the Venezuelan offer to
purchase.
Each shareholder of VenWorld has the right to cause VenWorld to convert
all or part of its interest in VenWorld into its proportionate interest in the
Class A shares owned by VenWorld, subject to pro rata rights of the other
shareholders of VenWorld to acquire such Class A shares. Between April 2001 and
July 13, 2001, Inversiones Inextel has, and we understand that a wholly owned
subsidiary of AT&T International Inc. and some other shareholders of VenWorld
have, exercised their conversion rights and received all or some of their
proportionate interest in CANTV held by VenWorld. We do not know if other
shareholders of VenWorld have exercised their conversion rights and received
shares of CANTV common stock since July 13, 2001. See Annex G to the Venezuelan
offer to purchase.
As a result of these conversions and after giving effect to the automatic
conversion of the Class A shares received by Inversiones Inextel and the other
VenWorld shareholders (except AT&T) into Class D shares and assuming no
conversions of Class B shares or Class C shares since June 30, 2001, the
Purchaser estimates that as of July 13, 2001:
o VenWorld owned 312,086,559 Class A shares, representing approximately
33.7% of CANTV's outstanding capital stock. The principal remaining
shareholders of VenWorld are GTE Venholdings B.V., a wholly-owned
subsidiary of Verizon Communications Inc., whom the Purchaser estimates
owns 74.0% of VenWorld's outstanding capital stock, and Telefonica
Venezuelan Holding B.V., a wholly owned subsidiary of TI Telefonica
Internacional de Espana, S.A., whom the Purchaser estimates owns 20.5% of
VenWorld's outstanding capital stock. In addition, based upon publicly
available information, we understand that Verizon beneficially owns an
additional 32,945,829 Class D shares, representing approximately 3.6% of
the outstanding capital stock of CANTV.
o The government of Venezuela owned all 51,900,000 outstanding Class B
shares, representing approximately 5.6% of the outstanding capital stock
of CANTV.
o Employees, retirees, their successors and related parties (including
trusts for the benefit of employees and retirees) owned all 99,318,876
outstanding Class C shares, representing approximately 10.7% of the
outstanding capital stock of CANTV.
o There were 442,731,950 Class D shares outstanding (including Class D
shares represented by ADSs and Class D shares beneficially owned by AES
and CEDC), representing approximately 47.8% of the outstanding capital
stock of CANTV.
5
See Section 4 of the Venezuelan offer to purchase and Annex G to the
Venezuelan offer to purchase.
THE PURCHASER HAS THE RIGHT TO WITHDRAW THIS VENEZUELAN OFFER IN CERTAIN
CIRCUMSTANCES. WHAT ARE THE MOST SIGNIFICANT EVENTS THAT COULD GIVE RISE TO
THIS RIGHT OF WITHDRAWAL?
If (i) the coordinator of this Venezuelan offer fails to receive valid
tenders of CANTV shares that allow the Purchaser to purchase a number of CANTV
shares that, together with the Class D shares represented by ADSs to be
purchased pursuant the U.S. offer, constitute at least 43.19% of the
outstanding shares of capital stock of CANTV, or (ii) fewer than 199,968,608
CANTV shares are validly tendered in this Venezuelan offer, or (iii) fewer than
28,566,944 ADSs are validly tendered in the U.S. offer, or (iv) an event takes
place that gives rise to the Purchaser's right to withdraw this Venezuelan
offer then the Purchaser reserves the right to, among other things, (a) deem
this Venezuelan offer failed and withdraw this Venezuelan offer in accordance
with the terms of the Venezuelan offer to purchase or (b) not deem this
Venezuelan offer failed and acquire the CANTV shares tendered pursuant to this
Venezuelan Offer, provided that the CANTV shares purchased represent at least a
number of CANTV shares which, together with the Class D shares represented by
ADSs purchased pursuant to the U.S. offer, represent at least 32.39% of the
outstanding capital stock of CANTV. See Section 6 of the Venezuelan offer to
purchase.
In addition, the Purchaser may withdraw this Venezuelan offer before the
expiration date in the event of the occurrence of, among other things, any of
the following, upon confirmation by the CNV:
(i) if ADSs validly tendered into the U.S. offer fail to be purchased
because of circumstances that, according to the terms and conditions
of the U.S. offer, give the Purchaser the right to withdraw the U.S.
offer, and
(ii) if all regulatory approvals required to consummate the offers,
including the authorization by the Venezuelan National
Telecommunications Commission (Venezuelan Comicion Nacional de
Telecomunicationes) (CONATEL) of the purchase of CANTV shares and
ADSs pursuant to the offers, shall not have been obtained or if such
approvals shall have not remained in full force and effect, or any
such approvals impose conditions or restrictions that would be
adverse to AES, CEDC, the Purchaser, CANTV or any of their affiliates
or if the holder of the Class B shares has not cast a favorable vote
in favor of the merger of CANTV with and into the Purchaser (see "Do
you have any plans for CANTV after consummation of the offers?",
below).
See Section 6 of the Venezuelan offer to purchase.
This Venezuelan offer may also be withdrawn by the Purchaser upon the
occurrence of other events upon confirmation by the CNV. See Section 6 of the
Venezuelan offer to purchase.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THIS VENEZUELAN OFFER?
You will have until 6:00 p.m., Caracas time (5:00 p.m., New York City
time), on Monday, October 29, 2001, to decide whether to tender your CANTV
shares in this Venezuelan offer unless this Venezuelan offer is extended. See
Sections 1 and 6 of the Venezuelan offer to purchase.
Please be aware that if your CANTV shares are held by a broker, bank or
other custodian, that entity may require notification before the expiration
date in order to make timely delivery of your securities and any necessary
tender documents. You must allow time for all necessary documentation to reach
the receiving agent for the CANTV shares in Venezuela. No guaranteed delivery
procedure is available with respect to your CANTV shares. See Sections 1 and 6
of the Venezuelan offer to purchase.
CAN THIS OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
Upon the occurrence of any of the events that give the Purchaser the right
to withdraw this Venezuelan offer, the Purchaser may request that the CNV
permit an extension of the period of time during which this Venezuelan offer is
open. The Purchaser will give notice of any such extension to the receiving
agent and by making a public announcement thereof. See Annex G to the
Venezuelan offer to purchase.
6
HOW WILL I BE NOTIFIED IF THIS VENEZUELAN OFFER IS EXTENDED?
If this Venezuelan offer is extended, we will make a public announcement
of the extension, not later than 9:00 a.m., New York City time, on the next
business day after the day on which this Venezuelan offer was previously
scheduled to expire. See Annex G to the Venezuelan offer to purchase.
HOW DO I TENDER MY CANTV SHARES IN THIS VENEZUELAN OFFER?
If you wish to tender CANTV shares in this Venezuelan offer, you must
comply with the following steps in order to accept this Venezuelan offer on or
before the expiration date of this Venezuelan offer (no guaranteed delivery
procedure is available with respect to your CANTV shares):
o complete and sign the Share Letter of Transmittal,
o submit the Share Letter of Transmittal and any other required documents
at any of the places indicated by the coordinator or the receiving agent
for this Venezuelan offer, indicating the currency of payment, and
o if you have certificates for the offered CANTV shares, you must deliver
such certificates together with the Share Letter of Transmittal.
See Section 7 of the Venezuelan offer to purchase.
Under CANTV's Bylaws, holders of Class C shares who wish to participate in
this Venezuelan offer must have previously offered such shares to other holders
of Class C shares in the CANTV "internal market." The Purchaser has established
a special procedure to facilitate the participation of holders of Class C
shares in this Venezuelan offer. Holders of Class C shares should contact the
coordinator of this Venezuelan offer or the agent appointed by the Purchaser to
facilitate the participation of holders of Class C shares in this Venezuelan
offer. See Section 7 of the Venezuelan offer to purchase and Annex F to the
Venezuelan offer to purchase for further information regarding this special
procedure.
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED CANTV SHARES?
You can withdraw CANTV shares at any time until this Venezuelan offer has
expired. See Sections 1 and 7 of the Venezuelan offer to purchase.
HOW DO I WITHDRAW PREVIOUSLY TENDERED CANTV SHARES?
To withdraw CANTV shares from this Venezuelan offer, you must deliver a
notice of withdrawal with the required information to the receiving agent for
CANTV shares, or sign such notice before such agent. The notice of withdrawal
must be received by the receiving agent for CANTV shares prior to the
expiration date of this Venezuelan offer. There is a special withdrawal
procedure for holders of Class C shares. See Sections 1 and 7 of the Venezuelan
offer to purchase.
WHAT ARE CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF TENDERING
CANTV SHARES?
The receipt of cash for CANTV shares pursuant to this Venezuelan offer by
a U.S. Holder will be a taxable transaction for United States federal income
tax purposes and possibly for state, local and foreign income tax purposes as
well. In general, a U.S. Holder who sells CANTV shares pursuant to this
Venezuelan offer will recognize gain or loss for United States federal income
tax purposes equal to the difference, if any, between the amount of cash
received and the holder's adjusted tax basis in the CANTV shares sold pursuant
to this Venezuelan offer. See Annex G to the Venezuelan offer to purchase.
The Caracas Stock Exchange may be required to withhold tax at a rate of 1%
on the gross amount of the payments made to those shareholders whose tendered
CANTV shares are accepted for payment in this Venezuelan offer. Certain U.S.
persons may be entitled to relief from such withholding under an applicable
treaty. See Section 6 of the Venezuelan offer to purchase.
DO YOU INTEND TO ACQUIRE ADDITIONAL CAPITAL STOCK OF CANTV FOLLOWING THE
OFFERS?
We do not currently have any plans or proposals following completion of
the offers to acquire additional shares of capital stock of CANTV but reserve
the right to do so in the future. We may decide,
7
directly or indirectly through affiliates, and subject to applicable law
(including Venezuelan tender offer regulations), to purchase additional CANTV
shares and ADSs following completion of the offers. See Section 3 of the
Venezuelan offer to purchase.
DO YOU HAVE ANY PLANS FOR CANTV AFTER CONSUMMATION OF THE OFFERS?
Yes. If we acquire control of CANTV pursuant to the offers, we intend to
conduct a detailed review of CANTV to consider what, if any, changes would be
desirable in light of the circumstances which then exist. See Section 3 of the
Venezuelan offer to purchase and Annex B to the Venezuelan offer to purchase.
Following the successful completion of the offers, we intend to cause
CANTV to distribute to all CANTV shareholders cash currently held by CANTV
determined to be in excess of CANTV's current or anticipated needs. Prior to
the payment of any dividends, the Purchaser intends to consummate a merger
between CANTV and the Purchaser in which the Purchaser would be the surviving
corporation, would change its name to CANTV and would continue all of the
business and operations of CANTV. As a result of the merger, the surviving
corporation would have as shareholders all those who were shareholders of CANTV
immediately prior to the merger, who will hold the same interest in the
surviving corporation and have the same rights granted by the class of shares
they held prior to the merger. The shares of the surviving corporation will be
registered in accordance with the Venezuelan Capital Markets Laws and
regulations thereunder, the Class D shares of the surviving corporation will be
listed on the Caracas Stock Exchange and the American Depositary Shares
representing the surviving corporation's Class D shares will trade on the New
York Stock Exchange, in each case to the same extent as the Class D shares and
ADSs of CANTV and subject to meeting applicable listing criteria. The merger is
intended to be taxable transaction for U.S. federal income tax purposes. See
Section 3 of the Venezuelan offer to purchase and Annex B to the Venezuelan
offer to purchase.
We also intend following the consummation of the offers to seek to sell
Telecomunicaciones Movilnet C.A., CANTV's wireless business. See Section 3 of
the Venezuelan offer to purchase and Annex B to the Venezuelan offer to
purchase.
WILL CANTV CONTINUE TO BE TRADED AS A PUBLIC COMPANY?
Yes. The Class D shares are listed on the Caracas Stock Exchange. The
Purchaser recognizes that the existence of a liquid trading market for the
Class D shares in Venezuela is important to the shareholders of CANTV.
Consequently, the current strategy of the Purchaser is to cause CANTV to
maintain the listing of the Class D shares on the Caracas Stock Exchange and to
request the listing of the Class D shares of the surviving corporation of the
merger described above. See Section 3 of the Venezuelan offer to purchase and
Annex B to the Venezuelan offer to purchase.
The ADSs are currently listed on the New York Stock Exchange. The
Purchaser intends to cause CANTV to maintain the listing of ADSs on the New
York Stock Exchange following the purchase of ADSs pursuant to the U.S. offer
and to request the listing of the American Depositary Shares of the surviving
corporation in the merger described above. However, it is possible that, due to
decreases in the number of ADS holders, trading volume and the potential
reduction of the market value of the ADSs following the consummation of the
U.S. offer, the ADSs will no longer meet the continued listing requirements of
the New York Stock Exchange. In the event that the ADSs fail to meet its
continued listing requirements, the New York Stock Exchange may choose, at its
discretion, to delist the ADSs. See Section 3 of the Venezuelan offer to
purchase and Annex B to the Venezuelan offer to purchase.
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFERS AFFECT MY CANTV SHARES?
The purchase of Class D shares pursuant to this Venezuelan offer and ADSs
pursuant to the U.S. offer will reduce substantially the number of Class D
shares and ADSs that might otherwise trade and may reduce the number of holders
of both the Class D shares and ADSs. The reduction in publicly traded Class D
shares and ADSs will likely adversely affect the liquidity, marketability and
market value of the Class D shares and the ADSs. See Section 3 of the
Venezuelan offer to purchase and Annex B to the Venezuelan offer to purchase.
8
DO HOLDERS OF CANTV SHARES OR ADSS HAVE APPRAISAL RIGHTS IN CONNECTION WITH THE
OFFERS?
Holders of CANTV shares or ADSs do not have appraisal rights in connection
with this Venezuelan offer or the U.S. offer. See Annex G to the Venezuelan
offer to purchase.
WHAT IS THE MARKET VALUE OF MY CLASS D SHARES AS OF A RECENT DATE?
On August 28, 2001, the last full trading day on the Caracas Stock
Exchange before the date of the announcement of this Venezuelan offer, the
reported closing price of one Class D share on the Caracas Stock Exchange was
Bs.2080. On September 24, 2001, the last trading day before the commencement of
this Venezuelan offer, the reported closing price of one Class D share on the
Caracas Stock Exchange was Bs. 2,467. We advise you to obtain a recent
quotation for Class D shares before deciding whether to tender your CANTV
shares. See Annex G to the Venezuelan offer to purchase.
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THIS VENEZUELAN OFFER?
You may call Activalores, Sociedad de Corretaje, the coordinator of this
Venezuelan offer. See the back cover of the Venezuelan offer to purchase or
this summary term sheet.
9
THE COORDINATOR FOR THE VENEZUELAN OFFER IS:
[ACTI VALORES]
SOCIEDAD DE CORRETAJE
Calle Los Chaguaramos
Centro Gerencial Mohedano PH-A
La Castellana
Caracas, Venezuela
Tel: (0212)201-7511
consult@activalores.com
THE RECEIVING AGENT, TRUSTEE OF CLASS C SHARES AND THE PAYING AGENT OF THE
VENEZUELAN OFFER IS:
[UNIBANCA LOGO]
Avenida Universidad, Esquina El Chorro
Torre Unibanca
Caracas, Venezuela
Tel: (0212)-501-7942
Fax: (0212)-501-8485
THE FACILITATING AGENT FOR THE CLASS C SHARES IS:
[GRAPHIC OMITTED] INVERUNION S.A.
CASA DE BOLSA
Avenida Universidad, Esquina El Chorro
Torre Unibanca
Caracas, Venezuela
Tel: (0212)-501-7942
Fax: (0212)-501-8485
THE LEGAL ADVISOR OF THE VENEZUELAN OFFER IS:
D'EMPAIRE REYNA BERMuDEZ ABOGADOS
Edificio Bancaracas, P.H.
Plaza La Castellana
Caracas 1160, Venezuela
Tel: (0212)264-6244
Fax: (0212)264-7543
www.drbalegal.com
THE FINANCIAL ADVISORS FOR THE VENEZUELAN OFFER ARE:
[JP MORGAN LOGO]
[CREDIT SUISSE FIRST BOSTON LOGO]
[BANC OF AMERICA SECURITIES LOGO]
SEPTEMBER 25, 2001
EX-99.(A)(1)(C)
5
file004.txt
SHARE LETTER OF TRANSMITTAL
EXHIBIT (a)(1)(C)
SHARE LETTER OF TRANSMITTAL OF THE TENDERED OFFER OF SHARES ISSUED BY COMPANIA
ANONIMA NACIONAL DE TELEFONOS DE VENEZUELA (CANTV) (HEREINAFTER CANTV) BY AES
COMUNICACIONES DE VENEZUELA, C.A. (HEREINAFTER "AES COMUNICACIONES DE VENEZUELA"
OR "THE PURCHASER")
NO
------------------------------------------------------------------------------------------------------------------
(1) RECEIVING OFFICE / BROKER/BROKERAGE HOUSE: (2) CODE: (3) DATE OF RECEIPT:
------------------------------------------------------------------------------------------------------------------
(4) FIRST AND LAST NAME OR FIRM NAME OR CORPORATE NAME OF THE SEX: M [ ]
SHAREHOLDER (HEREINAFTER "TENDERING SHAREHOLDER"): F [ ]
------------------------------------------------------------------------------------------------------------------
(5) IDENTITY CARD / PASSPORT / (6) DATE OF BIRTH: (7) LEGAL STATUS:
R.I.F. NUMBER:
V [ ]
E [ ] [ ] SINGLE [ ] MARRIED [ ] DIVORCED [ ] WIDOW(ER) [ ] OTHER [ ]
------------------------------------------------------------------------------------------------------------------
(8) FIRST AND LAST NAME OF SPOUSE: (9) IDENTITY CARD / PASSPORT:
V [ ]
F [ ]
------------------------------------------------------------------------------------------------------------------
(10) DOES SEPARATION OF MARITAL ESTATE OR (11) DOCUMENT INFORMATION: (12) DATE (13) NUMBER (14) VOLUME:
PRENUPTIAL AGREEMENT EXIST:
YES [ ] NO [ ]
------------------------------------------------------------------------------------------------------------------
LEGAL (15) COMMERCIAL REGISTRY WITH WHICH IT IS REGISTERED (16) DATE (17) NUMBER (18) VOLUME:
ENTITY
------------------------------------------------------------------------------------------------------------------
POWER OF (19) REGISTRY OR NOTARY'S OFFICE WITH WHICH IT IS (20) DATE (21) NUMBER (22) VOLUME:
ATTORNEY REGISTERED OR NOTARIZED:
------------------------------------------------------------------------------------------------------------------
(23) ADRESS OF AVENUE / STREET / CORNER / LINE / ROAD/ SECTOR: (24) HOUSE / BUILDING / TOWER / FLOOR /
THE SHAREHOLDER: APARTMENT / OFFICE / DEPARTMENT:
------------------------------------------------------------------------------------------------------------------
(25) SECTOR / MUNICIPALITY: (26) CITY: (27) STATE:
------------------------------------------------------------------------------------------------------------------
(28) TELEPHONE NUMBER: (29) MOBILE PHONE NUMBER: (30) E - MAIL:
------------------------------------------------------------------------------------------------------------------
INSTRUCTIONS FOR PAYMENT OF DIVIDENDS
(DATA HEREIN REFERRED SHALL BE USED ONLY BY THE TRANSFER AGENT AND/OR CVV CAJA VENEZOLANA DE VALORES)
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(31) NAME OF BANK: (32) ACCOUNT NUMBER: (33) TYPE OF ACCOUNT:
CHECKING [ ] SAVINGS [ ] FAL [ ]
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SALE ORDER AND/OR TRANSFER IN TRUST
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(34) AMOUNT AND CLASS OF SHARES TENDERED:
ALL [ ] OR NUMBER [ ][ ][ ][ ][ ][ ][ ][ ][ ] AMOUNT IN WORDS:______________
IF THE ALL BOX IS CHECKED, THE NUMBER BOX SHALL BE LEFT BLANK
(35) CLASS(3): A [ ] B [ ] D [ ] C [ ] TRANCHE: 9% [ ] 11% [ ]
ONLY A SINGLE FORM SHALL BE FILLED FOR EACH CLASS OF SHARES
(36) THE TENDERED SHARES ARE (37) FORM OF PAYMENT: Bs.(1) [ ] US$. [ ]
REGISTERED IN:
[ ] TRANSFER AGENT
[ ] CAJA VENEZOLANA DE VALORES. DEPOSITARY: ____________________________________
(38) FORM OF PAYMENT [ ] CHECK
[ ] DEPOSIT IN UNIBANCA ACCOUNT NUMBER ______________(2)
THE TENDERING SHAREHOLDER AUTHORIZES ACTIVALORES SOCIEDAD DE CORRETAJE S.A. OR
THE FACILITATING AGENT FOR THE CLASS C SHARES, AS THE CASE MAY BE, TO PROCESS
BEFORE THE TRANSFER AGENT AND/OR BEFORE CVV CAJA VENEZOLANA DE VALORES THE
TRANSFER, ASSIGNMENT OR DEPOSIT OF THE SHARES TO THE SPECIAL ACCOUNT OF
ACTIVALORES SOCIEDAD DE CORRETAJE S.A. IN THE CVV CAJA VENEZOLANA DE VALORES OR
IN THE NAME OF UNIBANCA, BANCO UNIVERSAL, C.A. AS TRUSTEE.
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IF THE AMOUNT OF SHARES HEREIN INDICATED IS GREATER THAN THE AMOUNT ACTUALLY
REGISTERED IN THE BOOKS OF THE COMPANY AND/OR IN THE CVV CAJA VENEZOLANA DE
VALORES, IT SHALL BE CONSIDERED THAT THE AMOUNT ACTUALLY REGISTERED IN THE BOOKS
OF THE COMPANY AND/OR IN THE CVV CAJA VENEZOLANA DE VALORES IS THAT FOR WHICH
THE TENDER IS MADE OR THE TRANSFER IN TRUST IS MADE, PROVIDED THEY ARE AVAILABLE
AND FREE OF ENCUMBRANCES, EXCEPT FOR THE PLEDGE GRANTED IN FAVOR OF THE ORIGINAL
TRUSTS IN THE CASE OF THE CLASS C SHARES. IN CASE THAT THE AMOUNT OF SHARES IS
FEWER THAN THE AMOUNT SO REGISTERED, IT SHALL BE TAKEN AS TENDERED THE AMOUNT
HEREIN INDICATED. IF THE "ALL" BOX IS CHECKED, IT SHALL BE UNDERSTOOD THAT THE
TENDERING SHAREHOLDER HAS EXPRESSED HIS/HER INDICATION TO TENDER, WITH OR
WITHOUT PRIOR TRANSFERS TO THE TRUST, AS THE CASE MAY BE, WITH RESPECT TO ALL
SHARES REGISTERED UNDER HIS/HER NAME A IN THE BOOKS OF THE COMPANY AND/OR IN THE
CVV CAJA VENEZOLANA DE VALORES.
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THE TENDERING SHAREHOLDER AUTHORIZES ACTIVALORES SOCIEDAD DE CORRETAJE S.A., THE
PERSON DESIGNATED BY IT OR THE FACILITATING AGENT FOR THE CLASS C SHARES, AS THE
CASE MAY BE, TO SIGN IN HIS/HER NAME AND ON HIS/HER BEHALF THE ASSIGNMENT
ENTRIES IN THE STOCK CERTIFICATES AND THE BOOKS OF COMPANIA ANONIMA TELEFONOS DE
VENEZUELA (CANTV)
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ONLY TO BE FILLED IN BY THE CLASS C SHAREHOLDERS WHO HAVE BALANCES DUE WITH THE
ORIGINAL TRUSTS
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(39) ORIGINAL TRUSTEE:
(40) NUMBER OF PLEDGED SHARES: [ ][ ][ ][ ][ ][ ][ ][ ][ ]
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THE TENDERING SHAREHOLDER REPRESENTS HAVING RECEIVED, KNOWN, UNDERSTOOD AND
ACCEPTED (I) THE VENEZUELAN OFFER TO PURCHASE WITH ALL ITS ANNEXES; (II) THE
SINGLE TEXT CONTAINING (a) THE REPRESENTATIONS AND WARRANTIES OF THE TENDERING
SHAREHOLDERS OF THE VENEZUELAN OFFER OF CANTV BY THE TENDERING SHAREHOLDER, AND
(b) THE POWER OF ATTORNEY GRANTED IN FAVOR OF THE COORDINATOR OF THE VENEZUELAN
OFFER OR THE FACILITATING AGENT FOR THE CLASS C SHARES, AS THE CASE MAY BE ("THE
SINGLE TEXT OF THE REPRESENTATIONS, WARRANTIES AND POWER OF ATTORNEY"), THAT WAS
GRANTED BEFORE THE THIRD NOTARY PUBLIC, OF CHACAO ON SEPTEMBER 14, 2001, BEING
REGISTERED UNDER NUMBER 1, VOLUME 127 OF THE AUTHENTICATION LEDGERS KEPT BY SUCH
NOTARY PUBLIC.
ADDITIONALLY, IN THE CASE OF A TENDERING SHAREHOLDER THAT IS A HOLDER CLASS C
SHARES, THE TENDERING SHAREHOLDER DECLARES HAVING RECEIVED, KNOWN, UNDERSTOOD
AND ACCEPTS ENTERING INTO THE TRUST AGREEMENT WHICH WAS EXECUTED BEFORE THE
THIRD NOTARY PUBLIC OF CHACAO ON SEPTEMBER 14, 2001, BEING REGISTERED UNDER
NUMBER 2, VOLUME 127 OF THE AUTHENTICATION LEDGERS KEPT BY SUCH NOTARY PUBLIC
("THE TRUST AGREEMENT").
THE TENDERING SHAREHOLDER, UPON SIGNING AT THE BOTTOM OF THIS DOCUMENT (I) JOINS
AND RATIFIES ALL CLAUSES OF THE "SINGLE TEXT OF REPRESENTATIONS, WARRANTIES AND
POWER OF ATTORNEY", (II) EXPRESSLY GRANTS A POWER OF ATTORNEY TO THE COORDINATOR
OF THE VENEZUELAN OFFER OR TO THE FACILITATING AGENT FOR THE CLASS C SHARES, AS
THE CASE MAY BE UNDER THE TERMS AND CONDITIONS INDICATED IN THE SINGLE TEXT OF
REPRESENTATIONS, WARRANTIES AND POWER OF ATTORNEY AND (III) IF THE TENDERING
SHAREHOLDER IS A HOLDER OF CLASS C SHARES, JOINS THE TRUST AGREEMENT AND
DECLARES THAT HE/SHE HAS RECEIVED A COPY OF THIS FORM.
THE TENDERING SHAREHOLDER DECLARES UNDER OATH THAT ALL DATA AND INFORMATION
CONTAINED IN THIS FORM IS TRUE.
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(41) S I G N A T U R E S
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HOLDER [ ] REPRESENTATIVE [ ] AGENT [ ]
NAME: __________________________________________________________________________
IDENTITY CARD OR PASSPORT NUMBER: ______________________________________________
SIGNATURE: _____________________________________________________________________
SPOUSE [ ] REPRESENTATIVE [ ] AGENT [ ]
NAME: __________________________________________________________________________
IDENTITY CARD OR PASSPORT NUMBER: ______________________________________________
SIGNATURE: _____________________________________________________________________
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(DO NOT FILL IN THIS SPACE)
THE DEPOSITARY, BROKER OR BROKERAGE HOUSE CERTIFIES THAT THE INFORMATION
FURNISHED AND THE ABOVE REGISTERED FIRMS ARE TRUE AND ARE RESPONSIBLE PURSUANT
TO ARTICLE 68 OF THE COMMERCIAL CODE AND ARTICLE 88 OF THE INTERNAL REGULATIONS
OF THE CARACAS STOCK EXCHANGE
SEAL AND SIGNATURE
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(1) SUBJECT TO THE PROVISIONS OF THE VENEZUELAN OFFER TO PURCHASE.
(2) THIS OPTION OF PAYMENT IS AVAILABLE ONLY TO TENDERING SHAREHOLDERS WHO HAVE
AN ACCOUNT WITH UNIBANCA, BANCO UNIVERSAL, C.A. AND WHO RECEIVED PAYMENT IN
BOLIVARS, SUBJECT TO THE TERMS OF THE VENEZUELAN OFFER TO PURCHASE.
(3) A SEPARATE SHARE LETTER OF TRANSMITTAL MUST BE COMPLETED FOR EACH CLASS.
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The undersigned, Julian J. Nebreda Marquez, a Venezuelan citizen, domiciled in
Caracas, married and bearer of the identity card number 6.911.647, acting on
behalf of AES COMUNICACIONES DE VENEZUELA, C.A., (the "Purchaser") a company
domiciled in Caracas and incorporated by document filed with the Seventh
Commercial Registry Office of the Judicial Circuit of the Federal District and
State of Miranda on April 20, 2001 under N degrees 31, Volume 180-A-VII, duly
authorized by the Articles of Incorporation and By-laws of the Purchaser,
hereby declares that the text contained herein below are the only
representations and warranties that shall be made by the Tendering Shareholders
under the Tender Offer (the "Venezuelan Offer") commenced by the Purchaser to
acquire 199,968,608 shares of Compania Anonima Nacional Telefonos de Venezuela
(CANTV) ("CANTV"), as well as the text of the power of attorney to be granted
by the Tendering Shareholders in favor of Activalores Sociedad de Corretaje,
S.A., ("Coordinator of the Venezuelan Offer") or in favor of Inverunion, S.A.
Casa de Bolsa ("Facilitating Agent for the Class C Shares"):
SINGLE TEXT OF THE REPRESENTATIONS AND WARRANTIES MADE BY THE TENDERING
SHAREHOLDERS UNDER THE VENEZUELAN OFFER COMMENCED BY THE PURCHASER AND POWER OF
ATTONEY GRANTED IN FAVOR OF THE COORDINATOR OF THE VENEZUELAN OFFER OR IN FAVOR
OF THE FACILITATING AGENT FOR THE CLASS C SHARES.
The Tendering Shareholder identified in the Share Letter of Transmittal of the
Venezuelan Offer declares the following:
FIRST. Definitions: For purposes of this document and the Share Letter of
Transmittal of the Venezuelan Offer, the following terms and phrases shall have
the following meanings:
1.1) Shares: shall be the term used to identify the shares of CANTV, regardless
of their class, that are tendered in the Venezuelan Offer by the Tendering
Shareholder as set forth in the Share Letter of Transmittal of the Venezuelan
Offer.
1.2) Class A, B and/or D Shares: shall be the term used to identify the class
A, B, and/or D shares of CANTV that are tendered in the Venezuelan Offer by the
Tendering Shareholder.
1.3) Class C Shares: shall be the term used to identify the class C shares of
CANTV that must be transferred by the Facilitating Agent for the Class C Shares
to the Special Trust for purposes of being tendered in the Venezuelan Offer
pursuant to this document.
1.4) Not Released Class C Shares: shall be the term used to identify the Class
C Shares with respect to which there is no evidence of release of the
Preferential Right to the satisfaction of the Facilitating Agent for the Class
C Shares.
1.5) Trust Shares: shall be the term used to identify the Class C Shares
released of the Preferential Right and Pledge that are transferred to the
Special Trust by the Facilitating Agent for the Class C Shares as a mechanism
to be sold to Purchaser pursuant to the Venezuelan Offer.
1.6) Tendering Shareholder: shall be the term used to identify any holder of
Class A, B, C or D shares of CANTV that tenders CANTV shares pursuant to the
Venezuelan Offer.
1.7) AES Comunicaciones de Venezuela or Purchaser: shall be the terms
alternatively used to identify AES Comunicaciones de Venezuela, C.A. a company
organized and domiciled in Caracas and registered with the Seventh Commercial
Registry Office of the Judicial Circuit of the Federal District and State of
Miranda on April 20, 2001, under N degrees31, Volume 180-A-VII, in its capacity
as purchaser pursuant to the Venezuelan Offer.
1.8) Facilitating Agent for the Class C Shares: shall be the term used to
identify Inverunion, S.A. Casa de Bolsa (formerly Inversiones Y Valores Union,
Inverunion, S.A.) a corporation domiciled in Avenida Universidad, esquina El
Chorro, Torre Unibanca, Piso 19, Caracas, Venezuela, and registered with the
Second Commercial Registry of the Judicial Circuit of the Federal District and
State of Miranda on June 13, 1990, under N degrees51, Volume 98-A-Second, which
by-laws were amended pursuant to the document registered with the said
Commercial Registry, on July 20, 2001, under N degrees47, Volume 140-A-Second,
which corporate name was amended as currently in the Extraordinary Shareholders
Meeting, held on June 4,
1
2001, which Minutes were registered with said Commercial Registry, on July 25,
2001, under N degrees48, Volume 143-A-Second, duly authorized to act as
BROKERAGE HOUSE by the National Securities Commission under Resolution Number
387, of October 3, 1990, as evidenced in the communication of October 30, 1990,
N degrees 293-90, which is in charge of presenting Class C Shares in the
Internal Market to be released of the Preferential Right and/or transfer the
Class C Shares to the Special Trust, as the case may be, through duly
authorized officers.
1.9) BANDES: shall be the term used to identify the Banco de Desarrollo
Economico y Social de Venezuela.
1.10) CANTV: shall be used to identify Compania Anonima Nacional Telefonos de
Venezuela (CANTV), a company organized and domiciled in Caracas and originally
registered with the Commercial Registry kept by the Commercial Court of the
Federal District on June 30, 1930, under N degrees 2, Volume 387.
1.11) Trust Agreement: shall be the term used to identify the special
administration and guarantee trust agreement entered into among (i) Unibanca,
Banco Universal, C.A. (as Trustee) and Inverunion, S.A. Casa de Bolsa, (ii)
Purchaser (as initial settlor), as evidenced in the document executed before
the Third Notary Public of Chacao, on September 14, 2001, under number 2,
Volume 127 of the authentication ledgers kept by such Notary Public and (iii)
the Tendering Shareholders holding Class C Shares, whose Class C Shares shall
be transferred from time to time to the Trustee pursuant to the terms and
conditions set forth in the Trust Agreement.
1.12) Coordinator of the Venezuelan Offer: shall be the term used to identify
Activalores Sociedad de Corretaje, S.A., a company organized and domiciled in
Caracas, and registered with the Commercial Registry Office of the Judicial
Circuit of the Federal District and State of Miranda, on May 22, 1991, under N
degrees 80, Volume 86-A-Second, appointed as coordinator of the Venezuelan
Offer by Purchaser and domiciled in Centro Gerencial Mohedano, PH, Calle
Chaguaramos con avenida Mohedano, La Castellana, Caracas, Venezuela.
1.13) Preferential Right: shall be the term used to identify the preferential
right in favor of holders of Class C Shares, as contemplated in article 5(e) of
the bylaws of CANTV.
1.14) Special Trust: shall be the term used to identify the special
administration and guarantee trust created pursuant to the Trust Agreement.
1.15) Original Trusts: shall be the term used to identify the trusts originally
established by the Fondo de Inversiones de Venezuela, with Unibanca, Banco
Universal, C.A., (formerly Banco Union), Banco Provincial, Banco de Venezuela,
Banco Consolidado (now Corp Banca), Citibank, Banco de Maracaibo and Banco
Latino and their successors, as amended as of the date hereof, to sell the
Class C Shares pursuant to the Labor Participation Plans derived from the
privatization of CANTV and to guarantee the payment of the total amount of the
purchase price of such Class C Shares to BANDES as successor of Fondo de
Inversiones de Venezuela (FIV) and in whose favor the Class C Shares are
pledged.
1.16) Trustee: shall be the term used to identify Unibanca, Banco Universal,
C.A., banking institute domiciled in Caracas and filed with the Commercial
Registry of the Judicial Circuit of the Federal District and State of Miranda
on January18, 1946 under number 93, Volume 6-B and which transformation into
Universal Bank is evidence in the Extraordinary Shareholders Meeting Minutes
dated August 28, 2000 filed with the First Commercial Registry Office of the
Judicial Circuit of the Federal District and State of Miranda on February 9,
2001 under Nro. 47, Volume 23-A-Pro and which name was changed to its current
one in the Extraordinary Shareholders Meeting of February 11, 2001, which
minutes were filed before the mentioned registry office on February 23, 2001,
under Nro. 12, Volume 33-A Pro., in its capacity as trustee under the Trust
Agreement.
1.17) Share Letter of Transmittal of the Venezuelan Offer: shall be the term
used to identify the form to be executed by the Tendering Shareholder to tender
in the Venezuelan Offer, which together with this document constitutes Annex D
of the Venezuelan Offer to Purchase.
1.18) Venezuelan Offer to Purchase: shall be the term used to identify the
Venezuelan Offer to Purchase, which contains the terms and conditions of the
Venezuelan Offer, including all its annexes, as amended or supplemented.
2
1.19) Internal Market: shall be the term used to identify the internal market
for the purchase and sale of Class C Shares as contemplated in article 5(e) of
the Bylaws of CANTV.
1.20) Tender Offer Rules: shall be the term used hereinafter to identify the
Venezuelan tender offer rules issued by the Venezuelan National Securities
Commission ("CNV").
1.21) Venezuelan Offer: shall be the term used to identify the public tender
offer that is being made by the Purchaser for shares of CANTV pursuant to the
terms and conditions set forth in the Venezuelan Offer to Purchase.
1.22) Pledge: shall be the term used to identify the existing pledge in favor
of the Original Trusts on certain Class C Shares to guarantee the payment of
the original purchase price of such shares to the Original Trusts.
All capitalized terms used herein in and not otherwise defined shall have the
meaning ascribed to them in the Trust Agreement and/or in the Venezuelan Offer
to Purchase.
SECOND. Representations and Warranties: The "Tendering Shareholder" hereby
represents and warrants the following:
a) That he/she has received and reviewed the Venezuelan Offer to Purchase
(including the Annexes thereto) and hereby accepts all its terms and
conditions, including the proration rules.
b) That he/she recognizes and accepts that the Purchaser may amend, extend,
withdraw or terminate the Venezuelan offer, or waive the terms and
conditions set forth therein, pursuant to the Venezuelan Offer.
c) If the Tendering Shareholder holds Class C Shares that (i) he/she has read,
knows and fully understands, accepts and agrees with all and each of the
terms, conditions and provisions of the Trust Agreement; (ii) his/her
signature on the Share Letter of Transmittal grants a power of attorney to
the Facilitating Agent for the Class C Shares in his/her name and on
his/her behalf (a) to tender the Not Released Class C Shares in the
Internal Market, performing all applicable actions in case that a holder of
Class C Shares exercises the Preferential Right; (b) to join the Special
Trust and (c) to transfer to the Trustee the Class C Shares indicated in
the Share Letter of Transmittal of the Venezuelan Offer after their release
of the Preferential Right, and for the Trustee to tender those Class C
Shares in the Venezuelan Offer.
d) That he/she accepts the Venezuelan Offer with respect to the Class A, B
and/or D Shares on the terms and conditions contained in the Venezuelan
Offer to Purchase, and therefore grants power of attorney to the
Coordinator of the Venezuelan Offer to, among other, formalize such tender.
In case of Tendering Shareholders holding Class C Shares, the tender
pursuant to the Venezuelan Offer is subject to the condition that such
shares are released from the Preferential Right. In case of Tendering
Shareholders holding Class C Shares, such tender shall be made by the
Trustee once they are transferred to the Trustee and with the prior release
of the Pledge and the Preferential Right.
e) That if the number of Shares owned by the Tendering Shareholder pursuant to
the Shareholders Book of CANTV and/or the records maintained by Caja de
Valores de Venezuela, are less than the amount of Shares indicated on the
Share Letter of Transmittal of the Venezuelan Offer, the transfer to the
Special Trust, if applicable, and the tender pursuant to the Venezuelan
Offer shall only be deemed validly made with respect to the number of
Shares that are actually owned by the Tendering Shareholder pursuant to
such Book and/or Caja de Valores de Venezuela. In the event that the
Tendering Shareholder has checked the "All" box in the Share Letter of
Transmittal of the Venezuelan Offer, it shall be understood that the tender
in the Venezuelan Offer shall be effective with respect to all and any
Shares of the class indicated in the Share Letter of Transmittal that are
registered as owned by the Tendering Shareholder pursuant to the
Shareholders Book of CANTV and/or the records maintained by Caja de Valores
de Venezuela. The Shares which pursuant to the Book of Shareholders of
CANTV show any kind of lien, different from the Pledge, or prohibitions to
sell or encumber, shall be excluded from the transfer to the Trustee, if
applicable, and from the tender in the Venezuelan Offer, since the transfer
to the Special Trust, if applicable, and tender in the
3
Venezuelan Offer shall only be accepted for the number of Shares which are
freely transferable. In the event of Class C Shares subject to the Pledge,
the Class C Shares shall be released from the Pledge by the Original
Trusts, with the authorization of BANDES prior to their transfer to the
Trustee.
f) That he/she recognizes and accepts that his/her signature on the Share
Letter of Transmittal of the Venezuelan Offer is authentic evidence that
this document constitutes a binding agreement between him/her, on the one
hand, and Purchaser and the Coordinator of the Venezuelan Offer, on the
other hand; and, in addition, with respect to the holders of the Class C
Shares, that the Trust Agreement constitutes a binding agreement between
him/her, on the one hand, and the Facilitating Agent for the Class C Shares
and the Trustee, on the other hand, all in accordance with the terms and
conditions set forth in the Venezuelan Offer to Purchase, in this document
and in the Trust Agreement, if applicable.
g) That Tendering Shareholders holding Not Released Class C Shares recognize
and accept that once the Not Released Class C Shares are in the Internal
Market, such Class C Shares must conclude such process even if the power of
attorney granted with the execution of the Share Letter of Transmittal of
the Venezuelan Offer is revoked under the terms and conditions provided in
this document, and that it is possible that such Not Released Class C
Shares will be sold in the Internal Market pursuant to the provisions of
the by-laws of CANTV and the applicable resolutions of the Board of
Directors if other Class C Shareholders exercise the Preferential Right. In
such case the Class C Shares so purchased will not be tendered in the
Venezuelan Offer, and therefore the holder thereof will have no claim
against the Purchaser, the Facilitating Agent for the Class C Shares, the
Trustee, the Coordinator of the Venezuelan Offer, or to any other person
related to the Venezuelan Offer with respect to such Class C Shares.
h) That he/she accepts that the Coordinator of the Venezuelan Offer, the
Facilitating Agent for the Class C Shares or the Trustee, acting on her/his
behalf or as trustee, as the case may be, and in exercise of the power of
attorney granted upon execution of the Share Letter of Transmittal of the
Venezuelan Offer, upon the terms and conditions of the Venezuelan Offer to
Purchase, the Trust Agreement and this document, shall sell the Shares to
Purchaser and shall process payment for such sale in the form contemplated
in the Venezuelan Offer or in the Trust Agreement, as the case may be.
i) That he/she accepts that if as a consequence of the proration rules or the
termination of the Venezuelan Offer the Purchaser has not purchased all or
any of the Shares, the same shall be transferred to the Tendering
Shareholder, and the same shall have the Pledge in favor of the Original
Trust in the case of the return of Class C Shares that at the time of the
execution of the Share Letter of Transmittal were encumbered with the
Pledge.
j) That, by execution of this document he/she hereby revokes and/or substitutes
(as the case may be) any power of attorney or mandate previously granted by
the Tendering Shareholder in connection with the Shares. Likewise, in case
of revocation the Tendering Shareholder shall notify the corresponding
representatives or agents of the revocation and shall not grant any power
of attorney or mandate to any third party other than the Coordinator of the
Venezuelan Offer or the Facilitating Agent for the Class C Shares, as the
case may be, in connection with the Shares while the Venezuelan Offer is
open and while the tender of the Shares in the Venezuelan Offer has not
been withdrawn or the Class C Shares have not been withdrawn from the
Trust, in accordance with the Venezuelan Offer to Purchase or the Trust
Agreement.
k) Additionally the Tendering Shareholder expressly represents: (a) that he/she
is the legitimate owner of the Shares; (b) that he/she is sufficiently
empowered and has the legal capacity to execute the Share Letter of
Transmittal of the Venezuelan Offer and tender in the Venezuelan Offer, and
in case of Tendering Shareholders holding Class C Shares that he/she is
additionally empowered and has the legal capacity to have the Facilitating
Agent for the Class C Shares previously tender the Not Released Class C
Shares in the Internal Market and to join and enter into the Trust
Agreement and to transfer the Class C Shares to the Trustee; (c) that the
signature that appears in the Share Letter of Transmittal is his/her
signature, and consequently, this document, as well as the Trust Agreement,
are completely binding on him/her and enforceable in accordance with their
terms and conditions;
4
(d) that no person other than the Tendering Shareholder may claim any right
on the Shares, that the Shares are free and clear of prohibitions to sell
or encumbrances, pledges, security assignments, privileges, preferential
rights or other liens, interests or rights which may affect their full use,
enjoyment and transferability, except for the Pledge over certain Class C
Shares which, if that is the case, shall be released concurrently with the
transfer of the Class C Shares to the Trustee; (e) that if the Shares are
transferred to the Purchaser, the Purchaser will acquire ownership of the
Shares, free and clear of prohibitions to sell or encumbrances, pledges,
security assignments, privileges, preferential rights or other liens,
interests or rights which may affect their complete use, enjoyment of
transferability, together with their voting rights and with rights to all
dividends, subscription rights and other distributions; (f) that the Shares
do not constitute treasury shares nor qualify as reciprocal participation
under the terms of the Capital Markets Law and the rules issued by the CNV;
(g) the tender of the Shares under the Venezuelan Offer by the Tendering
Shareholder or by the Trustee, as the case may be, complies with the
applicable legislation and (h) that when the Class C Shares are transferred
to the Trustee, the Trustee shall acquire ownership and possession in its
capacity as Trustee and all Distributions which correspond to them, free
and clear of prohibitions to sell or encumber, pledges, security
assignments, privileges, preferential rights or other liens, interests or
rights (except for the Pledge, which at that time shall be released by the
Original Trusts), for the sole purposes of complying with the Trust
Agreement, and not the Class C Shares nor the Distributions which
correspond to them shall be subject to actions and adverse claims.
l) In the event that he/she qualifies as a U.S. Holder, as defined in Annex G
to the Venezuelan Offer to Purchase, that he/she is the owner of the Shares
within the meaning of Rule 14e-4 issued under the United States Securities
Exchange Act of 1934 and the tender of the Shares pursuant to the
Venezuelan Offer through the Coordinator of the Venezuelan Offer or the
Trustee, as the case may be, complies with such rule.
THIRD. Power of Attorney to the Facilitating Agent for the Class C Shares:
Notwithstanding the provision of item 3.6) of this section, the Tendering
Shareholder holding Not Released Class C Shares by executing the Share Letter
of Transmittal of the Venezuelan Offer grants an irrevocable special power of
attorney, ample and sufficient as necessary and as required by law, to the
Facilitating Agent for the Class C Shares, to perform the following activities
as soon as possible on his/her behalf and in accordance with the terms and
conditions contained in the Trust Agreement, in this document and in the
Venezuelan Offer to Purchase. This power of attorney shall be effective while
the activities set forth therein are performed or until January 31, 2002, which
ever occurs first:
3.1) To request from the Transfer Agent, the CVV Caja Venezolana de Valores
and/or CANTV a statement of the Shares registered in the name of the Tendering
Shareholder and a list of the Not Released Class C Shares, as well as those
released from the Preferential Right, and, if possible, to review the share
registry books and other relevant registries. Likewise to request from the CVV
Caja Venezolana de Valores the name of the person under whose name the Class C
Shares of the Tendering Shareholder are deposited.
3.2) To offer any Not Released Class C Shares in the Internal Market at the
maximum price in accordance with the Bylaws of CANTV. In case the Not Released
Class C Shares are sold in the Internal Market as indicated above, to execute
all documents related to the sale of such shares in the Internal Market and to
collect the proceeds of the sale; make the payment which corresponds to the
Original Trusts and to release the Pledge, as the case may be. Also, the
Facilitating Agent for the Class C Shares shall proceed to pay the balance of
the sales price to the Tendering Shareholder within the five (5) days following
receipt of the proceeds of the sale. Payment shall be deemed made when the
check or the funds in case of a deposit to an account is available at the
offices of the Trustee. To use the Distribution in the manner indicated in the
Venezuelan Offer to Purchase.
3.3) To transfer the Class C Shares to the Trustee once they are released from
the Preferential Right and the Pledge, executing all documents which are
necessary to become a party to the Trust Agreement.
3.4) In any case, taking into account that the Tendering Shareholder holding
Class C Shares may have acquired such shares from the portion corresponding to
the 11% of the Employee Participation Plan of
5
1991 (the First PPL) and/or from the portion corresponding to the 9% of the
Employee Participation Plan of 1996 (the Second PPL); he/she instructs the
Facilitating Agent for the Class C Shares and/or the Trustee, as the case may
be, to sell in the Internal Market or through the Trust, first the Class C
Shares corresponding to the Second PPL, and if such shares are not sufficient,
the Class C Shares corresponding to the First PPL. In any event, the sale of
Class C Shares subject to the Pledge shall be given priority.
3.5) In general, by granting this power of attorney, the Facilitating Agent for
the Class C Shares is empowered to perform on behalf of the Tendering
Shareholder holding Class C Shares all the necessary and/or convenient acts to
complete the Internal Market process, as well as the transfer of Class C Shares
to the Special Trust, including, without limitation, the execution of any
required document, registry books and/or registries, and to complete the
mentioned transfers In this sense, the Facilitating Agent for the Class C
Shares acting as agent of the Tendering Shareholder holding Class C Shares may
perform, among others, without limitation, the following acts: (a) to request
from the Transfer Agent, the CVV Caja Venezolana de Valores and/or CANTV a
statement of the Shares registered to the name of the Tendering Shareholder and
a list of Class C Shares released from the Preferential Right, and the name of
the person under whose name the Shares of the the Tendering Shareholder are
deposited, and the ability to review the share registry books and other
relevant registries, (b) to complete and execute all transfer requests and any
other documents required to transfer ownership of such shares as a result of
the exercise of the Preferential Right or the transfer or the Special Trust in
accordance with the Trust Agreement and this document; (c) to deposit and/or
withdraw such shares from the Caja de Valores de Venezuela; (d) in case the
Tendering Shareholder holding Class C Shares requests the withdrawal of his/her
shares from the Special Trust, to proceed to revoke the tender in the
Venezuelan Offer in accordance with the terms and conditions of the Venezuelan
Offer to Purchase or in case of termination of the Venezuelan Offer without the
purchase of the Shares, to transfer the applicable Class C Shares to the
Tendering Shareholder with the prior encumbrance of the shares with the Pledge
in favor of the Original Trusts if at the moment of execution of the Share
Letter of Transmittal of the Venezuelan Offer a Pledge over such shares existed
and (e) if, as a consequence of the proration rules or the termination of the
Venezuelan Offer some of the Class C Shares are not purchased, to transfer such
shares to the Tendering Shareholder with the prior Pledge in favor of the
Original Trusts in the case of the return of Class C Shares that at the moment
of execution of the Share Letter of Transmittal of the Venezuelan Offer were
encumbered with the Pledge.
3.6) Notwithstanding the above, and only if the procedure to tender Class C
Shares in the Venezuelan Offer through the Special Trust is changed, the
Facilitating Agent for the Class C Shares may also take any steps and actions
necessary to tender the Class C Shares through any other procedure contemplated
in the Venezuelan Offer. Accordingly, the Facilitating Agent for Class C Shares
will be expressly authorized to (i) tender the Class C Shares in the Venezuelan
Offer and (ii) take any steps and actions necessary to pay the balance of the
debt to the Original Trusts and release the Pledge, if applicable, all in
accordance with the mechanisms and procedures previously agreed between the
Initial Settlor and the Facilitating Agent for the Class C Shares.
3.7) This power of attorney may be revoked, provided that the Facilitating
Agent for the Class C Shares receives on or before the Expiration Date, a
revocation notice granted by the person who executed the Share Letter of
Transmittal of the Venezuelan Offer in the places designated by the Receiving
Agent of the Venezuelan Offer, being deemed revoked only in the case that a
valid withdrawal of the tender in the Venezuelan Offer occurs in the terms
contemplated in the Venezuelan Offer to Purchase. The notice must indicate the
number of Class C Shares to which the revocation refers. This revocation does
not prevent the shareholder from granting a new power of attorney with the same
effect on or before the Expiration Date in favor of the Facilitating Agent for
the Class C Shares.
3.8) It is expressly understood that neither the Trustee nor the Facilitating
Agent for the Class C Shares will have any responsibility in case the transfer
to the Special Trust does not occur as a consequence of the exercise of the
Preferential Right in the Internal Market or for lack of the corresponding
authorization to release the Pledge by the Original Trustees.
FOURTH. Power of Attorney to the Coordinator of the Venezuelan Offer:
Notwithstanding the provision of item 4.6) of this section, the Tendering
Shareholder holding Class A, B and/or D Shares as well as the
6
Trustee for acceptance of the Venezuelan Offer with respect to Trust Shares,
hereby grants an irrevocable special power of attorney, ample and sufficient as
necessary and as required by law, to the Coordinator of the Venezuelan Offer,
to perform the following activities as soon as possible on his/her behalf and
in accordance to the terms and conditions contained in the Trust Agreement, in
this document and in the Venezuelan Offer to Purchase. This power of attorney
shall be effective while the activities set forth therein are performed or
until January 31, 2002, which ever occurs first:
4.1) To request from the Transfer Agent, the CVV Caja Venezolana de Valores
and/or CANTV a statement of the Shares registered in the name of the Tendering
Shareholder, and the ability to review the share registry books and other
relevant registries. Likewise to request from the CVV Caja Venezolana de
Valores the name of the person under whose name the Shares of the Tendering
Shareholder are deposited.
4.2) To exercise the voting right of the Shares in accordance with the terms
and conditions of the Venezuelan Offer to Purchase and in accordance with the
Trust Agreement with respect to Class C Shares.
4.3) To sell the Shares to Purchaser, on the terms and conditions described in
the Venezuelan Offer to Purchase. For such purposes the agent herein designated
is sufficiently empowered to sign as a transferor on behalf of the Tendering
Shareholder, the transfers corresponding to the Shares in the stock
certificates representing the shares as well as in the Shareholders Book of
CANTV and any other documents required by the Caja de Venezolana de Valores.
4.4) Receive on behalf and in the name of the Tendering Shareholder, the
payment of the purchase price for the Shares by the Purchaser and to make
available to the Tendering Shareholder such payment in accordance with the
terms and conditions established in the Venezuelan Offer to Purchase and to
grant the corresponding releases. To use the Distributions in the manner
indicated in the Venezuelan Offer to Purchase.
4.5) In general, by granting this power of attorney, the Coordinator of the
Venezuelan Offer is empowered to perform on behalf of the Tendering Shareholder
all the necessary and/or convenient acts to complete the above mentioned
transfers of the Shares, including, without limitation, the execution of any
required document, registry books and/or registries, and to complete the tender
of the Shares on the terms and conditions of the Venezuelan Offer to Purchase
and of this document, as well as to effect when legally possible, the
withdrawal of the acceptance of the offer. In this sense, the Coordinator of
the Venezuelan Offer acting as agent of the Tendering Shareholder may perform,
among others, without limitation, the following acts: (a) to request from the
Transfer Agent, the CVV Caja Venezolana de Valores and/or CANTV a statement of
the Shares registered to the name of the Tendering Shareholder and the name of
the person under whose name the Shares of the Tendering Shareholder are
deposited, and the ability to review the share registry books and other
relevant registries, (b) to complete and execute all transfer requests and any
other documents required to transfer ownership of the Shares, (c) to file any
transfer requests and other required documents and effect and formalize the
transfer of the Shares before the Transfer Agent, the CVV Caja Venezolana de
Valores, the Caracas Stock Exchange and any other entity nominee for the Shares
to effect and formalize the transfer of the Shares; (d) to deposit and/or
withdraw the Shares from the CVV Caja Venezolana de Valores; (e) to open a
sub-account in the CVV Caja de Venezolana de Valores on behalf of the Tendering
Shareholder and transfer the Shares to said sub-account; (f) in case of
withdrawal of the tender pursuant to the Venezuelan Offer in accordance with
the terms and conditions of the Venezuelan Offer to Purchase or in case of
termination of the Venezuelan Offer without the purchase of the Shares, to
transfer the Shares to the Tendering Shareholders and (g) if as a consequence
of the proration rules some of the Shares are not purchased, to transfer such
shares to the Tendering Shareholder.
4.6) This power of attorney shall be deemed revoked only in case of a valid
withdrawal of the tender of the Venezuelan Offer on the terms and conditions
contemplated in the Venezuelan Offer to Purchase.
FIFTH. Simultaneous Representation: The Coordinator of the Venezuelan Offer and
the Facilitating Agent for the Class C Shares are expressly authorized by the
Tendering Shareholder pursuant to article
7
1.171 of the Venezuelan Civil Code, to effect the transfer in trust of the
Class C Shares and/or to execute the purchase transactions of the Shares
contemplated in this document, as a representative and agent of the Tendering
Shareholder, as well as a representative and agent of the Trustee and/or the
Purchaser.
SIXTH: Accurate Information: The Tendering Shareholder hereby declares under
oath the true and exactness of all the information and data contained in this
document.
SEVENTH: Domicile: For all the effects resulting from and as a consequence of
this document, the city of Caracas is the special domicile to the jurisdiction
of which Courts the Tendering Shareholder agrees to be subject.
AES Comunicaciones de Venezuela, C.A.
/s/ Julian Jose Nebreda Marquez,
--------------------------------
Name: Julian Jose Nebreda Marquez
Title: Administrator
8
EX-99.(A)(1)(E)
6
file005.txt
SUMMARY ADVERTISEMENT
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell any securities. The U.S. Offer is made solely by the U.S. Offer
to Purchase, dated September 25, 2001 and the related ADS Letter of Transmittal
and Notice of Guaranteed Delivery. The Venezuelan Offer is made solely by the
Venezuelan Offer to Purchase, dated September 25, 2001 and the related Share
Letter of Transmittal. The Offers are not being made to, nor will tenders be
accepted from or on behalf of, holders of ADSs or Shares in any jurisdiction
in which the making of the Offers or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. In any jurisdiction where the
securities, blue sky or other laws require the Offers to be made by a licensed
broker or dealer, the Offers shall be deemed to be made on behalf of AES
Comunicaciones de Venezuela, C.A. by J.P. Morgan Securities Inc. (in the case
of the U.S. Offer only) or one or more registered brokers or dealers that are
licensed under the laws of such jurisdiction (in the case of both Offers).
NOTICE OF U.S. OFFER TO PURCHASE FOR CASH
28,566,944 AMERICAN DEPOSITARY SHARES
(EACH AMERICAN DEPOSITARY SHARE REPRESENTING SEVEN CLASS D SHARES
OF COMMON STOCK)
OF
COMPANIA ANONIMA NACIONAL TELEFONOS
DE VENEZUELA (CANTV)
FOR
$24.00 PER AMERICAN DEPOSITARY SHARE
AND
NOTICE OF VENEZUELAN OFFER TO PURCHASE FOR CASH
199,968,608 SHARES OF COMMON STOCK
OF
COMPANIA ANONIMA NACIONAL TELEFONOS
DE VENEZUELA (CANTV)
FOR
$3.4285714 PER SHARE
BY
AES COMUNICACIONES DE VENEZUELA, C.A.
A COMPANY JOINTLY OWNED BY
THE AES CORPORATION
AND
CORPORACION EDC, C.A.
AES Comunicaciones de Venezuela, C.A. (the "Purchaser"), a company organized
under the laws of Venezuela and jointly owned by The AES Corporation ("AES") and
AES's 87% owned subsidiary, Corporacion EDC, C.A. ("CEDC"), is offering, upon
the terms and subject to the conditions set forth in the U.S. Offer to Purchase,
dated September 25, 2001 (the "U.S. Offer to Purchase"), and the related ADS
Letter of Transmittal and Notice of Guaranteed Delivery (which together
constitute the "U.S. Offer"), to acquire for $24.00 per ADS, net to each seller
in cash, less any withholding taxes and without interest thereon, an aggregate
of 28,566,944 American Depositary Shares ("ADSs"), each ADS representing seven
Class D Shares of common stock, of Compania Anonima Nacional Telefonos de
Venezuela (CANTV), a company organized under the laws of Venezuela ("CANTV"),
properly tendered and not withdrawn prior to the expiration date of the U.S.
Offer. The U.S. Offer is open to all holders of ADSs.
The Purchaser is also making a contemporaneous offer in Venezuela to
purchase an aggregate of 199,968,608 shares of common stock of CANTV ("Shares"),
properly tendered and not withdrawn prior to the expiration of the Venezuelan
Offer (as defined below) for $3.4285714 per Share, net to each seller in cash,
less any withholding taxes and without interest thereon, upon the terms and
subject to the conditions set forth in the Venezuelan Offer to Purchase, dated
September 25, 2001 (the "Venezuelan Offer to Purchase") and the related Share
Letter of Transmittal (which together constitute the "Venezuelan Offer" and,
together with the U.S. Offer, are referred to as the "Offers"). The Venezuelan
Offer is open to all holders of Shares.
Tenders of Shares are not being accepted in the U.S. Offer. Holders of Class
D Shares (being the only class of Shares underlying the ADSs) may deposit their
Class D Shares with The Bank of New York (the "Depositary") and receive ADSs for
such Class D Shares pursuant to the Amended and Restated Deposit Agreement dated
September 10, 2000, among CANTV, the Depositary and all holders from time to
time of American Depositary Receipts ("ADRs") issued thereunder (the "Deposit
Agreement"). Such ADSs may then be tendered in the U.S. Offer. Tenders of ADSs
are not being accepted in the Venezuelan Offer. Holders of ADSs may withdraw the
underlying Class D Shares from the Depositary and receive Class D Shares
pursuant to the Deposit Agreement. Such Class D Shares may then be tendered in
the Venezuelan Offer.
The price per ADS payable in the U.S. Offer will be the same as the price
per Share payable in the Venezuelan Offer when adjusted to reflect the fact that
each ADS represents seven Class D Shares . If the price per Share in the
Venezuelan Offer is increased, the Purchaser intends to make a corresponding
increase to the price to be paid per ADS in the U.S. Offer, taking into account
the number of Class D Shares represented by each ADS. If the price per ADS in
the U.S. Offer is increased, the Purchaser intends to make a corresponding
increase to the price to be paid per Share in the Venezuelan Offer, taking into
account the number of Class D Shares represented by each ADS. The purchase price
for each ADS pursuant to the U.S. Offer is payable in U.S. dollars. The purchase
price for each Share pursuant to the Venezuelan Offer is payable in U.S. dollars
or, in accordance with, and subject to, the conditions set forth in the
Venezuelan Offer to Purchase, at the option of each holder of Shares, in
Venezuelan Bolivars. Under no circumstances will interest be paid on the
purchase price for the tendered ADSs or Shares, regardless of any delay in
making payment thereof or any extension of the expiration date.
--------------------------------------------------------------------------------
THE U.S. OFFER, VENEZUELAN OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 5:00 P.M., NEW YORK CITY (6:00 P.M., CARACAS TIME), ON MONDAY
OCTOBER 29, 2001, UNLESS EXTENDED.
--------------------------------------------------------------------------------
The purpose of the U.S. Offer and the Venezuelan Offer is to enable the
Purchaser and its affiliates to acquire control of, and a majority of the equity
interest in, CANTV. The Purchaser intends, as soon as practicable after
consummation of the Offers, to seek majority representation on CANTV's board of
directors.
The Purchaser's obligation to accept ADSs and Shares for purchase under the
Offers is conditioned upon, among other things, the sum of (x) the number of
shares of CANTV common stock (including Class D Shares represented by ADSs) held
directly or indirectly by AES (including Class D Shares held through CEDC), (y)
the number of Class D Shares represented by ADSs validly tendered and not
withdrawn on or prior to the expiration date of, and to be purchased pursuant
to, the U.S. Offer and (z) the number of Shares validly tendered and not
withdrawn on or prior to the expiration date of, and to be purchased pursuant
to, the Venezuelan Offer, representing at least a majority of the outstanding
shares of capital stock of CANTV. Each Offer is also subject to other conditions
set forth in the U.S. Offer to Purchase and the Venezuelan Offer to Purchase.
Tendering holders of ADSs or Shares who are the record holders of such
securities and who tender such securities in the Offers will not have to pay
brokerage fees or similar expenses. If tendering holders own their ADSs or
Shares through a broker or other nominee, their broker or nominee may charge
them a fee for tendering such securities, and the Purchaser will not be
responsible for paying that fee. Holders of ADSs and Class D Shares will bear
all costs and expenses associated with any deposit or withdrawal of Class D
Shares under the Deposit Agreement.
The term "expiration date" means with respect to each Offer 5:00 P.M., New
York City time (6:00 P.M., Caracas time), on Monday, October 29, 2001, unless
the Purchaser extends the period of time for which each of the Offers is open,
in which case the term "expiration date" means with respect to each Offer the
latest time and date on which such Offer, as so extended, expires.
Upon the terms and subject to the conditions of the Offers, if (i) more than
28,566,944 ADSs are validly tendered and not withdrawn on or prior to the
expiration date of the U.S. Offer, and at least 199,968,608 Shares are validly
tendered pursuant to the Venezuelan Offer or (ii) more than 199,968,608 Shares
are validly tendered and not withdrawn on or prior to the expiration date of the
Venezuelan Offer, and at least 28,566,944 ADSs are validly tendered pursuant to
the U.S. Offer, the Purchaser will purchase such ADSs or Shares, as the case may
be, on a pro rata basis. If proration of tendered ADSs is required, because of
the difficulty of determining the number of ADSs validly tendered and not
withdrawn, the Purchaser does not expect to be able to announce the final
results of such proration until at least seven business days after the
expiration date of the U.S. Offer. Preliminary results of such proration will be
announced by press release as promptly as practicable after the expiration date
of the U.S. Offer.
The number of ADSs available for tender into the U.S. Offer and the number
of Class D Shares available for tender into the Venezuelan Offer is subject to
fluctuation, on a daily basis, based on deposits and withdrawals of Class D
Shares and ADSs with the Depositary. Upon a deposit of Class D Shares the number
of outstanding ADSs is increased; upon a withdrawal of Class D Shares the number
of outstanding ADSs is decreased. Proration in the U.S. Offer may be adversely
affected to the extent that additional Class D Shares are deposited pursuant to
the Deposit Agreement and the ADSs issued on such deposit are tendered in the
U.S. Offer. Proration in the Venezuelan Offer may be adversely affected to the
extent that Class D Shares are withdrawn pursuant to the Deposit Agreement and
such Class D Shares are tendered in the Venezuelan Offer.
In order for ADSs to be validly tendered pursuant to the U.S. Offer (a) (1)
the ADS Letter of Transmittal, properly completed and duly executed, together
with any signature guarantees (or, in the case of book-entry transfer, an
Agent's Message in lieu of the ADS Letter of Transmittal), and any other
documents required by the ADS Letter of Transmittal must be received by the U.S.
Receiving Agent at its address set forth on the back cover of the U.S. Offer to
Purchase and (2) the ADRs representing the ADSs being tendered must be received
by the U.S. Receiving Agent or such ADRs for the ADSs must be tendered pursuant
to the procedure for book-entry transfer and book-entry confirmation must be
received by the U.S. Receiving Agent, in each case, prior to the expiration
date, or (b) the tendering ADS holder must comply with the guaranteed delivery
procedures. In order for Shares to be validly tendered pursuant to the
Venezuelan Offer the Share Letter of Transmittal, properly completed and duly
executed, together with any other documents required by the Share Letter of
Transmittal must be received by the Venezuelan Receiving Agent at its address
set forth in the Venezuelan Offer to Purchase. Holders of Class C Shares must
also follow the procedures described in the Venezuelan Offer to Purchase.
Upon the terms and subject to the conditions of the U.S. Offer and the
Venezuelan Offer, as the case may be, the Purchaser will accept for payment and
pay for ADSs and Shares validly tendered and not withdrawn by the expiration
date of the U.S. Offer and the Venezuelan Offer, as the case may be, (i) with
respect to the U.S. Offer, as soon as practicable after the later of (a) the
expiration date of the U.S. Offer and (b) the satisfaction or waiver of all the
conditions to the U.S. Offer, and (ii) with respect to the Venezuelan Offer,
upon satisfaction or waiver of all the conditions to the Venezuelan Offer,
within five Venezuelan stock exchange trading days following the settlement of
the purchase of the Shares on the Caracas Stock Exchange. In addition, the
Purchaser reserves the right, in its sole discretion and subject to applicable
law, to delay the acceptance for payment of or the payment for ADSs or Shares in
order to comply in whole or in part with any applicable law.
In all cases, payment for ADSs accepted for payment pursuant to the U.S.
Offer will be made only after timely receipt by the U.S. Receiving Agent of ADRs
for such ADSs (or of a confirmation of a book-entry transfer of such ADSs into
the U.S. Receiving Agent's account at the Book-Entry Transfer Facility), a
properly completed and duly executed ADS Letter of Transmittal or an Agent's
Message in lieu of ADS Letter of Transmittal and all other required documents.
In all cases, payment for Shares accepted for payment pursuant to the Venezuelan
Offer will be made only after timely receipt by the Venezuelan Receiving Agent
of Shares and a properly completed and duly executed Share Letter of Transmittal
and all other required documents. If proration is required, the Purchaser will
not pay for any ADSs accepted for payment pursuant to the U.S. Offer until the
final proration factor is known. Accordingly, payment for ADSs may be delayed in
the event of proration due to the difficulty of determining the number of ADSs
validly tendered. Payment may be made to tendering ADS holders and holders of
Shares at different times if delivery of the ADSs and Shares and other required
documents occur at different times.
The Purchaser shall be deemed to have accepted for payment tendered ADSs and
Shares when, as and if the Purchaser shall give oral or written notice to the
U.S. Receiving Agent or Venezuelan Receiving Agent, as the case may be, of its
acceptance of the tender of such ADSs and Shares. Payment for ADSs accepted for
payment pursuant to the U.S. Offer will be made by depositing the purchase price
with the U.S. Receiving Agent, which will act as agent for the tendering ADS
holders for the purpose of receiving payments from the Purchaser and
transmitting such payments to tendering ADS holders. Payment for Shares accepted
for payment pursuant to the Venezuelan Offer will be made by depositing the
purchase price with the Venezuelan Paying Agent, which will act as agent for the
tendering Share holders for the purpose of receiving payments from the Purchaser
and transmitting such payments to tendering Share holders.
Tenders of ADSs and Shares made pursuant to the Offers may be withdrawn at
any time prior to the expiration date of the U.S. Offer and the Venezuelan
Offer, respectively. Thereafter, tenders of ADSs and Shares are irrevocable,
except that ADSs may be withdrawn after Friday, November 23, 2001 unless
theretofore accepted for payment as provided in the U.S. Offer to Purchase, and
Shares may only be withdrawn if the Venezuelan Offer is extended. If the
Purchaser extends the period of time during which the U.S. Offer or the
Venezuelan Offer are open, is delayed in accepting for payment or paying for the
ADSs or the Shares or is unable to accept for payment or pay for the ADSs or the
Shares
3
pursuant to the U.S. Offer or the Venezuelan Offer, respectively, for any
reason, then, without prejudice to its rights under the U.S. Offer or the
Venezuelan Offer, the U.S. Receiving Agent or the Coordinator for the Venezuelan
Offer may, as the case may be, on the Purchaser's behalf, retain all ADSs or
Shares tendered and such ADSs or Shares may not be withdrawn except as otherwise
provided in the section of the U.S. Offer to Purchase captioned "The U.S.
Offer--Withdrawal Rights" or in the Section of the Venezuelan Offer to Purchase
captioned "Place and manner of acceptance notice," as the case may be.
For a withdrawal of ADSs tendered in the U.S. Offer to be effective, a
written, telegraphic, telex or facsimile transmission notice of withdrawal must
be timely received by the U.S. Receiving Agent at its address set forth on the
back cover of the U.S. Offer to Purchase and must specify the name of the person
who tendered the ADSs to be withdrawn, the number of ADSs to be withdrawn and
the name of the registered holder of ADSs, if different from that of the person
who tendered such ADSs. If the ADSs to be withdrawn have been delivered to the
U.S. Receiving Agent, a signed notice of withdrawal with (except in the case of
ADSs tendered by an Eligible Institution (as defined in the U.S. Offer to
Purchase)) signatures guaranteed by an Eligible Institution must be submitted
prior to the release of such ADSs. In addition, such notice must specify, in the
case of ADSs tendered by delivery of ADRs, the name of the registered holder (if
different from that of the tendering holder) and the serial numbers shown on the
particular ADRs representing the ADSs to be withdrawn or, in the case of ADSs
tendered by book-entry transfer, the name and number of the account at the
Book-Entry Transfer Facility (as defined in the Offer to Purchase) to be
credited with the withdrawn ADSs. For a withdrawal of Shares tendered under the
Venezuelan Offer to be effective a written notice of withdrawal must be timely
received by the Venezuelan Receiving Agent at its address set forth in the
Venezuelan Offer to Purchase and must specify, among other things, the name of
the person who tendered the Shares to be withdrawn and the number of Shares to
be withdrawn. Withdrawals may not be rescinded, and ADSs and Shares withdrawn
will thereafter be deemed not validly tendered for purposes of the Offers.
However, withdrawn ADSs and Shares may be retendered by again following one of
the procedures described in the section of the U.S. Offer to Purchase captioned
"The U.S. Offer--Procedure for Tendering ADSs in the U.S. Offer" or in the
section of the Venezuelan Offer to Purchase captioned "Place and manner of the
acceptance notice" at any time prior to the expiration date of the U.S. Offer or
the Venezuelan Offer, as the case may be.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding. None of AES, CEDC,
the Purchaser, the Dealer Manager, the U.S. Receiving Agent, the Venezuelan
Receiving Agent, the Venezuelan Paying Agent, the Information Agent, the
Coordinator for the Venezuelan Offer nor any other person will be under any duty
to give notification of any defect or irregularity in any notice of withdrawal
or incur any liability for failure to give any such notification.
Subject to applicable law (and with respect to the Venezuelan Offer, subject
to any applicable approval by the Venezuelan Comision Nacional de Valores), the
Purchaser reserves the right, at any time or from time to time, in its sole
discretion: (a) regardless of whether or not any of the conditions to the U.S.
Offer or the Venezuelan Offer shall have been satisfied, to extend for any
reason the period of time during which each of the U.S. Offer or the Venezuelan
Offer remains open, and to amend the U.S. Offer or the Venezuelan Offer in any
respect by giving oral or written notice of such extension or amendment to the
U.S. Receiving Agent or the Venezuelan Receiving Agent followed as promptly as
practicable by public announcement thereof, (b) in the event any of the
conditions to the U.S. Offer or the Venezuelan Offer shall not have been
satisfied and so long as the ADSs have not theretofore been accepted for
payment, to delay acceptance for payment of or payment for ADSs or Shares or to
terminate the U.S. Offer and not accept for payment or pay for ADSs or to
terminate the Venezuelan Offer and not accept for payment or pay for Shares and
(c) to waive any condition to the U.S. Offer or the Venezuelan Offer. There can
be no assurance that the Purchaser will exercise its right to extend or amend
the U.S. Offer or the Venezuelan Offer. The reservation by the Purchaser of the
right to delay acceptance for payment of or payment for ADSs or the Shares is
subject to applicable law, which requires that the Purchaser pay the
consideration offered or return the ADSs or the Shares deposited by or on behalf
of ADSs holders or Share holders promptly after the termination or withdrawal of
the U.S. Offer or the Venezuelan Offer.
Any extension, termination or amendment of the Offers will be followed as
promptly as practicable by a public announcement thereof. Without limiting the
manner in which the Purchaser may choose to make any public announcement, the
Purchaser will have no obligation (except as otherwise required by applicable
law) to publish, advertise or otherwise communicate any such public announcement
other than by making a release to the Dow Jones News Service (in the case of the
U.S. Offer) and Dow Jones News Service and press release in Venezuela (in the
case of the Venezuelan Offer). In the case of an extension of the Offers, the
Purchaser will make a public announcement of such extension no later than 9:00
A.M., New York City time, on the next business day after the previously
scheduled expiration date.
If any tendered ADSs or Shares are not purchased pursuant to the Offers for
any reason, or if ADSs are submitted for more than are tendered, such
unpurchased or untendered ADSs or Shares will be returned (or, in the case of
ADSs tendered by book-entry transfer, such ADSs will be credited to an account
maintained at the Book-Entry Transfer Facility), without expense to the
tendering holder, as promptly as practicable following the expiration or
termination of the U.S. Offer or the Venezuelan Offer, as the case may be.
The receipt of cash for ADSs pursuant to the U.S. Offer, and the receipt of
cash for Shares pursuant to the Venezuelan Offer by a U.S. holder, will be a
taxable transaction for United States federal income tax purposes and possibly
for state, local and foreign income tax purposes. In addition, with respect to
the Venezuelan Offer, the Caracas Stock Exchange will withhold tax at a rate of
1% on the gross amount of the payments made to shareholders whose tendered
Shares are purchased in the Venezuelan Offer, except in limited circumstances.
Certain U.S. persons may be entitled to relief from such withholding under an
applicable treaty. A holder of ADSs or Shares should consult with its tax
advisors as to the particular tax consequences of the Offers to it, including
the applicability and effect of any state, local, federal or Venezuelan or other
foreign income and other tax law consequences of the Offers.
The information required to be disclosed by paragraph (d)(1) of Rule 14d-6
under the Securities Exchange Act of 1934, as amended, and set forth in the U.S.
Offer to Purchase and the Venezuelan Offer to Purchase is incorporated herein by
reference.
The Purchaser is making a request to CANTV for the use of securityholder
lists and security position listings under the Securities Exchange Act of 1934,
as amended, for the purpose of disseminating the U.S. Offer to holders of ADSs.
In addition, the Purchaser is delivering the U.S. Offer to Purchase, the ADS
Letter of Transmittal, the Notice of Guaranteed Delivery and other relevant
material (the "U.S. Offer to Purchase Materials") to the Depositary under the
Deposit Agreement and requesting CANTV to make a request to the Depositary to
distribute the U.S. Offer to Purchase Materials to registered holders of ADSs
and requesting CANTV to request from the Depositary a list of all holders of
ADSs. The Purchaser intends to use the list of holders of ADSs to transmit the
U.S. Offer to Purchase Materials to holders of ADSs. The U.S. Offer to Purchase
Materials will be mailed to record holders of ADSs and will be furnished to
brokers, dealers, banks, trust companies and similar persons who may be listed
as participants in a clearing agency's security position listings for subsequent
transmittal to the beneficial owners of ADSs. Further, the Purchaser, as a
holder of ADSs, is requesting that the Depositary allow the Purchaser to inspect
its books for the purpose of obtaining the names of ADS holders. A request is
being made to CANTV to inspect CANTV's shareholder registry books maintained by
Banco Venezolano de Credito, S.A.C.A., CANTV's transfer agent, for the purpose
of obtaining the names of the holders of Shares. Under Venezuelan law, a company
is required to permit a holder of its shares to inspect its shareholders
registry books. The Venezuelan Offer to Purchase, the Share
4
Letter of Transmittal and other relevant material will be made available to
record holders of Shares and will be furnished to brokers, dealers, banks, trust
companies and similar persons who may be listed as holders for subsequent
transmittal to the beneficial owners of Shares.
THE U.S. OFFER TO PURCHASE AND THE ADS LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE U.S. OFFER. THE VENEZUELAN OFFER TO PURCHASE AND THE SHARE LETTER
OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE VENEZUELAN OFFER.
Questions and requests for assistance, or for copies of the U.S. Offer to
Purchase, the ADS Letter of Transmittal, the Notice of Guaranteed Delivery and
other U.S. Offer documents may be directed to the Information Agent or the
Dealer Manager at their respective telephone numbers and addresses listed below.
Questions and requests for assistance, or copies of the Venezuelan Offer to
Purchase, the Share Letter of Transmittal and other related documents may be
directed to the Coordinator for the Venezuelan Offer at its telephone number and
address listed below. Holders of ADSs or Shares may also contact their brokers,
dealers, commercial banks and trust companies or other nominees for assistance
concerning the U.S. Offer or the Venezuelan Offer. Copies of the foregoing will
be furnished at the Purchaser's expense. No fees or commissions will be payable
to brokers, dealers or other persons other than the Dealer Manager and the
Information Agent for soliciting tenders of ADSs pursuant to the U.S. Offer.
The Information Agent for the U.S. Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
+1 (800) 549-6746 (TOLL-FREE IN THE U.S.)
+1 (212) 269-5550 (COLLECT OUTSIDE THE U.S.)
The Dealer Manager for the U.S. Offer is:
J.P. MORGAN SECURITIES INC.
277 Park Avenue
New York, New York 10172
Call Toll-Free (800) 648-5544
Call Collect (212) 648-0888
JPMORGAN [LOGO]
The Coordinator for the Venezuelan Offer is:
ACTIVALORES
Sociedad de
Corretaje [LOGO]
Calle Los Chaguaramos
Centro Gerencial Mohedano PH-A
La Castellana
Caracas, Venezuela
011-58 (212) 201-7511
consult@activalores.com
SEPTEMBER 25, 2001
5
EX-99.(A)(1)(F)
7
file006.txt
PRESS RELEASE
Exhibit (a)(1)(F)
FOR IMMEDIATE RELEASE
THE AES CORPORATION AND CORPORACION EDC, C.A.
COMMENCE JOINT U.S. AND VENEZUELAN CASH OFFERS FOR
AMERICAN DEPOSITARY SHARES AND SHARES OF CANTV
AES AND CEDC COMMENCE OFFERS FOR CANTV
--------------------------------------------------------------------------------
ARLINGTON, VIRGINIA AND CARACAS, VENEZUELA - SEPTEMBER 25, 2001 - The AES
Corporation (NYSE:AES), the world's largest independent global power company,
together with its 87% owned subsidiary, Corporacion EDC, C.A., announced today
that they have commenced cash tender offers in the United States and Venezuela
to acquire American Depositary Shares and shares of Compania Anonima Nacional
Telefonos de Venezuela (CANTV), the national telephone company of Venezuela,
which represent approximately 43.2% of the outstanding CANTV shares. The offers
will expire at 5:00 pm New York City time (6:00 pm Caracas time), on Monday
October 29, 2001 unless extended.
Tender Details
The U.S. offer is for 28,566,944 American Depositary Shares of CANTV at U.S.
$24.00 per ADS in cash. The Venezuelan offer is for 199,968,608 shares of CANTV
at U.S. $3.4285714 per share in cash. The price per ADS and per share in the
U.S. and Venezuelan offers will be equal based upon the seven shares represented
by each ADS.
Through Corporacion EDC, AES currently owns 64,007,524 CANTV shares representing
approximately 6.9% of the outstanding capital stock of CANTV. When added to the
CANTV shares currently owned by Corporacion EDC, the ADSs and shares sought in
the tender offers would represent a majority of CANTV's outstanding shares.
Based on the number of ADSs and shares sought in the U.S. and Venezuelan offers,
the aggregate consideration to be paid pursuant to the two offers is
approximately U.S. $1.371 billion.
If more than 28,566,944 ADSs are tendered in the U.S. offer or more than
199,968,608 shares are tendered in the Venezuelan offer and all other conditions
to the offers are met, ADSs and shares would each be purchased in each offer on
a pro rata basis.
AES's Commitment to Venezuela
Mr. Paul T. Hanrahan, President of AES Americas, said "We are pleased that we
are in a position to present our offers and increase our investment in
Venezuela."
The offers are conditioned on, among other things, that the ADSs and shares
tendered and not withdrawn pursuant to the offers, together with the CANTV
shares and ADSs currently owned by Corporacion EDC, represent at least a
majority of the outstanding capital stock of CANTV. The offers are also
conditioned on the receipt of the approval of the Venezuelan National
Telecommunications Commission (Comision Nacional de Telecomunicaciones -
CONATEL) and other required regulatory approvals.
J.P. Morgan Securities, Inc., Credit Suisse First Boston and Banc of America
Securities LLC are acting as financial advisors in connection with the offers.
J.P. Morgan Securities, Inc. is acting as the dealer manager.
The complete details of the offer for CANTV ADSs and shares are set forth in the
U.S. Offer to Purchase and related documents and in the Venezuelan Offer to
Purchase and related documents as filed with the Securities and Exchange
Commission and the Venezuelan CNV, respectively.
About AES
AES is a leading global power company comprised of competitive generation,
distribution and retail supply businesses in Argentina, Australia, Bangladesh,
Brazil, Cameroon, Canada, Chile, China, Colombia, Czech Republic, Dominican
Republic, El Salvador, Georgia, Germany, Hungary, India, Italy, Kazakhstan, the
Netherlands, Nigeria, Mexico, Oman, Pakistan, Panama, Sri Lanka, Ukraine, the
United Kingdom, the United States and Venezuela.
The Company's generating assets include interests in one hundred and eighty one
facilities totaling over 60 gigawatts of capacity. AES's electricity
distribution network has over 920,000 km of conductor and associated rights of
way and sells over 126,000 gigawatt hours per year to over 18 million end-use
customers. In addition, through its various retail electricity supply
businesses, AES sells electricity to over 154,000 end-use customers.
AES is dedicated to providing electricity worldwide in a socially responsible
way.
WHERE YOU CAN FIND ADDITIONAL INFORMATION:
AES filed a Tender Offer Statement with the Securities and Exchange Commission
today. We urge investors and security holders of CANTV to read carefully the
U.S. offer to purchase regarding the proposed transaction because it will
contain important information about the transaction. Investors and security
holders may
obtain a free copy of the U.S. offer to purchase and other documents filed by
AES with the Securities and Exchange Commission at the Securities and Exchange
Commission's Web site at www.sec.gov. The U.S. exchange offer and these other
documents may also be obtained for free from D.F. King & Co., Inc., the
Information Agent, by calling 1-800-549-6746.
* * * * *
For more general information visit our web site at www.aesc.com or contact
investor relations at investing@aesc.com. The list aes-pr-announce is an
automated mailing list and can be found on the investing page of our website.
Those who subscribe to this list will receive updates when AES issues a press
release.
* * * * *
This press release is for informational purposes only. The solicitation of
offers to buy CANTV ADSs and shares will only be made pursuant to the offer to
purchase and related materials that AES has filed and is sending to CANTV
shareholders. This communication shall not constitute a solicitation of an offer
to purchase in any state in which such offer, solicitation or sale would be
unlawful.
* * * * *
This press release contains forward looking statements concerning the financial
condition, results of operations and business of AES following the consummation
of its proposed acquisition of CANTV and the anticipated financial and other
benefits of such proposed acquisition. In some cases, you can identify forward
looking statements by the words "will", "believes", "plans", "would" or similar
expressions. These forward looking statements are not guarantees of future
performance and are subject to risks and uncertainties and other important
factors, including those that could cause actual results to differ materially
from expectations based on forward looking statements made in this press release
or elsewhere. For a description of certain of these risks please refer to AES's
and CANTV's filings with the SEC.
* * * * *