-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QDZGpMTqQbreRMUiJvcwGAMIT3h+PzQfzHKINqY+it2snibTC3P69E0JEqJ8V49l OsMldy31q2/iKO5w1if73g== 0001005150-97-000899.txt : 19971111 0001005150-97-000899.hdr.sgml : 19971111 ACCESSION NUMBER: 0001005150-97-000899 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19971110 SROS: NASD FILER: 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: S-3 SEC ACT: SEC FILE NUMBER: 333-39857 FILM NUMBER: 97710887 BUSINESS ADDRESS: STREET 1: 1001 N 19TH ST STREET 2: STE 2000 CITY: ARLINGTON STATE: VA ZIP: 22209 BUSINESS PHONE: 7035221315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AES TRUST III CENTRAL INDEX KEY: 0001027127 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-39857-01 FILM NUMBER: 97710888 BUSINESS ADDRESS: STREET 1: 1001 N. 19TH ST. CITY: ARLINGTON STATE: VA ZIP: 22209 BUSINESS PHONE: 7035221315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AES TRUST IV CENTRAL INDEX KEY: 0001049124 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-39857-02 FILM NUMBER: 97710889 BUSINESS ADDRESS: STREET 1: 1001 N 19TH STREET CITY: ARLINGTON STATE: VA ZIP: 27209 BUSINESS PHONE: 7035221315 MAIL ADDRESS: STREET 1: 1001 N 19TH STREET CITY: ARLINGTON STATE: VA ZIP: 27209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AES TRUST V CENTRAL INDEX KEY: 0001049125 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-39857-03 FILM NUMBER: 97710890 BUSINESS ADDRESS: STREET 1: 1001 N 19TH STREET CITY: ARLINGTON STATE: VA ZIP: 27209 BUSINESS PHONE: 7035221315 MAIL ADDRESS: STREET 1: 1001 N 19TH STREET CITY: ARLINGTON STATE: VA ZIP: 27209 S-3 1 FORM S-3 As filed with the Securities and Exchange Commission on November 7, 1997 Registration No. 333- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ----------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -----------------------
THE AES CORPORATION DELAWARE 54-1163725 AES TRUST III DELAWARE 54-1840550 AES TRUST IV DELAWARE [APPLICATION PENDING] AES TRUST V DELAWARE [APPLICATION PENDING] (Exact name of Registrant as (State or other jurisdiction of (I.R.S. employer specified in its charter) incorporation or organization) identification number)
1001 NORTH 19TH STREET ARLINGTON, VIRGINIA 22209 (703) 522-1315 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) BARRY J. SHARP 1001 NORTH 19TH STREET ARLINGTON, VIRGINIA 22209 (703) 522-1315 (Name, address, including zip code, and telephone number, including area code, of agent for service) ----------------------- Copies to: RICHARD D. TRUESDELL, JR. DAVIS POLK & WARDWELL 450 LEXINGTON AVENUE NEW YORK, NEW YORK 10017 (212) 450-4000 ----------------------- Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective. ----------------------- If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities being offered only in connection with dividend or interest reinvestment plans, please check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE SECURITIES TO BE REGISTERED OFFERING PRICE (1)(2)(3) AMOUNT OF REGISTRATION FEE Senior Debt Securities, Senior Subordinated Debt Securities and Junior Subordinated Debt Securities (collectively, "Debt Securities") of The AES Corporation............................. $ 1,500,000,000 $ 454,545.45 Preferred Stock of The AES Corporation ("Preferred Stock")........... Common Stock of The AES Corporation ("Common Stock")................. Junior Subordinated Debt Securities of The AES Corporation for issuance directly or to AES Trust III, AES Trust IV and AES Trust V ("Junior Subordinated Debt Trust Securities").. Preferred Securities of AES Trust III, AES Trust IV, and AES Trust V, severally ("Preferred Securities")..................... Guarantees of Preferred Securities of AES Trust III, AES Trust IV and AES Trust V by the AES Corporation(4).................... Stock Purchase Contracts to purchase Common Stock ("Stock Purchase Contracts")............................................ Stock Purchase Units, each representing ownership of a Stock Purchase Contract and Debt Securities or debt obligations of third parties ("Stock Purchase Units")..........................
- ---------- (1) Such indeterminate number or amount of Debt Securities, Junior Subordinated Debt Trust Securities, Preferred Stock, Common Stock, Stock Purchase Contracts and Stock Purchase Units of The AES Corporation and Preferred Securities of AES Trust III, AES Trust IV and AES Trust V as may from time to time be issued at indeterminate prices. Junior Subordinated Debt Trust Securities may be issued and sold to AES Trust III, AES Trust IV and AES Trust V, in which event such Junior Subordinated Debt Trust Securities may later be distributed to the holders of Preferred Securities upon a dissolution of AES Trust III, AES Trust IV and AES Trust V and the distribution of the assets thereof. (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) and exclusive of accrued interest and dividends, if any. Calculated using the maximum aggregate offering price of such indeterminate amount of Debt Securities that may be offered from time to time at an offering price below their face value. (3) The AES Corporation is also registering under this Registration Statement all other obligations that it may have with respect to Preferred Securities issued by AES Trust III, AES Trust IV or AES Trust V. No separate consideration will be received for any Guarantee or any other such obligations. (4) Includes the rights of holders of the Preferred Securities of an AES Trust under the Trust Preferred Securities Guarantee and back-up undertakings, consisting of obligations by The AES Corporation to provide certain indemnities in respect of, and pay and be responsible for certain expenses, costs, liabilities, and debts of, as applicable, AES Trust III, AES Trust IV, AES Trust V and such other obligations of The AES Corporation set forth in the Amended and Restated Declaration of Trust, the Junior Subordinated Debt Trust Securities Indenture and Supplemental Indentures thereto, in each case as further described in the Registration Statement. No separate consideration will be received for any Guarantees or any back-up undertakings. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- EXPLANATORY NOTE This Registration Statement contains two forms of prospectuses to be used in connection with offerings of the following securities: (1) Debt Securities (consisting of Senior Debt Securities, Senior Subordinated Debt Securities and Junior Subordinated Debt Securities), Preferred Stock, Common Stock, Stock Purchase Contracts and Stock Purchase Units of The AES Corporation. (2) Preferred Securities of AES Trust III, AES Trust IV or AES Trust V, severally, Junior Subordinated Debt Trust Securities of The AES Corporation and Guarantees by The AES Corporation of Preferred Securities issued by AES Trust III, AES Trust IV or AES Trust V. Each offering of securities made under this Registration Statement will be made pursuant to one of these Prospectuses, with the specific terms of the securities offered thereby set forth in an accompanying Prospectus Supplement. SUBJECT TO COMPLETION, DATED NOVEMBER 7, 1997 PROSPECTUS [LOGO] THE AES CORPORATION $1,500,000,000 COMMON STOCK, PREFERRED STOCK, DEBT SECURITIES, STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS The AES Corporation (the "Company" or "AES") may from time to time offer, together or separately, (i) shares of its common stock, par value $.01 per share (the "Common Stock"), (ii) shares of its preferred stock, no par value (the "Preferred Stock"), (iii) unsecured senior debt securities (the "Senior Debt Securities"), (iv) unsecured senior subordinated debt securities (the "Senior Subordinated Debt Securities"), (v) unsecured junior subordinated securities (the "Junior Subordinated Debt Securities"), (vi) Stock Purchase Contracts to purchase Common Stock ("Stock Purchase Contracts") and (vii) Stock Purchase Units ("Stock Purchase Units"), each representing ownership of a Stock Purchase Contract and Debt Securities or debt obligations of third parties, including U.S. Treasury securities, securing the holder's obligation to purchase Common Stock under the Stock Purchase Contract, in each case in one or more series and in amounts, at prices and on terms to be determined at or prior to the time of sale. The Senior Debt Securities, Senior Subordinated Debt Securities and Junior Subordinated Securities are collectively referred to herein as the "Debt Securities." The Debt Securities, Common Stock, Preferred Stock, Stock Purchase Contracts and Stock Purchase Units are collectively referred to herein as the "Securities." SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. ----------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------------------- The Common Stock and Preferred Stock offered pursuant to this Prospectus may be issued in one or more series or issuances in U.S. dollars or in one or more foreign currencies, currency units or composite securities to be determined at or prior to the time of any offering. The Stock Purchase Contracts and the Stock Purchase Units offered pursuant to this Prospectus may be issued in one or more series and amounts, at prices and on terms to be determined at or prior to the time of any such offering. The Debt Securities offered pursuant to this Prospectus may consist of debentures, notes or other evidences of indebtedness in one or more series and in amounts, at prices and on terms to be INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. determined at or prior to the time of any such offering. The Company's obligations under the Senior Debt Securities will rank pari passu with all unsecured and unsubordinated debt (as defined herein) of the Company. The Company's obligations under the Senior Subordinated Debt Securities will be subordinated in right of payment to the prior payment in full of all Senior Debt (as defined herein). The Company's obligations under the Junior Subordinated Debt Securities will be subordinated in right of payment to the prior payment in full of all Senior and Senior Subordinated Debt (as defined herein) of the Company. See "Description of Debt Securities." By separate prospectus, the form of which is included in the Registration Statement of which this Prospectus forms a part, three Delaware statutory business trusts (the "AES Trusts"), which are wholly owned subsidiaries of the Company, may from time to time severally offer preferred securities guaranteed by the Company to the extent set forth therein and the Company may offer from time to time junior subordinated debt securities either directly or to an AES Trust. The aggregate public offering price of the securities to be offered by the Prospectus and such other prospectus shall not exceed $1,500,000,000. Specific terms of the Securities in respect of which this Prospectus is being delivered (the "Offered Securities") will be set forth in a Prospectus Supplement with respect to such Offered Securities, which Prospectus Supplement will describe, without limitation and where applicable, the following: (i) in the case of Common Stock, the specific designation, number of shares, purchase price and the rights and privileges thereof, together with any qualifications or restrictions thereon and any listing on a securities exchange; (ii) in the case of Preferred Stock, the specific designation, number of shares, purchase price and the rights, preferences and privileges thereof and any qualifications or restrictions thereon (including dividends, liquidation value, voting rights, terms for the redemption, conversion or exchange thereof and any other specific terms of the Preferred Stock) and any listing on a securities exchange; (iii) in the case of Debt Securities, the specific designation, aggregate principal amount, authorized denomination, maturity, premium, if any, exchangeability, redemption, conversion, prepayment or sinking fund provisions, if any, interest rate (which may be fixed or variable), if any, method, if any, of calculating interest payments and dates for payment thereof, dates on which premium, if any, will be payable, the right of the Company, if any, to defer payment of interest on the Debt Securities and the maximum length of such deferral period, the initial public offering price, any listing on a securities exchange and other specific terms of the offering; (iv) in the case of Stock Purchase Contracts, the designation and number of shares of Common Stock issuable thereunder, the purchase price of the Common Stock, the date or dates on which the Common Stock is required to be purchased by the holders of the Stock Purchase Contracts, any periodic payments required to be made by the Company to the holders of the Stock Purchase Contract or vice versa, and the terms of the offering and sale thereof, and (v) in the case of Stock Purchase Units, the specific terms of the Stock Purchase Contracts and any Debt Securities or debt obligations of third parties securing the holder's obligation to purchase the Common Stock under the Stock Purchase Contracts, and the terms of the offering and sale thereof. Unless otherwise indicated in the Prospectus Supplement, the Company does not intend to list any of the Securities other than the Common Stock and the Preferred Stock on a national securities exchange. Any Prospectus Supplement relating to any series of Offered Securities will contain information concerning certain United States federal income tax considerations, if applicable, to the Offered Securities. The Offered Securities may be offered directly, through agents designated from time to time, through dealers or through underwriters. Such agents or underwriters may act alone or with other agents or underwriters. See "Plan of Distribution." Any such agents, dealers or underwriters will be set forth in a Prospectus Supplement. If an agent of the Company, or a dealer or underwriter is involved in the offering of the Offered Securities, the agent's commission, dealer's purchase price, underwriter's discount and net proceeds to the Company, as the case may be, will be set forth in, or may be calculated from, the Prospectus Supplement. Any underwriters, dealers or agents participating in the offering may be deemed "underwriters" within the meaning of the Securities Act of 1933. This Prospectus may not be used to consummate sales of Offered Securities unless accompanied by a Prospectus Supplement. The date of this Prospectus is , 1997. AVAILABLE INFORMATION AES is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy and information statements and other information with the Securities and Exchange Commission (the "Commission"). These reports, proxy and information statements and other information may be inspected without charge and copied at the public reference facilities maintained by the Commission at its principal offices at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such materials also can be obtained at prescribed rates from the Public Reference Section of the Commission at the principal offices of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be inspected at the offices of the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. Such material may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov. The Company has filed with the Commission a Registration Statement on Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Securities offered hereby (including all amendments and supplements thereto, the "Registration Statement"). This Prospectus, which forms a part of the Registration Statement, does not contain all the information set forth in the Registration Statement and the exhibits filed thereto, certain parts of which have been omitted in accordance with the rules and regulations of the Commission. Statements contained herein concerning the provisions of any documents are not necessarily complete and, in each instance, reference is made to the copy of such document filed as an exhibit to the Registration Statement or otherwise filed with the Commission. Each such statement is qualified in its entirety by such reference. The Registration Statement and the exhibits thereto can be inspected and copied at the public reference facilities and regional and other offices referred to above. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company hereby incorporates in this Prospectus by reference thereto and makes a part hereof the following documents, heretofore filed with the Commission pursuant to the Exchange Act: (i) the Company's Annual Report on Form 10-K for the year ended December 31, 1996; (ii) the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997; (iii) the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997; (iv) the Company's Current Reports on Form 8-K filed on November 6, 1997, October 24, 1997, August 18, 1997, July 16, 1997, July 15, 1997, July 14, 1997, July 3, 1997, March 24, 1997, March 13, 1997, February 19, 1997 and January 30, 1997 and the Company's Current Report on Form 8-K/A filed on August 5, 1997. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to termination of the offering being made hereby shall be deemed to be incorporated in this Prospectus by reference and to be a part hereof from the respective dates of the filing of such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus and the Registration Statement of which it is a part to the extent that a statement contained herein or in any subsequently filed document which also is, or is deemed to be, incorporated by reference herein, modifies or supersedes such earlier statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus or such Registration Statement. The Company hereby undertakes to provide without charge to each person to whom a copy of this Prospectus has been delivered, upon written or oral request of any such person, a copy of any and all of the documents referred to above which have been or may be incorporated in this Prospectus by reference, other than exhibits to such documents which are not specifically incorporated by reference into such documents. Requests for such copies should be directed to William R. Luraschi, General Counsel and Secretary, The AES Corporation, 1001 North 19th Street, Arlington, Virginia 22209, telephone (703) 522-1315. USE OF PROCEEDS Unless otherwise set forth in the applicable Prospectus Supplement, proceeds from the sale of the Offered Securities will be used by the Company for general corporate purposes and initially may be temporarily invested in short-term securities. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the ratio of earnings to fixed charges.
SIX-MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, --------------------------------------------------------- ----------- 1992 1993 1994 1995 1996 1997 --------- ----------- --------- ---------- ---------- ----------- Ratio of earnings to fixed charges..... 1.37 1.62 2.08 2.18 1.83 1.71
For the purpose of computing the ratio of earnings to fixed charges, earnings consist of income from continuing operations before income taxes and minority interest, plus fixed charges, less capitalized interest, less excess of earnings over dividends of less-than-fifty-percent-owned companies. Fixed charges consist of interest (including capitalized interest) on all indebtedness, amortization of debt discount and expense and that portion of rental expense which the Company believes to be representative of an interest factor. A statement setting forth the computation of the above ratios is on file as an exhibit to the Registration Statement of which this Prospectus is a part. During the period from January 1, 1992 until June 30, 1997, no shares of Preferred Stock were issued or outstanding, and during that period the Company did not pay any Preferred Stock dividends. 2 THE COMPANY AES is a global power company committed to supplying electricity to customers world-wide in a socially responsible way. The Company was one of the original entrants in the independent power market and today is one of the world's largest independent power companies, based on net equity ownership of generating capacity (in megawatts) in operation or under construction. AES markets power principally from electricity generating facilities that it develops, acquires, owns and operates. Over the last five years, the Company has experienced significant growth. This growth has resulted primarily from the development and construction of new plants ("greenfield development") and also from the acquisition of existing generating plants and distribution companies, through competitively bid privatization initiatives outside of the United States or negotiated acquisitions. Since 1992, the Company's total generating capacity in megawatts has grown from 1,829 MW to 18,538 MW (an increase of 914%), with the total number of plants in operation increasing from eight to 74. Additionally, the Company's total revenues have increased at a compound annual growth rate of 20% from $401 million in 1992 to $835 million in 1996, while net income has increased at a compound annual growth rate of 22% from $56 million to $125 million over the same period. AES operates and owns (entirely or in part), through subsidiaries and affiliates, power plants in ten countries with a capacity of approximately 18,538 MW (including 4,000 MW attributable to Ekibastuz which currently has a capacity factor of approximately 20%). AES is also constructing nine additional power plants in seven countries with a capacity of approximately 4,921 MW. The Company's total ownership in plants in operation and under construction aggregates approximately 23,459 MW and its net equity ownership in such plants is approximately 11,882 MW. In addition, AES has numerous projects in advanced stages of development, including seven projects with design capacity of approximately 3,398 MW that have executed or been awarded power sales agreements. The Company is also engaged (entirely or in part) in electric power distribution businesses in Latin America through its subsidiaries and affiliates. These subsidiaries and affiliates serve approximately eight million commercial, industrial and residential customers using approximately 63,000 gigawatt hours per year. As a result of the Company's significant growth in recent years, the Company's operations have become more diverse with regard to both geography and fuel source and it has reduced its dependence upon any single project or customer. During 1996, four of the Company's projects individually contributed more than 10% of the Company's total revenues, Shady Point which represented approximately 20%, San Nicolas which represented approximately 16%, Thames which represented approximately 16% and Barbers Point which represented approximately 15%. OUTLOOK The global trend of electricity market restructuring has created significant new business opportunities for companies like AES. Both domestic and international electricity markets are being restructured and there is a trend away from government-owned electricity systems toward deregulated, competitive market structures. Many countries have rewritten their laws and regulations to allow foreign investment and private ownership of electricity generation, transmission or distribution systems. Some countries have or are in the process of "privatizing" their electricity systems by selling all or part of such systems to private investors. With 69 of its operating plants and distribution companies having been acquired or commenced commercial operations since 1992, AES has been an active participant in both the international privatization process and the development process. The Company is currently pursuing over 90 projects including acquisitions, the expansion of existing plants and new projects. AES believes that there is significant demand for both new and more efficiently operated electric generating capacity in many regions around the world. In an effort to further grow and diversify the Company's portfolio of electric generating plants, AES is pursuing, through its integrated divisions, additional greenfield developments and 3 acquisitions in many countries. Several of these acquisitions, if consummated, would require the Company to obtain substantial additional financing, in the form of both debt and equity financing, in the short term. STRATEGY The Company's strategy in helping meet the world's need for electricity is to participate in competitive power markets as they develop either by greenfield development or by acquiring and operating existing facilities or distribution systems in these markets. The Company generally operates electric generating facilities that utilize natural gas, coal, oil, hydro power, or combinations thereof. In addition, the Company participates in the electric power distribution and retail supply businesses in certain limited instances, and will continue to review opportunities in such markets in the future. Other elements of the Company's strategy include: o Supplying energy to customers at the lowest cost possible, taking into account factors such as reliability and environmental performance; o Constructing or acquiring projects of a relatively large size (generally larger than 100 MW); o When available, entering into power sales contracts with electric utilities or other customers with significant credit strength; and o Participating in electric power distribution and retail supply markets that grant concessions with long-term pricing arrangements. The Company also strives for operating excellence as a key element of its strategy, which it believes it accomplishes by minimizing organizational layers and maximizing company-wide participation in decision-making. AES has attempted to create an operating environment that results in safe, clean and reliable electricity generation. Because of this emphasis, the Company prefers to operate all facilities which it develops or acquires; however, there can be no assurance that the Company will have operating control of all of its facilities. Where possible, AES attempts to sell electricity under long-term power sales contracts. The Company attempts, whenever possible, to structure the revenue provisions of such power sales contracts such that changes in the cost components of a facility (primarily fuel costs) correspond, as effectively as possible, to changes in the revenue components of the contract. The Company also attempts to provide fuel for its operating plants generally under long-term supply agreements, either through contractual arrangements with third parties or, in some instances, through acquisition of a dependable source of fuel. As electricity markets become more competitive, it may be more difficult for AES (and other power generation companies) to obtain long-term power sales contracts. In markets where long-term contracts are not available, AES will pursue methods to hedge costs and revenues to provide as much assurance as possible of a project's profitability. In these situations, AES might choose to purchase a project with a partial hedge or with no hedge, with the strategy that its diverse portfolio of projects provides some hedge to the increased volatility of the project's earnings and cash flow. Additionally, AES may choose not to participate in these markets. The Company attempts to finance each domestic and foreign plant primarily under loan agreements and related documents which, except as noted below, require the loans to be repaid solely from the project's revenues and provide that the repayment of the loans (and interest thereon) is secured solely by the capital stock, physical assets, contracts and cash flow of that plant subsidiary or affiliate. This type of financing is generally referred to as "project financing." The lenders under these project financing structures cannot look to AES or its other projects for repayment, unless such entity explicitly agrees to undertake liability. AES has explicitly agreed to undertake certain limited obligations and 4 contingent liabilities, most of which by their terms will only be effective or will be terminated upon the occurrence of future events. In certain circumstances, the Company may incur indebtedness which is recourse to the Company or to more than one project. 5 RISK FACTORS Purchasers of the Securities should read this entire Prospectus carefully. Ownership of the Securities involves certain risks. The following factors should be considered carefully in evaluating AES and its business before purchasing the Securities offered by this Prospectus. Leverage and Subordination. The Company and its subsidiaries had approximately $4.1 billion of outstanding indebtedness at June 30, 1997. As a result of the Company's level of debt, the Company might be significantly limited in its ability to meet its debt service obligations, to finance the acquisition and development of additional projects, to compete effectively or to operate successfully under adverse economic conditions. As of June 30, 1997, the Company had a consolidated ratio of total debt to total book capitalization (including current debt) of approximately 75%. The Senior Subordinated Debt Securities will be subordinated to all Senior Debt, including, but not limited to, the amounts outstanding under the Company's current $425 million credit facility. The Junior Subordinated Debt Securities will be subordinated to all Senior and Senior Subordinated Debt of the Company, including, but not limited to, the amounts outstanding under the Company's current $425 million credit facility. As of June 30, 1997, the Company had approximately $386 million in aggregate principal amount of Senior Debt and $911 million in aggregate principal amount of Senior and Senior Subordinated Debt. Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, receivership, reorganization, assignment for the benefit of creditors, marshaling of assets and liabilities or any bankruptcy, insolvency or similar proceedings of the Company, the holders of Senior Debt will first be entitled to receive payment in full of all amounts due or to become due under all Senior Debt before the holders of the Senior Subordinated Debt Securities will be entitled to receive any payment in respect of the principal of, premium, if any, or interest on such Senior Subordinated Debt Securities and holders of Senior and Senior Subordinated Debt will first be entitled to receive payment in full of all amounts due or to become due under all Senior and Senior Subordinated Debt before the holders of the Junior Subordinated Debt Securities will be entitled to receive any payment in respect of the principal of, premium, if any, or interest on such Junior Subordinated Debt Securities. No payments on account of principal, premium, if any, or interest in respect of the Senior Subordinated Debt Securities or Junior Subordinated Debt Securities may be made if there shall have occurred and be continuing a default in any payment under any Senior Debt or Senior and Senior Subordinated Debt, respectively, or during certain periods when an event of default under certain Senior Debt or Senior and Senior Subordinated Debt, respectively, permits the respective lenders thereunder to accelerate the maturity thereof. See "Description of Debt Securities--Subordination of Senior Subordinated Debt Securities" and "Description of Debt Securities--Subordination of Junior Subordinated Debt Securities." The Debt Securities will be effectively subordinated to the indebtedness and other obligations (including trade payables) of the Company's subsidiaries. At June 30, 1997, the indebtedness and obligations of the Company's subsidiaries aggregated approximately $3.3 billion. The ability of the Company to pay principal of, premium, if any, and interest on the Debt Securities will be dependent upon the receipt of funds from its subsidiaries by way of dividends, fees, interest, loans or otherwise. Most of the Company's subsidiaries with interests in power generation facilities currently have in place, and the Indentures for the Debt Securities will, under certain circumstances, permit the Company's subsidiaries to enter into, arrangements that restrict their ability to make distributions to the Company by way of dividends, fees, interest, loans or otherwise. The Company's subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the Debt Securities or to make any funds available therefor, whether by dividends, loans or other payments, and do not guarantee the payment of interest on or principal of the Debt Securities. Any right of the Company to receive any assets of any of its subsidiaries upon any liquidation, dissolution, winding up, receivership, reorganization, assignment for the benefit of creditors, marshaling of assets and liabilities or any bankruptcy, insolvency or similar proceedings of the Company (and the consequent right of the holders of the Debt Securities to participate in the distribution of, or to realize proceeds from, those assets) will be effectively subordinated to the claims of any such subsidiary's creditors (including trade creditors and holders of debt issued by such subsidiary). The Company currently conducts substantially all of its operations through its subsidiaries. 6 Doing Business Outside the United States. The Company's involvement in the development of new projects and the acquisition of existing plants in locations outside the United States is increasing and most of the Company's current development and acquisition activities are for projects and plants outside the United States. The Company, through subsidiaries, affiliates and joint ventures, has ownership interests in 76 power plants outside the United States in operation or under construction. Thirty-nine of such power plants are located in Brazil; nine in the People's Republic of China; seven in Kazakhstan; six in Argentina; five in the United Kingdom; three in Hungary; two in each of Australia and Pakistan; and one in each of the Netherlands, Canada and the Dominican Republic. The financing, development and operation of projects outside the United States entail significant political and financial uncertainties (including, without limitation, uncertainties associated with first-time privatization efforts in the countries involved, currency exchange rate fluctuations, currency repatriation restrictions, currency inconvertibility, political instability, civil unrest, and expropriation) and other credit quality, liquidity or structuring issues that have the potential to cause substantial delays in respect of or material impairment of the value of the project being developed or operated, which AES may not be capable of fully insuring or hedging against. The ability to obtain financing on a commercially acceptable non-recourse basis in developing nations may also require higher investments by the Company than historically have been the case. In addition, financing in countries with less than investment grade sovereign credit ratings may also require substantial participation by multilateral financing agencies. There can be no assurance that such financing can be obtained when needed. The uncertainty of the legal environment in certain countries in which the Company, its subsidiaries and its affiliates are or in the future may be developing, constructing or operating could make it more difficult for the Company to enforce its respective rights under agreements relating to such projects. In addition, the laws and regulations of certain countries may limit the Company's ability to hold a majority interest in some of the projects that it may develop or acquire. International projects owned by the Company may, in certain cases, be expropriated by applicable governments. Although AES may have legal recourse in enforcing its rights under agreements and recovering damages for breaches thereof, there can be no assurance that any such legal proceedings will be successful. Competition. The global power production market is characterized by numerous strong and capable competitors, many of whom may have extensive and diversified developmental or operating experience (including both domestic and international experience) and financial resources similar to or greater than the Company. Further, in recent years, the power production industry has been characterized by strong and increasing competition with respect to both obtaining power sales agreements and acquiring existing power generation assets. In certain markets, these factors have caused reductions in prices contained in new power sales agreements and, in many cases, have caused higher acquisition prices for existing assets through competitive bidding practices. The evolution of competitive electricity markets and the development of highly efficient gas-fired power plants have also caused, or are anticipated to cause, price pressure in certain power markets where the Company sells or intends to sell power. There can be no assurance that the foregoing competitive factors will not have a material adverse effect on the Company. Development Uncertainties. The majority of the projects that AES develops are large and complex and the completion of any such project is subject to substantial risks. Development can require the Company to expend significant sums for preliminary engineering, permitting, legal and other expenses in preparation for competitive bids which the Company may not win or before it can be determined whether a project is feasible, economically attractive or capable of being financed. Successful development and construction is contingent upon, among other things, negotiation on terms satisfactory to the Company of engineering, construction, fuel supply and power sales contracts with other project participants, receipt of required governmental permits and consents and timely implementation and satisfactory completion of construction. There can be no assurance that AES will be able to obtain new power sales contracts, overcome local opposition, if any, obtain the necessary site agreements, fuel supply and ash disposal agreements, construction contracts, steam sales contracts, licenses and certifications, environmental and other permits and financing commitments necessary for the successful development of its projects. There can be no assurance that development efforts on any particular project, or the Company's efforts generally, will be successful. If these development efforts are not successful, the Company may abandon a project under development. At the time of abandonment, the Company would expense all capitalized development costs incurred in connection therewith and 7 could incur additional losses associated with any related contingent liabilities. The future growth of the Company is dependent, in part, upon the demand for significant amounts of additional electrical generating capacity and its ability to obtain contracts to supply portions of this capacity. Any material unremedied delay in, or unsatisfactory completion of, construction of the Company's projects could, under certain circumstances, have an adverse effect on the Company's ability to meet its obligations, including the payment of principal of, premium, if any and interest on Debt Securities. The Company also is faced with certain development uncertainties arising out of doing business outside of the United States. See "--Doing Business Outside the United States." Risks Associated with Acquisitions. The Company has achieved a significant portion of its growth through acquisitions and expects that it will continue to grow, in part, through acquisitions. During 1997 alone the Company consummated several major acquisitions in which the Company invested an aggregate of $1.9 billion (excluding non-recourse debt). Although each of the acquired businesses had a significant operating history at the time of its acquisition by the Company, the Company has a limited history of owning and operating these businesses. In addition, most of these businesses were government owned and some were operated as part of a larger integrated utility prior to their acquisition by the Company. There can be no assurances that the Company will be successful in transitioning these to private ownership, that such businesses will perform as expected or that the returns from such businesses will support the indebtedness incurred to acquire them or the capital expenditures needed to develop them. Uncertainty of Access to Capital for Future Projects. Each of AES's projects under development and those independent power facilities it may seek to acquire may require substantial capital investment. Continued access to capital with acceptable terms is necessary to assure the success of future projects and acquisitions. AES has substantially utilized project financing loans to fund the capital expenditures associated with constructing and acquiring its electric power plants and related assets. Project financing borrowings have been substantially non- recourse to other subsidiaries and affiliates and to AES as the parent company and are generally secured by the capital stock, physical assets, contracts and cash flow of the related project subsidiary or affiliate. The Company intends to continue to seek, where possible, such non-recourse project financing in connection with the assets which the Company or its affiliates may develop, construct or acquire. However, depending on market conditions and the unique characteristics of individual projects, such financing may not be available or the Company's traditional providers of project financing, particularly multinational commercial banks, may seek higher borrowing spreads and increased equity contributions. Furthermore, because of the reluctance of commercial lending institutions to provide non-recourse project financing (including financial guarantees) in certain less developed economies, the Company, in such locations, has and will continue to seek direct or indirect (through credit support or guarantees) project financing from a limited number of multilateral or bilateral international financial institutions or agencies. As a precondition to making such project financing available, these institutions may also require governmental guarantees of certain project and sovereign related risks. Depending on the policies of specific governments, such guarantees may not be offered and as a result, AES may determine that sufficient financing will ultimately not be available to fund the related project. In addition to the project financing loans, if available, AES provides a portion, or in certain instances all, of the remaining long-term financing required to fund development, construction, or acquisition. These investments have generally taken the form of equity investments or loans, which are subordinated to the project financing loans. The funds for these investments have been provided by cash flows from operations and by the proceeds from borrowings under the short-term credit facilities and issuances of senior subordinated notes, convertible debentures and common stock of the Company. The Company's ability to arrange for financing on either a fully recourse or a substantially non-recourse basis and the costs of such capital are dependent on numerous factors, including general economic and capital market conditions, the availability of bank credit, investor confidence in the Company, the continued success of current projects and provisions of tax and securities laws which are conducive to raising capital in this manner. Should future access to capital not be available, AES may decide not to build new plants or acquire existing facilities. While a decision not to build new plants or acquire existing facilities would not affect the results of operations of AES on its currently operating facilities or facilities under construction, such a decision would affect the future growth of AES. 8 Dependence on Utility Customers and Certain Projects. The nature of most of AES's power projects is such that each facility generally relies on one power sales contract with a single customer for the majority, if not all, of its revenues over the life of the power sales contract. During 1996, five customers, including Connecticut Light & Power Company, a subsidiary of Northeast Utilities, accounted for 73% of the Company's consolidated total revenues. The prolonged failure of any one utility customer to fulfill its contractual obligations could have a substantial negative impact on AES's primary source of revenues. AES has sought to reduce this risk in part by entering into power sales contracts with utilities or other customers of strong credit quality and by locating its plants in different geographic areas in order to mitigate the effects of regional economic downturns. Four of the Company's plants collectively represented approximately 39% of AES's consolidated total assets at December 31, 1996 and generated approximately 67% of AES's consolidated total revenues for the year ended December 31, 1996. Sales to Connecticut Light & Power Company ("CL&P") represented 16% of the Company's total revenues in 1996. Moody's Investor Service Inc. ("Moody's") and Standard & Poor's Corporation ("S&P") have recently downgraded CL&P's senior secured long-term debt from Baa3/BBB- to Ba1/BB+, Both Moody's and S&P have placed CL&P under review for possible downgrade or on credit watch. In March 1997, as a result of regulatory action by the Public Service Commission of New Hampshire, Moody's and S&P downgraded the senior unsecured debt of Northeast Utilities, the parent of CL&P, from Ba2/BB to Ba3/BB- and placed Northeast Utilities on watch for possible downgrade. Regulatory Uncertainty. AES's cogeneration operations in the United States are subject to the provisions of various laws and regulations, including the Public Utility Regulatory Policies Act of 1978, as amended ("PURPA") and the Public Utility Holding Company Act, as amended ("PUHCA"). PURPA provides to qualifying facilities ("QFs") certain exemptions from substantial federal and state legislation, including regulation as public utilities. PUHCA regulates public utility holding companies and their subsidiaries. AES is not and will not be subject to regulation as a holding company under PUHCA as long as the domestic power plants it owns are QFs under PURPA. QF status is conditioned on meeting certain criteria, and would be jeopardized, for example, by the loss of a steam customer. The Company believes that, upon the occurrence of an event that would threaten the QF status of one of its domestic plants, it would be able to react in a manner that would avoid the loss of QF status (such as by replacing the steam customer). In the event the Company were unable to avoid the loss of such status for one of its plants, to avoid public utility holding company status, AES could apply to the Federal Energy Regulatory Commission ("FERC") to obtain status as an Exempt Wholesale Generator ("EWG"), or could restructure the ownership of the project subsidiary. EWGs, however, are subject to broader regulation by FERC and may be subject to state public utility commissions regulation regarding non-rate matters. In addition, any restructuring of a project subsidiary could result in, among other things, a reduced financial interest in such subsidiary, which could result in a gain or loss on the sale of the interest in such subsidiary, the removal of such subsidiary from the consolidated income tax group or the consolidated financial statements of the Company, or an increase or decrease in the results of operations of the Company. The United States Congress is considering proposed legislation which would repeal PURPA entirely, or at least repeal the obligation of utilities to purchase from QFs. There is strong support for grandfathering existing QF contracts if such legislation is passed, and also support for requiring utilities to conduct competitive bidding for new electric generation if the PURPA purchase obligation is eliminated. Various bills have also proposed repeal of PUHCA. Repeal of PUHCA would allow both independents and vertically integrated utilities to acquire retail utilities in the United States that are geographically widespread, as opposed to the current limitations of PUHCA which require that retail electric systems be capable of physical integration. In addition, registered holding companies would be free to acquire non-utility businesses, which they may not do now, with certain limited exceptions. In the event of a PUHCA repeal, competition for independent power generators from vertically integrated utilities would likely increase. Repeal of PURPA and/or PUHCA may or may not be part of comprehensive legislation to restructure the electric utility industry, allow retail competition, and deregulate most electric rates. The effect of any such repeal cannot be predicted, although any such repeal could have a material adverse effect on the Company. 9 Electric Utility Industry Restructuring Proposals. The FERC and many state utility commissions are currently studying a number of proposals to restructure the electric utility industry in the United States. Such restructuring would permit utility customers to choose their utility supplier in a competitive electric energy market. The FERC issued a final rule in April 1996 which requires utilities to offer wholesale customers and suppliers open access on utility transmission lines, on a comparable basis to the utilities' own use of the lines. The final rule is subject to rehearing and may become the subject of court litigation. Many utilities have already filed "open access" tariffs. The utilities contend that they should recover from departing customers their fixed costs that will be "stranded" by the ability of their wholesale customers (and perhaps eventually, their retail customers) to choose new electric power suppliers. The FERC final rule endorses the recovery of legitimate and verifiable "stranded costs." These may include the costs utilities are required to pay under many QF contracts which the utilities view as excessive when compared with current market prices. Many utilities are therefore seeking ways to lower these contract prices or rescind the contracts altogether, out of concern that their shareholders will be required to bear all or part of such "stranded" costs. Some utilities have engaged in litigation against QFs to achieve these ends. In addition, future United States electric rates may be deregulated in a restructured United States electric utility industry and increased competition may result in lower rates and less profit for United States electricity sellers. Falling electricity prices and uncertainty as to the future structure of the industry is inhibiting United States utilities from entering into long-term power purchase contracts. The effect of any such restructuring on the Company cannot be predicted, although any such restructuring could have a material adverse effect on the Company. Litigation and Regulatory Proceedings. From time to time, the Company and its affiliates are parties to litigation and regulatory proceedings. Investors should review the descriptions of such matters contained in the Company's Annual, Quarterly and Current Reports filed with the Commission and incorporated by reference herein. There can be no assurances that the outcome of such matters will not have a material adverse effect on the Company's consolidated financial position. Business Subject to Stringent Environmental Regulations. AES's activities are subject to stringent environmental regulation by federal, state, local and foreign governmental authorities. For example, the Clean Air Act Amendments of 1990 impose more stringent standards than those previously in effect, and require states to impose permit fees on certain emissions. Congress and other foreign governmental authorities also may consider proposals to restrict or tax certain emissions. These proposals, if adopted, could impose additional costs on the operation of AES's power plants. There can be no assurance that AES would be able to recover all or any increased costs from its customers or that its business, financial condition or results of operations would not be materially and adversely affected by future changes in domestic or foreign environmental laws and regulations. The Company has made and will continue to make capital and other expenditures to comply with environmental laws and regulations. There can be no assurance that such expenditures will not have a material adverse effect on the Company's financial condition or results of operations. Control by Existing Stockholders. As of June 30, 1997, AES's two founders, Roger W. Sant and Dennis W. Bakke, and their immediate families together owned beneficially approximately 24.1% of AES's outstanding Common Stock. As a result of their ownership interests, Messrs. Sant and Bakke may be able to significantly influence or exert control over the affairs of AES, including the election of the Company's directors. As of June 30, 1997, all of AES's officers and directors and their immediate families together owned beneficially approximately 32.5% of AES's outstanding Common Stock. To the extent that they decide to vote together, these stockholders would be able to significantly influence or control the election of AES's directors, the management and policies of AES and any action requiring stockholder approval, including significant corporate transactions. Adherence to AES's Principles--Possible Impact on Results of Operations. A core part of AES's corporate culture is a commitment to "shared principles": to act with integrity, to be fair, to have fun and to be socially responsible. The Company seeks to adhere to these principles not as a means to achieve economic success, but because adherence is a worthwhile goal in and of itself. However, if the Company perceives a conflict between these principles and profits, the Company will try to adhere to its principles--even though doing so might result in diminished or foregone opportunities or financial benefits. 10 Shares Eligible for Future Sale. Certain credit facilities of AES subsidiaries are secured by the pledge of 34.6 million shares of the AES Common Stock held by a subsidiary of AES. The sale of a substantial number of such shares in the public market upon any foreclosure or otherwise could have an adverse effect on the market price of the AES Common Stock. Risk of Fraudulent Transfer. Various fraudulent conveyance laws have been enacted for the protection of creditors and may be applied by a court on behalf of any unpaid creditor or a representative of AES's creditors in a lawsuit to subordinate or avoid Debt Securities in favor of other existing or future creditors of AES. Under applicable provisions of the U.S. Bankruptcy code or comparable provisions of state fraudulent transfer or conveyance laws, if AES at the time of issuance of Debt Securities , (i) incurred such indebtedness with intent to hinder, delay or defraud any present or future creditor of AES or contemplated insolvency with a design to prefer one or more creditors to the exclusion in whole or in part of others or (ii) received less than reasonably equivalent value or fair consideration for issuing Debt Securities and AES (a) was insolvent, (b) was rendered insolvent by reason of the issuance of the Debt Securities, (c) was engaged or about to engage in business or a transaction for which the remaining assets of AES constitute unreasonably small capital to carry on its business or (d) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature, then, in each case, a court of competent jurisdiction could void, in whole or in part, the Debt Securities. Among other things, a legal challenge of the Debt Securities on fraudulent conveyance grounds may focus on the benefits, if any, realized by AES as a result of the issuance by AES of the Debt Securities. The measure of insolvency for purposes of the foregoing will vary depending upon the law applied in such case. Generally, however, AES would be considered insolvent if the sum of its debts, including contingent liabilities, were greater than all of its assets at fair valuation or if the present fair market value of its assets were less than the amount that would be required to pay the probable liability on its existing debts, including contingent liabilities, as they become absolute and mature. There can be no assurance that, after providing for all prior claims, there will be sufficient assets to satisfy the claims of the holders of the Debt Securities. Management believes that, for purposes of all such insolvency, bankruptcy and fraudulent transfer or conveyance laws, the Debt Securities are being incurred without the intent to hinder, delay or defraud creditors and for proper purposes and in good faith, and that AES after the issuance of the Debt Securities will be solvent, will have sufficient capital for carrying on its business and will be able to pay its debts as they mature. There can be no assurance, however, that a court passing on such questions would agree with management's view. No Prior Public Market--Possible Price Volatility of Debt Securities, Stock Purchase Contracts, Stock Purchase Units and Preferred Stock. Prior to the offering, there has been no public market for the Senior Debt Securities, the Junior Subordinated Debt Securities, the Preferred Stock, the Stock Purchase Contracts and the Stock Purchase Units. There can be no assurance that an active trading market for the Senior Debt Securities, the Junior Subordinated Debt Securities, the Preferred Stock, the Stock Purchase Contracts or the Stock Purchase Units will develop or be sustained. If such a market were to develop, the Senior Debt Securities, the Junior Subordinated Debt Securities, the Preferred Stock, the Stock Purchase Contracts or the Stock Purchase Units could trade at prices that may be higher or lower than their initial offering price depending upon many factors, including prevailing interest rates, the Company's operating results and the markets for similar securities. Historically, the market for non-investment grade debt has demonstrated substantial volatility in the prices of securities similar to the Debt Securities. There can be no assurance that the future market for the Debt Securities will not be subject to similar volatility. 11 DESCRIPTION OF CAPITAL STOCK Under the Amended and Restated Certificate of Incorporation of the Company (the "Certificate of Incorporation"), the authorized capital stock of the Company consists of 500,000,000 shares of Common Stock, par value $.01 per share, and 50,000,000 shares of Preferred Stock, no par value. The following summary contains a description of certain general terms of the Common Stock and the Preferred Stock to which any Prospectus Supplement may relate. Certain terms of any series of Preferred Stock offered by a Prospectus Supplement will be described in the Prospectus Supplement relating thereto. If so indicated in the Prospectus Supplement, the terms of any series may differ from the terms set forth below. The description of certain material provisions of the Common Stock and the Preferred Stock is subject to and qualified in its entirety by reference to the provisions of the Company's Certificate of Incorporation, and, in the case of the Preferred Stock, to the Certificate of Designation (the "Certificate of Designation") relating to each particular series of Preferred Stock which will be filed or incorporated by reference, as the case may be, as an exhibit to the Registration Statement of which this Prospectus is a part at or prior to the time of the issuance of such Preferred Stock. COMMON STOCK As of June 30, 1997, there were, after giving effect to the stock split discussed below, 165,309,292 shares of Common Stock outstanding. The holders of Common Stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Subject to preferences that may be applicable to any outstanding Preferred Stock, the holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors of the Company (the "Board of Directors") out of funds legally available therefor. In the event of the liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of the Preferred Stock, if any, then outstanding. The Common Stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of Common Stock are fully paid and non-assessable, and any shares of Common Stock in respect of which this Prospectus is being delivered will be fully paid and non-assessable. The transfer agent for the Company's Common Stock is First Chicago Trust Company. PRICE RANGE OF AES COMMON STOCK AND COMMON STOCK DIVIDENDS AES Common Stock began trading on the New York Stock Exchange on October 16, 1996 under the symbol "AES." Prior to that date, Common Stock had been quoted on the NASDAQ National Market System ("NASDAQ/NMS") under the symbol "AESC." The following table sets forth for the periods indicated the high and low sale prices for the Common Stock as reported on the NYSE Composite Tape and by NASDAQ/NMS. In July 1997, the Company announced a two for one stock split, in the form of a stock dividend, for holders of record on July 28, 1997 of its Common Stock, par value $.01 per share, which was paid on August 28, 1997. The prices set forth below are adjusted for such stock split. HIGH LOW ------------ ------------ 1995 - ---- First Quarter...................................... $ 9.88 $ 8.00 Second Quarter..................................... 9.63 8.00 Third Quarter...................................... 10.81 9.25 Fourth Quarter..................................... 12.00 9.38 12 HIGH LOW ------------ ------------ 1996 - ---- First Quarter...................................... $ 12.63 $ 10.50 Second Quarter..................................... 14.81 11.13 Third Quarter...................................... 20.25 13.94 Fourth Quarter..................................... 25.06 19.63 HIGH LOW ------------ ------------ 1997 - ---- First Quarter...................................... $ 34.13 $ 22.38 Second Quarter..................................... 37.75 27.50 Third Quarter ..................................... 45.25 34.63 Fourth Quarter (through November 6, 1997).......... 49.63 38.94 No cash dividends have been paid on Common Stock since December 22, 1993 in order to provide capital for the Company's equity investments in projects. The Company's ability to declare and pay dividends is dependent, among other things, on the ability of its project subsidiaries to declare and pay dividends (and otherwise distribute cash) to it, the Company's ability to service its parent company debt and the Company's ability to meet certain criteria for paying dividends under its corporate credit facility and under existing indentures of Debt Securities. The ability of the Company's subsidiaries to declare and pay dividends and otherwise distribute cash to the Company is subject to certain limitations in the project loans and other documents entered into by such project subsidiaries. Such limitations permit the payment of dividends out of current cash flow for quarterly, semi-annual or annual periods only at the end of such periods and only after payment of principal and interest on project loans due at the end of such periods. Cash dividend payments on Common Stock are limited to a certain percentage of cash flow under the Company's corporate credit agreement. The indentures relating to the Company's existing senior subordinated notes preclude the payment of cash dividends if at the time of such payment or after giving effect thereto an event of default (as defined) or an event that, after the giving of notice or lapse of time or both, would become an event of default, shall have occurred and be continuing, if certain fixed charge coverage ratios are not met or if the payment of such dividends, together with other restricted payments, would exceed certain limits. PREFERRED STOCK As of June 30, 1997, there were no shares of Preferred Stock outstanding. The Board of Directors has the authority to issue Preferred Stock in one or more classes or series and to fix, by resolution, the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, exchange rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any class or series or the designation of such class or series, without any further action or vote by the stockholders. Preferred Stock, if issued, will not be entitled to any preemptive or similar rights. The applicable Prospectus Supplement will describe the following terms of any Preferred Stock in respect of which the Prospectus is being delivered (to the extent applicable to such Preferred Stock): (i) the specific designation, number of shares, seniority and purchase price; (ii) any liquidation preference per share; (iii) any date of maturity; (iv) any redemption, repayment or sinking fund provisions; (v) any dividend rate or rates and the dates on which any such dividends will be payable (or the method by which such rates or dates will be determined); (vi) any voting rights; (vii) if other than the currency of the United States, the currency or currencies including composite currencies in which such Preferred Stock is denominated and/or in which payments will or may be payable; (viii) the method by which amounts in respect of such Preferred Stock may be calculated and any commodities, currencies or indices, or value, rate or price, 13 relevant to such calculation; (ix) whether such Preferred Stock is convertible or exchangeable and, if so, the securities or rights into which such Preferred Stock is convertible or exchangeable, and the terms and conditions upon which such conversions or exchanges will be effected including conversion or exchange prices or rates, the conversion or exchange period and any other related provisions; (x) the place or places where dividends and other payments on the Preferred Stock will be payable; and (xi) any additional voting, dividend, liquidation, redemption and other rights, preferences, privileges, limitations and restrictions. All shares of Preferred Stock offered hereby, or issuable upon conversion, exchange or exercise of Securities, will, when issued, be fully paid and non-assessable. Any shares of Preferred Stock that are issued would have priority over the Common Stock with respect to dividend or liquidation rights or both. The transfer agent for each series of Preferred Stock will be described in the applicable Prospectus Supplement. DESCRIPTION OF CERTAIN PROVISIONS OF CERTIFICATE OF INCORPORATION AND BY-LAWS The Certificate of Incorporation and By-Laws of AES contain several provisions that may make the acquisition of control of AES by means of a tender offer, open market purchases, a proxy fight or otherwise more difficult. Set forth below is a description of certain of these provisions in the Certificate of Incorporation and By-Laws. Special Meetings of Stockholders. AES's By-Laws provide that, unless otherwise prescribed by law, special meetings of stockholders may be called by a resolution adopted by a majority of the entire Board of Directors, by the Chairman of the Board or by the President and shall be called by the Chairman of the Board or by the President upon written request of stockholders owning at least 10% of stock entitled to vote. Only such business as shall be specified in the notice of stockholders of the special meeting shall be considered. Stockholder Nomination of Directors. AES's By-Laws contain a procedure for stockholder nomination of directors. The By-Laws provide that any record owner of stock entitled to be voted generally in the election of directors may nominate one or more persons for election as a director at a stockholders meeting only if written notice is given to the Secretary of AES of the intent to make such nomination. The notice must be given, with respect to an annual meeting, not later than 90 days in advance of such annual meeting and with respect to a special meeting, not later than the close of business on the seventh day following the earlier of (a) the date on which notice of such special meeting is first given to stockholders and (b) the date on which a public announcement of such meeting is first made. Each notice must include (i) the name and address of each stockholder who intends to appear in person or by proxy to make the nomination and of the person or persons to be nominated; (ii) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming them) pursuant to which the nomination is to be made by the stockholder; (iii) such other information regarding each nominee proposed by such stockholder as would have been included in a proxy statement filed pursuant to Rule 14a-8 under the Exchange Act; and (iv) the consent of each nominee to serve if elected. The presiding officer of the meeting may refuse to acknowledge the nomination of any person not made in compliance with this procedure. The procedure for stockholder nomination of directors described above may have the effect of precluding a nomination for election of directors at a particular meeting if the required procedure is not followed. Elimination of Liability; Indemnification. Except as set forth below, the Certificate of Incorporation eliminates the liability of AES's directors to AES or its stockholders for monetary damages resulting from breaches of their fiduciary duties as directors. Directors remain liable for breaches of their duty of loyalty to the Company or its stockholders, as well as for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law and transactions from which a director derives improper personal benefit. The Certificate of Incorporation also does not absolve directors of liability under Section 174 of the Delaware General Corporation Law (the "GCL"), which makes directors personally liable for unlawful dividends or unlawful stock repurchases or redemptions if the unlawful conduct is willful or results from negligence. 14 Under AES's By-Laws, and in accordance with Section 145 of the GCL, AES shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than any action or suit by or in the right of the Company to procure a judgment in its favor, a "derivative action") by reason of the fact that such person is or was a director or officer of or employed by AES, or is or was serving in such capacity or as an agent at the request of the Company for another entity, to the full extent authorized by Delaware law, against expenses (including, but not limited to, attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with the defense or settlement of such action, suit or proceeding if such person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of AES, and, with respect to any criminal action or proceeding, had no reasonable cause to believe was unlawful. AES shall indemnify persons in a derivative action under the same conditions, except that no indemnification is permitted without judicial approval if the person is adjudged to be liable to the Company in the performance of his or her duty. Agents of the Company may be similarly indemnified at the discretion of the Board of Directors. Under Section 145 of the GCL, a similar duty of care is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with the defense or settlement of such an action and then, where the person is adjudged to be liable to AES, only if and to the extent that the Court of Chancery of the State of Delaware or the court in which such action was brought determines that such person is fairly and reasonably entitled to such indemnity and only for such expenses as the court shall deem proper. Pursuant to AES's By-Laws, a person eligible for indemnification may have the expenses incurred in connection with any matter described above paid in advance of a final disposition by AES. However, such advances will only be made upon the delivery of an undertaking by or on behalf of the indemnified person to repay all amounts so advanced if it is ultimately determined that such person is not entitled to indemnification. In addition, under AES's By-Laws, the Company may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of AES or of another corporation against any liability asserted against and incurred by such person in such capacity, or arising out of the person's status as such whether or not AES would have the power or the obligation to indemnify such person against such liability under the provisions of AES's By-Laws. The Company maintains directors' and officers' insurance. 15 DESCRIPTION OF DEBT SECURITIES The Debt Securities may consist of Senior Debt Securities, Subordinated Debt Securities or Junior Subordinated Debt Securities. The Senior Debt Securities will be issued under an indenture (the "Senior Debt Indenture") between The AES Corporation, as issuer, and The First National Bank of Chicago, as trustee. The Senior Subordinated Debt Securities will be issued under an indenture (the "Senior Subordinated Debt Indenture") dated as of July 1, 1996 between The AES Corporation, as issuer, and The First National Bank of Chicago, as trustee. The Junior Subordinated Debt Securities will be issued under an indenture (the "Junior Subordinated Debt Indenture") between The AES Corporation, as issuer, and The First National Bank of Chicago, as trustee. The First National Bank of Chicago, in its capacity as trustee under each of the Indentures, is referred to herein as the "Trustee." Copies of the Indentures (or the forms thereof) have been incorporated by reference or included herein as exhibits to the Registration Statement of which this Prospectus is a part and are also available for inspection at the office of the Trustee. The Indentures are subject to and governed by the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). Section references contained herein are applicable to each of the Indentures. The following summaries of certain provisions of the Indentures do not purport to be complete, and where reference is made to particular provisions of the Indentures, such provisions, including definitions of certain terms, are incorporated by reference as a part of such summaries or terms, which are qualified in their entirety by such reference. The Indentures are substantially identical except for provisions relating to subordination. GENERAL None of the Indentures limits the amount of Debt Securities which may be issued thereunder. Each Indenture provides that Debt Securities issuable thereunder may be issued up to the aggregate principal amount which may be authorized from time to time by the Company. Reference is made to the Prospectus Supplement for the following terms of the Debt Securities (to the extent such terms are applicable to such Debt Securities) in respect of which this Prospectus is being delivered (the "Offered Debt Securities"): (i) the designation, aggregate principal amount and authorized denominations of the Offered Debt Securities; (ii) the date or dates on which the Offered Debt Securities will mature; (iii) the rate or rates per annum at which the Offered Debt Securities will bear interest and the method of calculating such rates, if any; (iv) the dates on which any such interest will be payable and the record dates for any such interest payments; (v) any mandatory or optional redemption terms or prepayment, conversion, sinking fund or exchangeability provisions; (vi) the place where the principal of and interest on the Offered Debt Securities will be payable; (vii) if other than denominations of $1,000 or multiples thereof, the denominations in which the Offered Debt Securities will be issuable; (viii) whether the Offered Debt Securities shall be issued in the form of Global Securities (as defined below) or certificates; (ix) additional provisions, if any, relating to the defeasance of the Offered Debt Securities; (x) the currency or currencies, if other than the currency of the United States, in which payment of the principal of and interest on the Offered Debt Securities will be payable; (xi) whether the Offered Debt Securities will be issuable in registered form or bearer form ("Bearer Securities") or both and, if Bearer Securities are issuable, any restrictions applicable to the exchange of one form for another and the offer, sale and delivery of Bearer Securities; (xii) any applicable United States federal income tax consequences, including whether and under what circumstances the Company will pay additional amounts on Offered Debt Securities held by a person who is not a U.S. Person (as defined in each Prospectus Supplement relating to any particular series of Debt Securities offered thereby) in respect of any tax, assessment or governmental charge withheld or deducted and, if so, whether the Company will have the option to redeem such Offered Debt Securities rather than pay such additional amounts; (xiii) the dates on which premium, if any, will be payable; (xiv) the right of the Company, if any, to defer payment of interest and the maximum length of such deferral period; (xv) any listing on a securities exchange; (xvi) the initial public offering price; and (xvii) other specific terms, including any additional events of default or covenants provided for with respect to the Offered Debt Securities. As described in each Prospectus Supplement relating to any particular series of Debt Securities offered thereby, the Indenture under which such Debt Securities are issued may contain covenants limiting: (i) the incurrence of debt by the Company; (ii) the incurrence of debt by subsidiaries of the Company; (iii) the making of certain payments by the Company and its subsidiaries; (iv) subsidiary mergers; (v) business activities of the Company and its subsidiaries; 16 (vi) the issuance of preferred stock of subsidiaries; (vii) asset dispositions; (viii) transactions with affiliates; (ix) liens; and (x) mergers and consolidations involving the Company. BOOK-ENTRY SYSTEM If so specified in any accompanying Prospectus Supplement relating to Debt Securities, Debt Securities of any series may be issued under a book-entry system in the form of one or more global securities (each, a "Global Security"). Each Global Security will be deposited with, or on behalf of, a depositary, which, unless otherwise specified in the accompanying Prospectus Supplement, will be The Depository Trust Company, New York, New York (the "Depositary"). The Global Securities will be registered in the name of the Depositary or its nominee. The Depositary has advised the Company that the Depositary is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of the New York banking law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. The Depositary was created to hold securities of its participants and to facilitate the clearance and settlement of securities transactions among its participants through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. The Depositary's participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, some of which (and/or their representatives) own the Depositary. Access to the Depositary's book-entry system is also available to others, such as banks, brokers, dealers, and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Upon the issuance of a Global Security in registered form, the Depositary will credit, on its book-entry registration and transfer system, the respective principal amounts of the Debt Securities represented by such Global Security to the accounts of participants. The accounts to be credited will be designated by the underwriters, dealers, or agents, if any, or by the Company, if such Debt Securities are offered and sold directly by the Company. Ownership of beneficial interests in the Global Security will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests by participants in the Global Security will be shown on, and the transfer of that ownership interest will be effected only through, records maintained by such participants. The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability to transfer beneficial interests in a Global Security. So long as the Depositary or its nominee is the owner of record of a Global Security, the Depositary or such nominee, as the case may be, will be considered the sole owner or holder of the Debt Securities represented by such Global Security for all purposes under the Indenture under which such Debt Securities are issued. Except as set forth below, owners of beneficial interests in a Global Security will not be entitled to have the Debt Security represented by such Global Security registered in their names, and will not receive or be entitled to receive physical delivery of such Debt Securities in definitive form and will not be considered the owners or holders thereof under the Indenture under which such Debt Securities are issued. Accordingly, each person owning a beneficial interest in a Global Security must rely on the procedures of the Depositary and, if such person is not a participant, on the procedures of the participant through which such person owns its interest, to exercise any rights of a holder of record under the applicable Indenture pursuant to which the Debt Securities relating to such Global Security are issued. The Company understands that under existing industry practices, if the Company requests any action of holders or if any owner of a beneficial interest in a Global Security desires to give or take any action which a holder is entitled to give or take under the applicable Indenture, the Depositary would authorize the participants holding the relevant beneficial interests to give or take such action, and such participants would authorize beneficial owners owning through such participants to give or take such action or would otherwise act upon the instruction of beneficial owners holding through them. Payments of principal of, premium, if any, and interest on Debt Securities represented by a Global Security registered in the name of the Depositary or its nominee will be made to such Depositary or such nominee, as the case may be, as the registered owner of such Global Security. None of the Company, the Trustee or any other agent of the 17 Company or agent of the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in such Global Security or for maintaining, supervising, or reviewing any records relating to such beneficial ownership interests. The Company has been advised by the Depositary that the Depositary will credit participants, accounts with payments of principal, premium, if any, or interest on the payment date thereof in amounts proportionate to their respective beneficial interests in the principal amount of the Global Security as shown on the records of the Depositary. The Company expects that payments by participants to owners of beneficial interests in the Global Security held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in "street name," and will be the responsibility of such participants. A Global Security may not be transferred except as a whole by the Depositary to a nominee or successor of the Depositary or by a nominee of the Depositary to another nominee of the Depositary. A Global Security representing all but not part of an offering of Offered Debt Securities hereby is exchangeable for Debt Securities in definitive form of like tenor and terms if (i) the Depositary notifies the Company that it is unwilling or unable to continue as depositary for such Global Security or if at any time the Depositary is no longer eligible to be or in good standing as a clearing agency registered under the Exchange Act, and in either case, a successor depositary is not appointed by the Company within 90 days of receipt by the Company of such notice or of the Company becoming aware of such ineligibility, or (ii) the Company in its sole discretion at any time determines not to have all of the Debt Securities represented in an offering of Offered Debt Securities by a Global Security and notifies the Trustee thereof. A Global Security exchangeable pursuant to the preceding sentence shall be exchangeable for Debt Securities registered in such names and in such authorized denominations as the Depositary for such Global Security shall direct. The Debt Securities of a series may also be issued in the form of one or more bearer global Debt Securities (a "Bearer Global Security") that will be deposited with a common depositary for Euro-clear and CEDEL, or with a nominee for such depositary identified in the Prospectus Supplement relating to such series. The specific terms and procedures, including the specific terms of the depositary arrangement, with respect to any portion of a series of Debt Securities to be represented by a Bearer Global Security will be described in the Prospectus Supplement relating to such series. SENIOR DEBT SECURITIES The payment of principal of, premium, if any, and interest on the Senior Debt Securities will, to the extent and in the manner set forth in the Senior Debt Indenture, rank pari passu with all unsecured and unsubordinated debt of the Company. SUBORDINATION OF SENIOR SUBORDINATED DEBT SECURITIES The payment of principal of, premium, if any, and interest on the Senior Subordinated Debt Securities will, to the extent and in the manner set forth in the Senior Subordinated Debt Indenture, be subordinated in right of payment to the prior payment in full, in cash equivalents, of all Senior Debt. Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, receivership, reorganization, assignment for the benefit of creditors, marshaling of assets and liabilities or any bankruptcy, insolvency or similar proceedings of the Company, the holders of all Senior Debt will first be entitled to receive payment in full of all amounts due or to become due thereon before the holders of the Senior Subordinated Debt Securities will be entitled to receive any payment in respect of the principal of, premium, if any, or interest on the Senior Subordinated Debt Securities. No payments on account of principal, premium, if any, or interest in respect of the Senior Subordinated Debt Securities may be made by the Company if there shall have occurred and be continuing a default in any payment with respect to Senior Debt. In addition, during the continuance of any other event of default (other than a payment default) with respect to Designated Senior Debt pursuant to which the maturity thereof may be accelerated, from and after the 18 date of receipt by the Trustee of written notice from the holders of such Designated Senior Debt or from an agent of such holders, no payments on account of principal, premium, if any, or interest in respect of the Senior Subordinated Debt Securities may be made by the Company for a period (the "Payment Blockage Period") commencing on the date of delivery of such notice and ending 179 days thereafter (unless such Payment Blockage Period shall be terminated by written notice to the Trustee from the holders of such Designated Senior Debt or from an agent of such holders, or such event of default has been cured or waived or has ceased to exist). Only one Payment Blockage Period may be commenced with respect to the Senior Subordinated Debt Securities during any period of 360 consecutive days. No event of default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Debt initiating such Payment Blockage Period shall be or be made the basis for the commencement of any subsequent Payment Blockage Period by the holders of such Designated Senior Debt, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days. By reason of such subordination, in the event of insolvency, funds that would otherwise be payable to holders will be paid to the holders of Senior Debt to the extent necessary to pay the Senior Debt in full, and the Company may be unable to meet fully its obligations with respect to the Senior Subordinated Debt Securities. "Debt" is defined to mean, with respect to any person at any date of determination (without duplication), (i) all indebtedness of such person for borrowed money, (ii) all obligations of such person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such person in respect of letters of credit or bankers' acceptance or other similar instruments (or reimbursement obligations with respect thereto), (iv) all obligations of such person to pay the deferred purchase price of property or services, except trade payables, (v) all obligations of such person as lessee under capitalized leases, (vi) all Debt of others secured by a lien on any asset of such person, whether or not such Debt is assumed by such person; provided that, for purposes of determining the amount of any Debt of the type described in this clause, if recourse with respect to such Debt is limited to such asset, the amount of such Debt shall be limited to the lesser of the fair market value of such asset or the amount of such Debt, (vii) all Debt of others guaranteed by such person to the extent such Debt is guaranteed by such person, (viii) all redeemable stock valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends and (ix) to the extent not otherwise included in this definition, all obligations of such person under currency agreements and interest rate agreements. "Designated Senior Debt" is defined to mean (i) Debt under the Credit Agreement dated as of August 2, 1996 (the "Credit Agreement") among the Company, the Banks named on the signature pages thereof and the Morgan Guaranty Trust Company of New York, as agent for the banks, as such Credit Agreement has been and may be amended, restated, supplemented or otherwise modified from time to time and (ii) Debt constituting Senior Debt which, at the time of its determination, (A) has an aggregate principal amount of at least $30 million and (B) is specifically designated as "Designated Senior Debt" by the Company. "Senior Debt" is defined to mean the principal of (and premium, if any) and interest on all Debt of the Company whether created, incurred or assumed before, on or after the date of the Senior Subordinated Debt Indenture; provided that Senior Debt shall not include (i) the Company's 8.875% Senior Subordinated Debentures due 2027, 8.50% Senior Subordinated Notes due 2007, 8.375% Senior Subordinated Notes Due 2007 and the Company's 10.25% Senior Subordinated Notes due 2006 which rank pari passu with the Senior Subordinated Debt Securities, (ii) Debt of the Company to any affiliate, (iii) Debt of the Company that, when incurred, and without respect to any election under Section 1111(b) of Title 11, U.S. Code, was without recourse, (iv) any other Debt of the Company which by the terms of the instrument creating or evidencing the same are specifically designated as not being senior in right of payment to the Senior Subordinated Debt Securities and (v) redeemable stock of the Company. SUBORDINATION OF JUNIOR SUBORDINATED DEBT SECURITIES The payment of principal of, premium, if any, and interest on the Junior Subordinated Debt Securities will, to the extent and in the manner set forth in the Junior Subordinated Debt Indenture, be subordinated in right of payment to the prior payment in full, in cash or cash equivalents, of all Senior and Subordinated Debt of the Company. 19 Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, receivership, reorganization, assignment for the benefit of creditors, marshaling of assets and liabilities or any bankruptcy, insolvency or similar proceedings of the Company, the holders of all Senior and Subordinated Debt will first be entitled to receive payment in full of all amounts due or to become due thereon before the holders of the Junior Subordinated Debt Securities will be entitled to receive any payment in respect of the principal of, premium, if any, or interest on the Junior Subordinated Debt Securities. No payments on account of principal, premium, if any, or interest in respect of the Junior Subordinated Debt Securities may be made by the Company if there shall have occurred and be continuing a default in any payment with respect to Senior and Subordinated Debt. In addition, during the continuance of any other event of default (other than a payment default) with respect to Designated Senior and Subordinated Debt pursuant to which the maturity thereof may be accelerated, from and after the date of receipt by the Trustee of written notice from holders of such Designated Senior and Subordinated Debt or from an agent of such holders, no payments on account of principal, premium, if any, or interest may be made by the Company during a Payment Blockage Period in respect of such Junior Subordinated Debt Securities (unless such Payment Blockage Period shall be terminated by written notice to the Trustee from the holders of such Designated Senior and Subordinated Debt or from an agent of such holders, or such event of default has been cured or waived or has ceased to exist). Only one Payment Blockage Period may be commenced with respect to the Junior Subordinated Debt Securities during any period of 360 consecutive days. No event of default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior and Subordinated Debt initiating such Payment Blockage Period shall be or be made the basis for the commencement of any subsequent Payment Blockage Period by the holders of such Designated Senior and Subordinated Debt, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days. By reason of such subordination, in the event of insolvency, funds that would otherwise be payable to holders of Junior Subordinated Debt Securities will be paid to the holders of Senior and Subordinated Debt of the Company to the extent necessary to pay such Debt in full, and the Company may be unable to meet fully its obligations with respect to the Junior Subordinated Debt Securities. "Designated Senior and Subordinated Debt" is defined to mean (i) Debt under the Credit Agreement and (ii) Debt constituting Senior and Subordinated Debt which, at the time of its determination, (A) has an aggregate principal amount of at least $30 million and (B) is specifically designated in the instrument as "Designated Senior and Subordinated Debt" by the Company. "Senior and Subordinated Debt" is defined to mean the principal of (and premium, if any) and interest on all Debt of the Company whether created, incurred or assumed before, on or after the date of the Junior Subordinated Debt Indenture; provided that such Senior and Subordinated Debt shall not include (i) Debt of the Company to any affiliate, (ii) Debt of the Company that, when incurred and without respect to any election under Section 1111(b) of Title 11, U.S. Code, was without recourse, (iii) any other Debt of the Company which by the terms of the instrument creating or evidencing the same are specifically designated as not being senior in right of payment to the Junior Subordinated Debt Securities, and in particular the Junior Subordinated Debt Securities shall rank pari passu with all other debt securities and guarantees issued to an AES Trust or any other trust, partnership or other entity affiliated with the Company which is a financing vehicle of the Company in connection with an issuance of preferred securities by such financing entity, and (iv) redeemable stock of the Company. EVENTS OF DEFAULT An Event of Default, as defined in each of the Indentures and applicable to Debt Securities issued under such Indenture, will occur with respect to the Debt Securities of any series issued under such Indenture if: (i) the Company defaults in the payment of principal of (or premium, if any, on) any Debt Security of such series issued under such Indenture when the same becomes due and payable at maturity, upon acceleration, redemption, mandatory repurchase, or otherwise; (ii) the Company defaults in the payment of interest on any Debt Security of such series issued under such Indenture when the same becomes due and payable, and such default continues for a period of 30 20 days; (iii) the Company defaults in the performance of or breaches any other covenant or agreement of the Company in such Indenture with respect to the Debt Securities of any series issued under such Indenture and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or by the holders (as defined in the Indenture) of 25% or more in aggregate principal amount of the Debt Securities of all series issued under such Indenture; (iv) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company or any of its subsidiaries in an involuntary case under any applicable bankruptcy, insolvency, or other similar law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator, or similar official of the Company or any of its subsidiaries or for all or substantially all of the property and assets of the Company or any of its subsidiaries or (C) the winding up or liquidation of the affairs of the Company or any of its subsidiaries and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; (v) the Company or any of its subsidiaries (A) commences a voluntary case under any applicable bankruptcy, insolvency, or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator, or similar official of the Company or any of its subsidiaries or for all or substantially all of the property and assets of the Company or any of its subsidiaries or (C) effects any general assignment for the benefit of creditors; (vi) any other Events of Default set forth in the applicable Prospectus Supplement occur. If an Event of Default (other than an Event of Default specified in clause (iv) or (v) above that occurs with respect to the Company) occurs with respect to the Debt Securities of any series issued under an Indenture, and if such Event of Default is continuing under such Indenture, then, and in each and every such case, except for any series of Debt Securities issued under such Indenture the principal of which shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debt Securities of any such series issued under such Indenture (each such series voting as a separate class) by written notice to the Company (and to the Trustee if such notice is given by the holders (the "Acceleration Notice")), may, and the Trustee at the request of such holders shall, declare the principal of, premium, if any, and accrued interest on the Debt Securities of such series to be immediately due and payable. Upon a declaration of acceleration, such principal of, premium, if any, and accrued interest shall be immediately due and payable. If an Event of Default specified in clause (iv) or (v) above occurs with 21 respect to the Company, the principal of, premium, if any, and accrued interest on the Debt Securities then outstanding under each of the Indentures shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder. The holders of at least a majority in principal amount of the outstanding Debt Securities of any series under an Indenture may, by written notice to the Company and to the Trustee, waive all past defaults with respect to Debt Securities of such series and rescind and annul a declaration of acceleration with respect to Debt Securities of such series and its consequences if (i) all existing Events of Default applicable to Debt Securities of such series, other than the nonpayment of the principal of, premium, if any, and interest on the Debt Securities that have become due solely by such declaration of acceleration, have been cured or waived and (ii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. For information as to the waiver of defaults, see "--Modification and Waiver." The holders of at least a majority in aggregate principal amount of the outstanding Debt Securities of any series under an Indenture may direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or the applicable Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of holders of such series of Debt Securities not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from holders of Debt Securities of such series. A holder may not pursue any remedy with respect to the applicable Indenture or the Debt Securities of any series issued under such Indenture unless: (i) the holder gives the Trustee written notice of a continuing Event of Default; (ii) the holders of at least 25% in aggregate principal amount of outstanding Debt Securities of such series make a written request to the Trustee to pursue the remedy; (iii) such holder or holders offer the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense; (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (v) during such 60-day period, the holders of a majority in aggregate principal amount of the outstanding Debt Securities of such series do not give the Trustee a direction that is inconsistent with the request. However, such limitations do not apply to the right of any holder of a Debt Security to receive payment of the principal of, premium, if any, or interest on, such Debt Security or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Debt Securities, which right shall not be impaired or affected without the consent of the holder. Each of the Indentures requires that certain officers of the Company certify, on or before a date not more than four months after the end of each fiscal year, that to the best of such officers, knowledge, the Company has fulfilled all its obligations under such Indenture. The Company is also obligated to notify the Trustee of any default or defaults in the performance of any covenants or agreements under any of the Indentures. MODIFICATION AND WAIVER Each of the Indentures provides that the Company and the Trustee may amend or supplement such Indenture or the Debt Securities of any series issued under such Indenture without notice to or the consent of any holder: (i) to cure any ambiguity, defect, or inconsistency in such Indenture; provided that such amendments or supplements shall not adversely affect the interests of the holders in any material respect; (ii) to comply with the terms in "Restriction on Mergers, Consolidations and Sales of Assets" described below; (iii) to comply with any requirements of the Commission in connection with the qualification of such Indenture under the Trust Indenture Act of 1939, as amended; (iv) to evidence and provide for the acceptance of appointment with respect to the Debt Securities of any or all series issued under such Indenture by a successor Trustee; (v) to establish the form or forms of Debt Securities of any series issued under such Indenture or of the coupons pertaining to such Debt Securities as permitted by such Indenture; (vi) to provide for uncertificated Debt Securities and to make all appropriate changes for such purpose; and (vii) to make any change that does not materially and adversely affect the rights of any holder. Each of the Indentures also provides that modifications and amendments of such Indenture may be made by the Company and the Trustee with the consent of the holders of not less than a majority in aggregate principal amount of the outstanding Debt Securities of each series issued under such Indenture affected thereby (each series voting as a separate class); provided, however, that no such modification or amendment may, without the consent of each holder 22 affected thereby, (i) change the stated maturity of the principal of, or any sinking fund obligation or any installment of interest on, any Debt Security issued under such Indenture, (ii) reduce the principal amount of, or premium, if any, or interest on, any Debt Security issued under such Indenture, (iii) reduce the above-stated percentage of outstanding Debt Securities issued under such Indenture the consent of whose holders is necessary to modify or amend such Indenture with respect to the Debt Securities of any series issued under such Indenture, (iv) reduce the percentage or aggregate principal amount of outstanding Debt Securities of any series issued under the Indenture the consent of whose holders is necessary for waiver of compliance with certain provisions of such Indenture or for waiver of certain defaults. A supplemental indenture which changes or eliminates any covenant or other provision of an Indenture which has expressly been included solely for the benefit of one or more particular series of Debt Securities issued under such Indenture, or which modifies the rights of holders of Debt Securities of such series with respect to such covenant or provision, shall be deemed not to affect the rights under the applicable Indenture of the holders of Debt Securities of any other series issued under such Indenture or of the coupons appertaining to such Debt Securities. It shall not be necessary for the consent of the holders under this section of an Indenture to approve the particular form of any proposed amendment, supplement, or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement, or waiver under this section of an Indenture becomes effective, the Company shall give to the holders affected thereby a notice briefly describing the amendment, supplement, or waiver. The Company will mail supplemental indentures to holders upon request. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture or waiver. RESTRICTION ON MERGERS, CONSOLIDATIONS AND SALES OF ASSETS Pursuant to the Indentures, the Company may not consolidate with, merge with or into, or transfer all or substantially all of its assets (as an entirety or substantially an entirety in one transaction or a series of related transactions), to any Person (as defined in the Indentures) unless: (i) the Company shall be the continuing Person, or the Person (if other than the Company) formed by such consolidation or into which the Company is merged or to which properties and assets of the Company are transferred shall be a solvent corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia and shall expressly assume in writing all the obligations of the Company under the Notes, (ii) immediately after giving effect to such transaction no Event of Default or event or condition which through the giving of notice or lapse of time or both would become an Event of Default shall have occurred and be continuing and (iii) such other conditions as may be established in connection with the issuance of the applicable Debt Securities. DEFEASANCE AND DISCHARGE Each of the Indentures provides that the Company shall be deemed to have paid and shall be discharged from any and all obligations in respect of the Debt Securities of any series issued under such Indenture on the 123rd day after the deposit referred to below has been made, and the provisions of such Indenture will no longer be in effect with respect to the Debt Securities of such series issued thereunder (except for, among other matters, certain obligations to register the transfer or exchange of the Debt Securities of such series, to replace stolen, lost or mutilated Debt Securities of such series, to maintain paying agencies and to hold monies for payment in trust) if, among other things, (A) the Company has deposited with the Trustee, in trust, money and/or U.S. Government Obligations that through the payment of interest and principal in respect thereof, in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the applicable Debt Securities, on the due date thereof or earlier redemption (irrevocably provided for under arrangements satisfactory to the Trustee), as the case may be, in accordance with the terms of such Indenture and the applicable Debt Securities, (B) the Company has delivered to the Trustee (i) either (x) an opinion of counsel to the effect that holders will not recognize income, gain or loss for federal income tax purposes as a result of the Company's exercise of its option under this "Defeasance" provision and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred, which opinion of counsel must be based upon a ruling of the Internal Revenue Service to the same effect unless there has been a change in applicable federal income tax law or related treasury regulations after the date of such Indenture that a ruling is no longer required or (y) a ruling directed to the Trustee received from the Internal Revenue Service to the same effect as the aforementioned opinion 23 of counsel and (ii) an opinion of counsel to the effect that the creation of the defeasance trust does not violate the Investment Company Act of 1940 and after the passage of 123 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the U.S. Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law, (C) immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the giving of notice or lapse of time or both would become an Event of Default, shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after the date of such deposit, and such deposit shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is a party or by which the Company is bound, (D) the Company is not prohibited from making payments in respect of the applicable Debt Securities by the subordination provisions contained in such Indenture and (E) if at such time the applicable Debt Securities are listed on a national securities exchange, the Company has delivered to the Trustee an opinion of counsel to the effect that such Debt Securities will not be delisted as a result of such deposit, defeasance and discharge. As more fully described in the Prospectus Supplement, each of the Indentures also provides for defeasance of certain covenants. 24 DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS AES may issue Stock Purchase Contracts, representing contracts obligating holders to purchase from the Company, and the Company to sell to the holders, a specified number of shares of Common Stock at a future date or dates. The price per share of Common Stock may be fixed at the time the Stock Purchase Contracts are issued or may be determined by reference to a specific formula set forth in the Stock Purchase Contracts. The Stock Purchase Contracts may be issued separately or as a part of units ("Stock Purchase Units") consisting of a Stock Purchase Contract and Debt Securities or debt obligations of third parties, including U.S. Treasury securities, securing the holders' obligations to purchase the Common Stock under the Stock Purchase Contracts. The Stock Purchase Contracts may require AES to make periodic payments to the holders of the Stock Purchase Units or vice versa, and such payments may be unsecured or prefunded on some basis. The Stock Purchase Contracts may require holders to secure their obligations thereunder in a specified manner. The applicable Prospectus Supplement will describe the terms of any Stock Purchase Contracts or Stock Purchase Units. The description in the Prospectus Supplement will not purport to be complete and will be qualified in its entirety by reference to the Stock Purchase Contracts, and, if applicable, collateral arrangements and depositary arrangements, relating to such Stock Purchase Contracts or Stock Purchase Units. 25 PLAN OF DISTRIBUTION The Company may sell the Offered Securities in any of three ways (or in any combination thereof): (i) through underwriters or dealers; (ii) directly to a limited number of purchasers or to a single purchaser; or (iii) through agents. The Prospectus Supplement with respect to any Offered Securities will set forth the terms of the offering of such Offered Securities, including the name or names of any underwriters, dealers or agents and the respective amounts of such Offered Securities underwritten or purchased by each of them, the initial public offering price of such Offered Securities and the proceeds to the Company from such sale, any discounts, commissions or other items constituting compensation from the Company and any discounts, commissions or concessions allowed or reallowed or paid to dealers and any securities exchanges on which such Offered Securities may be listed. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. If underwriters are used in the sale of any Offered Securities, such Offered Securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. Such Offered Securities may be either offered to the public through underwriting syndicates represented by managing underwriters, or directly by underwriters. Unless otherwise set forth in the Prospectus Supplement, the obligations of the underwriters to purchase such Offered Securities will be subject to certain conditions precedent and the underwriters will be obligated to purchase all of such Offered Securities if any are purchased. Offered Securities may be sold directly by the Company or through agents designated by the Company from time to time. Any agent involved in the offer or sale of Offered Securities in respect of which this Prospectus is delivered will be named, and any commissions payable by the Company to such agent will be set forth, in the Prospectus Supplement. Unless otherwise indicated in the Prospectus Supplement, any such agent will be acting on a best efforts basis for the period of its appointment. If so indicated in the Prospectus Supplement, the Company will authorize underwriters, dealers or agents to solicit offers by certain purchasers to purchase Offered Securities from the Company at the public offering price set forth in the Prospectus Supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. Such contracts will be subject only to those conditions set forth in the Prospectus Supplement, and the Prospectus Supplement will set forth the commission payable for solicitation of such contracts. Agents and underwriters may be entitled under agreements entered into with the Company to indemnification by the Company against certain civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments which the agents or underwriters may be required to make in respect thereof. Agents and underwriters may be customers of, engage in transactions with, or perform services for the Company in the ordinary course of business. LEGAL MATTERS The legality of the Securities offered hereby will be passed upon for the Company by Davis Polk & Wardwell, New York, New York. EXPERTS The financial statements as of December 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1996 incorporated by reference in this Prospectus from the Company's Current Report on Form 8-K filed November 6, 1997 and the related financial statement schedules incorporated by reference in the Registration Statement from the Company's Annual Report on Form 10-K have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports which are incorporated by reference herein, and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. 26 The financial statements of Companhia Energetica de Minas Gerais -- CEMIG for the years ended December 31, 1996 and 1995, prepared in accordance with accounting principles generally accepted in Brazil, incorporated by reference in this Prospectus from Item 7 of the Current Report on Form 8-K of The AES Corporation filed July 16, 1997, have been audited by Price Waterhouse Auditores Independentes, Belo Horizonte, Brazil, independent accountants, as stated in their report, which is incorporated herein by reference, and has been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 27 ====================================== ====================================== NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT, IN CONNECTION WITH ANY $1,500,000,000 OFFERING CONTEMPLATED HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY UNDERWRITER, AGENT OR DEALER. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS THE AES CORPORATION SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF. NEITHER THIS DEBT SECURITIES PROSPECTUS NOR ANY PROSPECTUS COMMON STOCK SUPPLEMENT SHALL CONSTITUTE AN OFFER PREFERRED STOCK TO SELL OR A SOLICITATION OF AN OFFER STOCK PURCHASE CONTRACTS TO BUY ANY SECURITIES BY ANYONE IN ANY STOCK PURCHASE UNITS JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. ----------------------- ----------------------- PROSPECTUS TABLE OF CONTENTS PAGE ----------------------- Available Information............. 1 Incorporation of Certain Information by Reference....... 1 Use of Proceeds................... 2 Ratios of Earnings to Fixed Charges........................ 2 The Company....................... 3 Risk Factors...................... 5 Description of Capital Stock...... 11 Description of Debt Securities.... 15 Description of Stock Purchase Contracts and Stock Purchase Units.......................... 24 Plan of Distribution.............. 25 Legal Matters..................... 25 Experts........................... 25 , 1997 ====================================== ====================================== SUBJECT TO COMPLETION, DATED NOVEMBER 7, 1997 PROSPECTUS [LOGO] THE AES CORPORATION $1,500,000,000 JUNIOR SUBORDINATED DEBT SECURITIES AES TRUST III AES TRUST IV AES TRUST V PREFERRED TRUST SECURITIES FULLY AND UNCONDITIONALLY GUARANTEED AS SET FORTH HEREIN BY THE AES CORPORATION The AES Corporation (the "Company" or "AES") may from time to time offer, together or separately unsecured junior subordinated securities (the "Junior Subordinated Debt Trust Securities") consisting of debentures, notes or other evidences of indebtedness in one or more series and in amounts, at prices and on terms to be determined at or prior to the time of any such offering. The Junior Subordinated Debt Trust Securities when issued will be unsecured obligations of the Company. The Company's obligations under the Junior Subordinated Debt Trust Securities will be subordinate and junior in right of payment to all Senior and Subordinated Debt (as defined herein) of the Company. SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. ----------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------------------- AES Trust III, AES Trust IV and AES Trust V (collectively, the "AES Trusts"), each a statutory business trust formed under the laws of the State of Delaware, may offer and sell, from time to time, preferred trust securities representing undivided beneficial interests in the assets of the respective AES Trust (the "Preferred Securities" and, together with the Junior Subordinated Debt Trust Securities, the INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. "Securities"). The Preferred Securities may be offered in amounts, at prices and on terms to be determined at or prior to the time of any such offering. The payment of periodic cash distributions ("distributions") with respect to Preferred Securities of each of the AES Trusts out of moneys held by the Property Trustee (as defined herein) of each of the AES Trusts, and payments on liquidation of each AES Trust and on redemption of Preferred Securities of such AES Trust, will be guaranteed by the Company fully and unconditionally as described herein (each such guarantee, a "Preferred Securities Guarantee"). See "Description of the Preferred Securities Guarantees." The Company's obligation under each Preferred Securities Guarantee is an unsecured obligation of the Company and will rank (i) subordinate and junior in right of payment to all other liabilities of the Company, including the Junior Subordinated Debt Trust Securities, except those made pari passu or subordinate by their terms, and (ii) senior to all capital stock now or hereafter issued by the Company and to any guarantee now or hereafter entered into by the Company in respect of any of its capital stock. Junior Subordinated Debt Trust Securities may be issued and sold from time to time in one or more series by the Company to an AES Trust, or a trustee of such trust, in connection with the investment of the proceeds from the offering of Preferred Securities and Common Securities (as defined herein) of such AES Trust. The Junior Subordinated Debt Trust Securities purchased by an AES Trust may be subsequently distributed pro rata to holders of Preferred Securities and Common Securities in connection with the dissolution of such AES Trust, upon the occurrence of certain events as may be described in an accompanying Prospectus Supplement. Specific terms of the Junior Subordinated Debt Trust Securities and Preferred Securities in respect of which this Prospectus is being delivered (the "Offered Securities") will be set forth in a Prospectus Supplement with respect to such Offered Securities, which will describe, without limitation and where applicable, the following: (i) in the case of Junior Subordinated Debt Trust Securities, the specific designation, aggregate principal amount, authorized denomination, maturity, premium, if any, exchangeability, redemption, conversion, prepayment or sinking fund provisions, if any, interest rate (which may be fixed or variable), if any, method, if any, of calculating interest payments, and dates for payment thereof, dates on which premium, if any, will be payable, the right of the Company, if any, to defer payment of interest on the Junior Subordinated Debt Trust Securities and the maximum length of such deferral period, the public offering price, any listing on a securities exchange and other specific terms of the offering; and (ii) in the case of Preferred Securities, the specific designation, number of securities, liquidation amount per security, initial public offering price, and any listing on a securities exchange, distribution rate (or method of calculation thereof), dates on which distributions shall be payable and dates from which distributions shall accrue, voting rights (if any), terms for any conversion or exchange into other securities, any redemption or sinking fund provisions, any other rights, preferences, privileges, limitations or restrictions relating to the Preferred Securities and the terms upon which the proceeds of the sale of the Preferred Securities shall be used to purchase a specific series of Junior Subordinated Debt Trust Securities of the Company. Unless otherwise indicated in the Prospectus Supplement, the Company does not intend to list any of the Offered Securities on a national securities exchange. Any Prospectus Supplement relating to any series of Offered Securities will contain information concerning certain United States federal income tax considerations, if applicable, to the Offered Securities. By separate prospectus, the form of which is included in the Registration Statement of which this Prospectus is a part, the Company may offer from time to time debt securities or preferred stock. The aggregate initial public offering price of the securities to be offered by this Prospectus and such other prospectus shall not exceed $1,500,000,000. The Offered Securities may be offered directly, through agents designated from time to time, through dealers or through underwriters. Such agents or underwriters may act alone or with other agents or underwriters. See "Plan of Distribution." Any such agents, dealers or underwriters will be set forth in a Prospectus Supplement. If an agent of the Company and/or any AES Trust, or a dealer or underwriter is involved in the offering of the Offered Securities, the agent's commission, dealer's purchase price, underwriter's discount and net proceeds to the Company, as the case may be, will be set forth in, or may be calculated from, the Prospectus Supplement. Any underwriters, dealers or agents participating in the offering may be deemed "underwriters" within the meaning of the Securities Act of 1933. This Prospectus may not be used to consummate sales of Offered Securities unless accompanied by a Prospectus Supplement. The date of this Prospectus is , 1997. AVAILABLE INFORMATION The AES Corporation is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy and information statements and other information with the Securities and Exchange Commission (the "Commission"). These reports, proxy and information statements and other information may be inspected without charge and copied at the public reference facilities maintained by the Commission at its principal offices at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such materials also can be obtained at prescribed rates from the Public Reference Section of the Commission at the principal offices of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be inspected at the offices of the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. Such material may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov. The Company has filed with the Commission a Registration Statement on Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Securities offered hereby (including all amendments and supplements thereto, the "Registration Statement"). This Prospectus, which forms a part of the Registration Statement, does not contain all the information set forth in the Registration Statement and the exhibits filed thereto, certain parts of which have been omitted in accordance with the rules and regulations of the Commission. Statements contained herein concerning the provisions of any documents are not necessarily complete and, in each instance, reference is made to the copy of such document filed as an exhibit to the Registration Statement or otherwise filed with the Commission. Each such statement is qualified in its entirety by such reference. The Registration Statement and the exhibits thereto can be inspected and copied at the public reference facilities and regional and other offices referred to above. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company hereby incorporates in this Prospectus by reference thereto and makes a part hereof the following documents, heretofore filed with the Commission pursuant to the Exchange Act: (i) the Company's Annual Report on Form 10-K for the year ended December 31, 1996; (ii) the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997; (iii) the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997; (iv) the Company's Current Reports on Form 8-K filed on filed on November 6, 1997, October 24, 1997, August 18, 1997, July 16, 1997, July 15, 1997, July 14, 1997, July 3, 1997, March 24, 1997, March 13, 1997, February 19, 1997 and January 30, 1997 and the Company's Current Report on Form 8-K/A filed on August 5, 1997. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to termination of the offering being made hereby shall be deemed to be incorporated in this Prospectus by reference and to be a part hereof from the respective dates of the filing of such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus and the Registration Statement of which it is a part to the extent that a statement contained herein or in any subsequently filed document which also is, or is deemed to be, incorporated by reference herein, modifies or supersedes such earlier statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus or such Registration Statement. The Company hereby undertakes to provide without charge to each person to whom a copy of this Prospectus has been delivered, upon written or oral request of any such person, a copy of any and all of the documents referred to above which have been or may be incorporated in this Prospectus by reference, other than exhibits to such documents which are not specifically incorporated by reference into such documents. Requests for such copies should be directed to William R. Luraschi, General Counsel and Secretary, The AES Corporation, 1001 North 19th Street, Arlington, Virginia 22209, telephone (703) 522-1315. USE OF PROCEEDS Unless otherwise set forth in the applicable Prospectus Supplement, proceeds from the sale of the Junior Subordinated Debt Trust Securities will be used by the Company for general corporate purposes and initially may be temporarily invested in short-term securities. Each AES Trust will use all proceeds received from the sale of its Trust Securities to purchase Junior Subordinated Debt Trust Securities from the Company. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the ratio of earnings to fixed charges.
YEAR ENDED DECEMBER 31, ----------------------------------------------- SIX MONTHS ENDED 1992 1993 1994 1995 1996 JUNE 30, 1997 -------------------------------------------------------------- Ratio of earnings to fixed charges ..................... 1.37 1.62 2.08 2.18 1.83 1.71
For the purpose of computing the ratio of earnings to fixed charges, earnings consist of income from continuing operations before income taxes and minority interest, plus fixed charges, less capitalized interest, less excess of earnings over dividends of less-than-fifty-percent-owned companies. Fixed charges consist of interest (including capitalized interest) on all indebtedness, amortization of debt discount and expense and that portion of rental expense which the Company believes to be representative of an interest factor. A statement setting forth the computation of the above ratios of earnings to fixed charges is on file as an exhibit to the Registration Statement of which this Prospectus is a part. During the period from January 1, 1992 until June 30, 1997, no shares of Preferred Stock were issued or outstanding, and during that period the Company did not pay any Preferred Stock dividends. 2 THE COMPANY AES is a global power company committed to supplying electricity to customers world-wide in a socially responsible way. The Company was one of the original entrants in the independent power market and today is one of the world's largest independent power companies, based on net equity ownership of generating capacity (in megawatts) in operation or under construction. AES markets power principally from electricity generating facilities that it develops, acquires, owns and operates. Over the last five years, the Company has experienced significant growth. This growth has resulted primarily from the development and construction of new plants ("greenfield development") and also from the acquisition of existing generating plants and distribution companies, through competitively bid privatization initiatives outside of the United States or negotiated acquisitions. Since 1992, the Company's total generating capacity in megawatts has grown from 1,829 MW to 18,538 MW (an increase of 914%), with the total number of plants in operation increasing from eight to 74. Additionally, the Company's total revenues have increased at a compound annual growth rate of 20% from $401 million in 1992 to $835 million in 1996, while net income has increased at a compound annual growth rate of 22% from $56 million to $125 million over the same period. AES operates and owns (entirely or in part), through subsidiaries and affiliates, power plants in ten countries with a capacity of approximately 18,538 MW (including 4,000 MW attributable to Ekibastuz which currently has a capacity factor of approximately 20%). AES is also constructing nine additional power plants in seven countries with a capacity of approximately 4,921 MW. The Company's total ownership in plants in operation and under construction aggregates approximately 23,459 MW and its net equity ownership in such plants is approximately 11,882 MW. In addition, AES has numerous projects in advanced stages of development, including seven projects with design capacity of approximately 3,398 MW that have executed or been awarded power sales agreements. The Company is also engaged (entirely or in part) in electric power distribution businesses in Latin America through its subsidiaries and affiliates. These subsidiaries and affiliates serve approximately eight million commercial, industrial and residential customers using approximately 63,000 gigawatt hours per year. As a result of the Company's significant growth in recent years, the Company's operations have become more diverse with regard to both geography and fuel source and it has reduced its dependence upon any single project or customer. During 1996, four of the Company's projects individually contributed more than 10% of the Company's total revenues, Shady Point which represented approximately 20%, San Nicolas which represented approximately 16%, Thames which represented approximately 16% and Barbers Point which represented approximately 15%. OUTLOOK The global trend of electricity market restructuring has created significant new business opportunities for companies like AES. Both domestic and international electricity markets are being restructured and there is a trend away from government-owned electricity systems toward deregulated, competitive market structures. Many countries have rewritten their laws and regulations to allow foreign investment and private ownership of electricity generation, transmission or distribution systems. Some countries have or are in the process of "privatizing" their electricity systems by selling all or part of such systems to private investors. With 69 of its operating plants and distribution companies having been acquired or commenced commercial operations since 1992, AES has been an active participant in both the international privatization process and the development process. The Company is currently pursuing over 90 projects including acquisitions, the expansion of existing plants and new projects. AES believes that there is significant demand for both new and more efficiently operated electric generating capacity in many regions around the world. In an effort to further grow and diversify the Company's portfolio of electric generating plants, AES is pursuing, through its integrated divisions, additional greenfield developments and 3 acquisitions in many countries. Several of these acquisitions, if consummated, would require the Company to obtain substantial additional financing, in the form of both debt and equity financing, in the short term. STRATEGY The Company's strategy in helping meet the world's need for electricity is to participate in competitive power markets as they develop either by greenfield development or by acquiring and operating existing facilities or distribution systems in these markets. The Company generally operates electric generating facilities that utilize natural gas, coal, oil, hydro power, or combinations thereof. In addition, the Company participates in the electric power distribution and retail supply businesses in certain limited instances, and will continue to review opportunities in such markets in the future. Other elements of the Company's strategy include: o Supplying energy to customers at the lowest cost possible, taking into account factors such as reliability and environmental performance; o Constructing or acquiring projects of a relatively large size (generally larger than 100 MW); o When available, entering into power sales contracts with electric utilities or other customers with significant credit strength; and o Participating in electric power distribution and retail supply markets that grant concessions with long-term pricing arrangements. The Company also strives for operating excellence as a key element of its strategy, which it believes it accomplishes by minimizing organizational layers and maximizing company-wide participation in decision-making. AES has attempted to create an operating environment that results in safe, clean and reliable electricity generation. Because of this emphasis, the Company prefers to operate all facilities which it develops or acquires; however, there can be no assurance that the Company will have operating control of all of its facilities. Where possible, AES attempts to sell electricity under long-term power sales contracts. The Company attempts, whenever possible, to structure the revenue provisions of such power sales contracts such that changes in the cost components of a facility (primarily fuel costs) correspond, as effectively as possible, to changes in the revenue components of the contract. The Company also attempts to provide fuel for its operating plants generally under long-term supply agreements, either through contractual arrangements with third parties or, in some instances, through acquisition of a dependable source of fuel. As electricity markets become more competitive, it may be more difficult for AES (and other power generation companies) to obtain long-term power sales contracts. In markets where long-term contracts are not available, AES will pursue methods to hedge costs and revenues to provide as much assurance as possible of a project's profitability. In these situations, AES might choose to purchase a project with a partial hedge or with no hedge, with the strategy that its diverse portfolio of projects provides some hedge to the increased volatility of the project's earnings and cash flow. Additionally, AES may choose not to participate in these markets. The Company attempts to finance each domestic and foreign plant primarily under loan agreements and related documents which, except as noted below, require the loans to be repaid solely from the project's revenues and provide that the repayment of the loans (and interest thereon) is secured solely by the capital stock, physical assets, contracts and cash flow of that plant subsidiary or affiliate. This type of financing is generally referred to as "project financing." The lenders under these project financing structures cannot look to AES or its other projects for repayment, unless such entity explicitly agrees to undertake liability. AES has explicitly agreed to undertake certain limited obligations and 4 contingent liabilities, most of which by their terms will only be effective or will be terminated upon the occurrence of future events. In certain circumstances, the Company may incur indebtedness which is recourse to the Company or to more than one project. 5 RISK FACTORS Purchasers of the Securities should read this entire Prospectus carefully. Ownership of the Securities involves certain risks. The following factors should be considered carefully in evaluating AES and its business before purchasing the Securities offered by this Prospectus. Leverage and Subordination. The Company and its subsidiaries had approximately $4.1 billion of outstanding indebtedness at June 30, 1997. As a result of the Company's level of debt, the Company might be significantly limited in its ability to meet its debt service obligations, to finance the acquisition and development of additional projects, to compete effectively or to operate successfully under adverse economic conditions. As of June 30, 1997, the Company had a consolidated ratio of total debt to total book capitalization (including current debt) of approximately 75%. The Junior Subordinated Debt Trust Securities will be subordinated to all Senior and Senior Subordinated Debt including, but not limited to, the Company's current $425 million credit facility debt. The obligations of AES under the Preferred Securities Guarantee are subordinate and junior in right of payment to all liabilities of AES and pari passu in right of payment with the most senior preferred stock issued, from time to time, if any, by AES. As of June 30, 1997, the Company had approximately $911 million in aggregate principal amount of Senior and Senior Subordinated Debt. Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, receivership, reorganization, assignment for the benefit of creditors, marshaling of assets and liabilities or any bankruptcy, insolvency or similar proceedings of the Company, the holders of Senior and Senior Subordinated Debt will first be entitled to receive payment in full of all amounts due or to become due under all Senior and Subordinated Debt before the holders of the Junior Subordinated Debt Trust Securities will be entitled to receive any payment in respect of the principal of, premium, if any, or interest on such Junior Subordinated Debt Trust Securities. No payments on account of principal, premium, if any, or interest in respect of the Junior Subordinated Debt Trust Securities may be made if there shall have occurred and be continuing a default in any payment under any Senior and Senior Subordinated Debt or during certain periods when an event of default under certain Senior and Subordinated Debt permits the lenders thereunder to accelerate the maturing of such Senior and Senior Subordinated Debt. See "Description of Junior Subordinated Debt Trust Securities--Subordination." The Preferred Securities will rank subordinate and junior in right of payment to all other liabilities of the Company, including the Junior Subordinated Debt Trust Securities, except those made pari passu by their terms and (ii) senior to all capital stock now or hereafter issued by the Company and to any guarantee now or hereafter entered into by the Company in respect of any of its capital stock. See "Description of the Preferred Securities Guarantees--Status of the Preferred Securities Guarantees." The Junior Subordinated Debt Trust Securities will be effectively subordinated to the indebtedness and other obligations (including trade payables) of the Company's subsidiaries. At June 30, 1997, the indebtedness and obligations of the Company's subsidiaries aggregated approximately $3.3 billion. The ability of the Company to pay principal of, premium, if any, and interest on the Junior Subordinated Debt Trust Securities will be dependent upon the receipt of funds from its subsidiaries by way of dividends, fees, interest, loans or otherwise. There are no terms in the Junior Subordinated Debt Trust Securities, the Preferred Securities or the Preferred Securities Guarantee that limit the Company's or its subsidiaries' ability to incur additional indebtedness. Most of the Company's subsidiaries with interests in power generation facilities currently have in place arrangements that restrict their ability to make distributions to the Company by way of dividends, fees, interest, loans or otherwise. The Company's subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the Junior Subordinated Debt Trust Securities or the Preferred Securities or to make any funds available therefor, whether by dividends, loans or other payments, and do not guarantee the payment of interest on or principal of the Junior Subordinated Debt Trust Securities or the Preferred Securities. Any right of the Company to receive any assets of any of its subsidiaries upon any liquidation, dissolution, winding up, receivership, reorganization, assignment for the benefit of creditors, marshaling of assets and liabilities or any bankruptcy, insolvency or similar proceedings of the Company (and the consequent right of the holders of the Junior Subordinated Debt Trust Securities and the Preferred Securities to participate in the distribution of, or to realize proceeds from, those assets) will be effectively subordinated to the claims of any such subsidiary's creditors (including trade creditors and holders of debt issued by such subsidiary). 6 The Company currently conducts substantially all of its operations through its subsidiaries. See "Description of the Preferred Securities Guarantees--Status of the Preferred Securities Guarantees" and "Description of the Junior Subordinated Debt Securities--Subordination." Doing Business Outside the United States. The Company's involvement in the development of new projects and the acquisition of existing plants in locations outside the United States is increasing and most of the Company's current development and acquisition activities are for projects and plants outside the United States. The Company, through subsidiaries and joint ventures, has ownership interests in 76 power plants outside the United States in operation or under construction. Thirty-nine of such power plants are located in Brazil; nine in the People's Republic of China; seven in Kazakhstan; six in Argentina; five in the United Kingdom; three in Hungary; two in each of Australia and Pakistan; and one in each of the Netherlands, Canada and the Dominican Republic. The financing, development and operation of projects outside the United States entail significant political and financial uncertainties (including, without limitation, uncertainties associated with first-time privatization efforts in the countries involved, currency exchange rate fluctuations, currency repatriation restrictions, currency convertibility, political instability, civil unrest, and expropriation) and other credit quality, liquidity or structuring issues that have the potential to cause substantial delays in respect of or material impairment of the value of the project being developed or operated, which AES may not be capable of fully insuring or hedging against. The ability to obtain financing on a commercially acceptable non-recourse basis in developing nations may also require higher investments by the Company than historically have been the case. In addition, financing in countries with less than investment grade sovereign credit ratings may also require substantial participation by multilateral financing agencies. There can be no assurance that such financing can be obtained when needed. The uncertainty of the legal environment in certain countries in which the Company, its subsidiaries and its affiliates are or in the future may be developing, constructing or operating could make it more difficult for the Company to enforce its respective rights under agreements relating to such projects. In addition, the laws and regulations of certain countries may limit the Company's ability to hold a majority interest in some of the projects that it may develop or acquire. International projects owned by the Company may, in certain cases, be expropriated by applicable governments. Although AES may have legal recourse in enforcing its rights under agreements and recovering damages for breaches thereof, there can be no assurance that any such legal proceedings will be successful. Competition. The global power production market is characterized by numerous strong and capable competitors, many of whom may have extensive and diversified developmental or operating experience (including both domestic and international experience) and financial resources similar to or greater than the Company. Further, in recent years, the power production industry has been characterized by strong and increasing competition with respect to both obtaining power sales agreements and acquiring existing power generation assets. In certain markets, these factors have caused reductions in prices contained in new power sales agreements and, in many cases, have caused higher acquisition prices for existing assets through competitive bidding practices. The evolution of competitive electricity markets and the development of highly efficient gas-fired power plants have also caused, or are anticipated to cause, price pressure in certain power markets where the Company sells or intends to sell power. There can be no assurance that the foregoing competitive factors will not have a material adverse effect on the Company. Development Uncertainties. The majority of the projects that AES develops are large and complex and the completion of any such project is subject to substantial risks. Development can require the Company to expend significant sums for preliminary engineering, permitting, legal and other expenses in preparation for competitive bids which the Company may not win or before it can be determined whether a project is feasible, economically attractive or capable of being financed. Successful development and construction is contingent upon, among other things, negotiation on terms satisfactory to the Company of engineering, construction, fuel supply and power sales contracts with other project participants, receipt of required governmental permits and consents and timely implementation and satisfactory completion of construction. There can be no assurance that AES will be able to obtain new power sales contracts, overcome local opposition, if any, obtain the necessary site agreements, fuel supply and ash disposal agreements, construction contracts, steam sales contracts, licenses and certifications, environmental and other permits 7 and financing commitments necessary for the successful development of its projects. There can be no assurance that development efforts on any particular project, or the Company's efforts generally, will be successful. If these development efforts are not successful, the Company may abandon a project under development. At the time of abandonment, the Company would expense all capitalized development costs incurred in connection therewith and could incur additional losses associated with any related contingent liabilities. The future growth of the Company is dependent, in part, upon the demand for significant amounts of additional electrical generating capacity and its ability to obtain contracts to supply portions of this capacity. Any material unremedied delay in, or unsatisfactory completion of, construction of the Company's projects could, under certain circumstances, have an adverse effect on the Company's ability to meet its obligations, including the payment of principal of, premium, if any and interest on Debt Securities. The Company also is faced with certain development uncertainties arising out of doing business outside of the United States. See "--Doing Business Outside the United States." Risks Associated with Acquisitions. The Company has achieved a significant portion of its growth through acquisitions and expects that it will continue to grow, in part, through acquisitions. During 1997 alone the Company consummated several major acquisitions in which the Company invested an aggregate of $1.9 billion (excluding non-recourse debt). Although each of the acquired businesses had a significant operating history at the time of its acquisition by the Company, the Company has a limited history of owning and operating these businesses. In addition, most of these businesses were government owned and some were operated as part of a larger integrated utility prior to their acquisition by the Company. There can be no assurances that the Company will be successful in transitioning these to private ownership, that such businesses will perform as expected or that the returns from such businesses will support the indebtedness incurred to acquire them or the capital expenditures needed to develop them. Uncertainty of Access to Capital for Future Projects. Each of AES's projects under development and those independent power facilities it may seek to acquire may require substantial capital investment. Continued access to capital with acceptable terms is necessary to assure the success of future projects and acquisitions. AES has primarily utilized project financing loans to fund the capital expenditures associated with constructing and acquiring its electric power plants and related assets. Project financing borrowings have been substantially non-recourse to other subsidiaries and affiliates and to AES as the parent company and are generally secured by the capital stock, physical assets, contracts and cash flow of the related project subsidiary or affiliate. The Company intends to continue to seek, where possible, such non-recourse project financing in connection with the assets which the Company or its affiliates may develop, construct or acquire. However, depending on market conditions and the unique characteristics of individual projects, the Company's traditional providers of project financing, particularly multinational commercial banks, may seek higher borrowing spreads and increased equity contributions. Furthermore, because of the reluctance of commercial lending institutions to provide non-recourse project financing (including financial guarantees) in certain less developed economies, the Company, in such locations, has and will continue to seek direct or indirect (through credit support or guarantees) project financing from a limited number of multilateral or bilateral international financial institutions or agencies. As a precondition to making such project financing available, these institutions may also require governmental guarantees of certain project and sovereign related risks. Depending on the policies of specific governments, such guarantees may not be offered and as a result, AES may determine that sufficient financing will ultimately not be available to fund the related project. In addition to the project financing loans, if available, AES provides a portion, or in certain instances all, of the remaining long-term financing required to fund development, construction, or acquisition. These investments have generally taken the form of equity investments or loans, which are subordinated to the project financing loans. The funds for these investments have been provided by cash flows from operations and by the proceeds from borrowings under short-term credit facilities, and issuances of senior subordinated notes, convertible debentures and common stock of the Company. The Company's ability to arrange for financing on either a fully recourse or a substantially non-recourse basis and the costs of such capital are dependent on numerous factors, including general economic and capital market conditions, the availability of bank credit, investor confidence in the Company, the continued success of current projects and 8 provisions of tax and securities laws which are conducive to raising capital in this manner. Should future access to capital not be available, AES may decide not to build new plants or acquire existing facilities. While a decision not to build new plants or acquire existing facilities would not affect the results of operations of AES on its currently operating facilities or facilities under construction, such a decision would affect the future growth of AES. Dependence on Utility Customers and Certain Projects. The nature of most of AES's power projects is such that each facility generally relies on one power sales contract with a single customer for the majority, if not all, of its revenues over the life of the power sales contract. During 1996, five customers, including Connecticut Light & Power Company, a subsidiary of Northeast Utilities, accounted for 73% of the Company's consolidated total revenues. The prolonged failure of any one utility customer to fulfill its contractual obligations could have a substantial negative impact on AES's primary source of revenues. AES has sought to reduce this risk in part by entering into power sales contracts with utilities or other customers of strong credit quality and by locating its plants in different geographic areas in order to mitigate the effects of regional economic downturns. Four of the Company's plants collectively represented approximately 39% of AES's consolidated total assets at December 31, 1996 and generated approximately 67% of AES's consolidated total revenues for the year ended December 31, 1996. Sales to Connecticut Light & Power Company ("CL&P") represented 16% of the Company's total revenues in 1996. Moody's Investor Service Inc. ("Moody's") and Standard & Poor's Corporation ("S&P") have recently downgraded CL&P's senior secured long-term debt from Baa3/BBB- to Ba1/BB+. Both Moody's and S&P have placed CL&P under review for possible downgrade or credit watch. In March 1997, as a result of regulatory action by the Public Service Commission of New Hampshire, Moody's and S&P downgraded the senior unsecured debt of Northeast Utilities, the parent of CL&P, from Ba2/BB to Ba3/BB- and placed Northeast Utilities on watch for possible downgrade. Regulatory Uncertainty. AES's cogeneration operations are subject to the provisions of various laws and regulations, including the Public Utility Regulatory Policies Act of 1978, as amended ("PURPA") and the Public Utility Holding Company Act, as amended ("PUHCA"). PURPA provides to qualifying facilities ("QFs") certain exemptions from substantial federal and state legislation, including regulation as public utilities. PUHCA regulates public utility holding companies and their subsidiaries. AES is not and will not be subject to regulation as a holding company under PUHCA as long as the domestic power plants it owns are QFs under PURPA. QF status is conditioned on meeting certain criteria, and would be jeopardized, for example, by the loss of a steam customer. The Company believes that, upon the occurrence of an event that would threaten the QF status of one of its domestic plants, it would be able to react in a manner that would avoid the loss of QF status (such as by replacing the steam customer). In the event the Company were unable to avoid the loss of such status for one of its plants, to avoid public utility holding company status, AES could apply to the Federal Energy Regulatory Commission ("FERC") to obtain status as an Exempt Wholesale Generator ("EWG"), or could restructure the ownership of the project subsidiary. EWGs, however, are subject to broader regulation by FERC and may be subject to state public utility commissions regulation regarding non-rate matters. In addition, any restructuring of a project subsidiary could result in, among other things, a reduced financial interest in such subsidiary, which could result in a gain or loss on the sale of the interest in such subsidiary, the removal of such subsidiary from the consolidated income tax group or the consolidated financial statements of the Company, or an increase or decrease in the results of operations of the Company. The United States Congress is considering proposed legislation which would repeal PURPA entirely, or at least repeal the obligation of utilities to purchase from QFs. There is strong support for grandfathering existing QF contracts if such legislation is passed, and also support for requiring utilities to conduct competitive bidding for new electric generation if the PURPA purchase obligation is eliminated. Various bills have also proposed repeal of PUHCA. Repeal of PUHCA would allow both independents and vertically integrated utilities to acquire retail utilities in the United States that are geographically widespread, as opposed to the current limitations of PUHCA which require that retail electric systems be capable of physical integration. In addition, registered holding companies would be free to acquire non-utility businesses, which they may not do now, with certain limited exceptions. In the event of a PUHCA repeal, competition for independent power generators from vertically integrated utilities would likely increase. Repeal of 9 PURPA and/or PUHCA may or may not be part of comprehensive legislation to restructure the electric utility industry, allow retail competition, and deregulate most electric rates. The effect of any such repeal cannot be predicted, although any such repeal could have a material adverse effect on the Company. Electric Utility Industry Restructuring Proposals. The FERC and many state utility commissions are currently studying a number of proposals to restructure the electric utility industry in the United States. Such restructuring would permit utility customers to choose their utility supplier in a competitive electric energy market. The FERC issued a final rule in April 1996 which requires utilities to offer wholesale customers and suppliers open access on utility transmission lines, on a comparable basis to the utilities' own use of the lines. The final rule is subject to rehearing and may become the subject of court litigation. Many utilities have already filed "open access" tariffs. The utilities contend that they should recover from departing customers their fixed costs that will be "stranded" by the ability of their wholesale customers (and perhaps eventually, their retail customers) to choose new electric power suppliers. The FERC final rule endorses the recovery of legitimate and verifiable "stranded costs." These may include the costs utilities are required to pay under many QF contracts which the utilities view as excessive when compared with current market prices. Many utilities are therefore seeking ways to lower these contract prices or rescind the contracts altogether, out of concern that their shareholders will be required to bear all or part of such "stranded" costs. Some utilities have engaged in litigation against QFs to achieve these ends. In addition, future United States electric rates may be deregulated in a restructured United States electric utility industry and increased competition may result in lower rates and less profit for United States electricity sellers. Falling electricity prices and uncertainty as to the future structure of the industry is inhibiting United States utilities from entering into long-term power purchase contracts. The effect of any such restructuring on the Company cannot be predicted, although any such restructuring could have a material adverse effect on the Company. Litigation and Regulatory Proceedings. From time to time, the Company and its affiliates are parties to litigation and regulatory proceedings. Investors should review the descriptions of such matters contained in the Company's Annual, Quarterly and Current Reports filed with the Commission and incorporated by reference herein. There can be no assurances that the outcome of such matters will not have a material adverse effect on the Company's consolidated financial position. Business Subject to Stringent Environmental Regulations. AES's activities are subject to stringent environmental regulation by federal, state, local and foreign governmental authorities. For example, the Clean Air Act Amendments of 1990 impose more stringent standards than those previously in effect, and require states to impose permit fees on certain emissions. Congress and other foreign governmental authorities also may consider proposals to restrict or tax certain emissions. These proposals, if adopted, could impose additional costs on the operation of AES's power plants. There can be no assurance that AES would be able to recover all or any increased costs from its customers or that its business, financial condition or results of operations would not be materially and adversely affected by future changes in domestic or foreign environmental laws and regulations. The Company has made and will continue to make capital and other expenditures to comply with environmental laws and regulations. There can be no assurance that such expenditures will not have a material adverse effect on the Company's financial condition or results of operations. Control by Existing Stockholders. As of June 30, 1997, AES's two founders, Roger W. Sant and Dennis W. Bakke, and their immediate families together owned beneficially approximately 24.1% of AES's outstanding Common Stock. As a result of their ownership interests, Messrs. Sant and Bakke may be able to significantly influence or exert control over the affairs of AES, including the election of the Company's directors. As of June 30, 1997, all of AES's officers and directors and their immediate families together owned beneficially approximately 32.5% of AES's outstanding Common Stock. To the extent that they decide to vote together, these stockholders would be able to significantly influence or control the election of AES's directors, the management and policies of AES and any action requiring stockholder approval, including significant corporate transactions. Adherence to AES's Principles--Possible Impact on Results of Operations. A core part of AES's corporate culture is a commitment to "shared principles": to act with integrity, to be fair, to have fun and to be socially responsible. The 10 Company seeks to adhere to these principles not as a means to achieve economic success, but because adherence is a worthwhile goal in and of itself. However, if the Company perceives a conflict between these principles and profits, the Company will try to adhere to its principles--even though doing so might result in diminished or foregone opportunities or financial benefits. Shares Eligible for Future Sale. Certain credit facilities of AES subsidiaries are secured by the pledge of 34.6 million shares of the AES Common Stock held by a subsidiary of AES. The sale of a substantial number of such shares in the public market upon any foreclosure or otherwise could have an adverse effect on the market price of the AES Common Stock and thereby an adverse effect on the market price of any Preferred Securities that are convertible to AES Common Stock. Risk of Fraudulent Transfer. Various fraudulent conveyance laws have been enacted for the protection of creditors and may be applied by a court on behalf of any unpaid creditor or a representative of AES's creditors in a lawsuit to subordinate or avoid the Junior Subordinated Debentures in favor of other existing or future creditors of AES. Under applicable provisions of the U.S. Bankruptcy code or comparable provisions of state fraudulent transfer or conveyance laws, if AES at the time of issuance of the Junior Subordinated Debentures, (i) incurred such indebtedness with intent to hinder, delay or defraud any present or future creditor of AES or contemplated insolvency with a design to prefer one or more creditors to the exclusion in whole or in part of others or (ii) received less than reasonably equivalent value or fair consideration for issuing the Junior Subordinated Debentures and AES (a) was insolvent, (b) was rendered insolvent by reason of the issuance of the Junior Subordinated Debentures, (c) was engaged or about to engage in business or a transaction for which the remaining assets of AES constitute unreasonably small capital to carry on its business or (d) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature, then, in each case, a court of competent jurisdiction could void, in whole or in part, the Junior Subordinated Debentures. Among other things, a legal challenge of the Junior Subordinated Debentures on fraudulent conveyance grounds may focus on the benefits, if any, realized by AES as a result of the issuance by AES of the Junior Subordinated Debentures. The measure of insolvency for purposes of the foregoing will vary depending upon the law applied in such case. Generally, however, AES would be considered insolvent if the sum of its debts, including contingent liabilities, were greater than all of its assets at fair valuation or if the present fair market value of its assets were less than the amount that would be required to pay the probable liability on its existing debts, including contingent liabilities, as they become absolute and mature. There can be no assurance that, after providing for all prior claims, there will be sufficient assets to satisfy the claims of the holders of the Junior Subordinated Debentures. [JAY] Management believes that, for purposes of all such insolvency, bankruptcy and fraudulent transfer or conveyance laws, the Junior Subordinated Debentures are being incurred without the intent to hinder, delay or defraud creditors and for proper purposes and in good faith, and that AES after the issuance of the Junior Subordinated Debentures will be solvent, will have sufficient capital for carrying on its business and will be able to pay its debts as they mature. There can be no assurance, however, that a court passing on such questions would agree with management's view. Ability of AES to Make Distributions. The ability of the AES Trusts to make distributions and other payments on the Preferred Securities is solely dependent upon the Company making interest and other payments on the Junior Subordinated Debt Trust Securities deposited as trust assets as and when required. If the Company were not to make distributions or other payments on the Junior Subordinated Debt Trust Securities for any reason, including as a result of the Company's election to defer the payment of interest on the Junior Subordinated Debt Trust Securities by extending the interest period on the Junior Subordinated Debt Trust Securities, the AES Trusts will not make payments on the Trust Securities (as defined herein). In such an event, holders of the Preferred Securities would not be able to rely on the Preferred Securities Guarantee since distributions and other payments on the Preferred Securities are subject to such Guarantee only if and to the extent that the Company has made a payment to the Property Trustee (as defined herein) of interest or principal on the Junior Subordinated Debt Trust Securities deposited in the Trust as trust assets. Instead, holders of Preferred Securities would rely on the enforcement by the Property Trustee of its rights as registered holder of the Junior Subordinated Debt Trust Securities against the Company pursuant to the terms of the Indenture (as defined herein). However, if the Trust's failure to make distributions on the Preferred Securities is a consequence of the Company's exercise of its right to extend the interest payment period for the Junior Subordinated Debt Trust Securities, the Property Trustee will have no right to enforce the payment of distributions on the Preferred Securities until an Event of Default (as defined herein) under the Declaration (as defined herein) shall have occurred. 11 The Declaration provides that the Company shall pay for all debts and obligations (other than with respect to the Trust Securities) and all costs and expenses of the AES Trusts, including any taxes and all costs and expenses with respect thereto, to which the AES Trusts may become subject, except for United States withholding taxes. No assurance can be given that the Company will have sufficient resources to enable it to pay such debts, obligations, costs and expenses on behalf of the AES Trusts. Option to Extend Interest Payment Period; Tax Impact of Extension. So long as the Company shall not be in default in the payment of interest on the Junior Subordinated Debt Trust Securities, the Company has the right under the Indenture to defer payments of interest on the Junior Subordinated Debt Trust Securities by extending the interest payment period from time to time on the Junior Subordinated Debt Trust Securities for an extension period not exceeding 20 consecutive quarterly interest periods (an "Extension Period"), during which no interest shall be due and payable. In such an event, quarterly distributions on the Preferred Securities would not be made by the applicable AES Trust during any such Extension Period. If the Company exercises the right to extend an interest payment period, the Company may not during such Extension Period declare or pay dividends on, or redeem, purchase, acquire or make a distribution or liquidation payment with respect to, any of its common stock or preferred stock; provided that (i) the Company will be permitted to pay accrued dividends upon the exchange or redemption of any series of preferred stock of the Company as may be outstanding from time to time, in accordance with the terms of such stock and (ii) the foregoing will not apply to stock dividends paid by the Company. Under the Amended and Restated Certificate of Incorporation the Company is authorized to issue up to 50,000,000 shares of preferred stock. As of June 30, 1997, no shares of the Company's preferred stock were outstanding. The Company may from time to time offer shares of its preferred stock to the public. Prior to the termination of any Extension Period, the Company may further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarterly interest periods. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may commence a new Extension Period, subject to the above requirements. The Company may also prepay at any time all or any portion of the interest accrued during an Extension Period. Consequently, there could be multiple Extension Periods of varying lengths throughout the term of the Junior Subordinated Debt Trust Securities, not to exceed 20 consecutive quarters or to cause any extension beyond the maturity of the Junior Subordinated Debt Trust Securities. See any accompanying Prospectus Supplement relating to Junior Subordinated Debt Trust Securities. Because the Company has the right to extend the interest payment period for an Extension Period of up to 20 consecutive quarterly interest periods on various occasions, the Junior Subordinated Debt Trust Securities will be treated as issued with "original issue discount" for United States federal income tax purposes. As a result, holders of Preferred Securities will be required to include their pro rata share of original issue discount in gross income as it accrues for United States federal income tax purposes in advance of the receipt of cash. Generally, all of a securityholder's taxable interest income with respect to the Junior Subordinated Debt Trust Securities will be accounted for as "original issue discount" and actual distributions of stated interest will not be separately reported as taxable income. See any accompanying Prospectus Supplement relating to Junior Subordinated Debt Trust Securities. Special Event Redemption or Distribution. Upon the occurrence and during the continuation of a Tax Event or Investment Company Event (each as defined herein), which may occur at any time, the applicable AES Trust shall, unless the Junior Subordinated Debt Trust Securities are redeemed in the limited circumstances described below, be dissolved with the result that Junior Subordinated Debt Trust Securities having an aggregate principal amount equal to the aggregate stated liquidation amount of, and bearing accrued and unpaid distributions on, the Preferred Securities and Common Securities would be distributed on a Pro Rata Basis (as defined herein under "The AES Trusts -- Distributions") to the holders of the Preferred Securities and Common Securities in liquidation of such Trust. In the case of a Tax Event, in certain circumstances, the Company shall have the right to redeem at any time the Junior Subordinated Debt Trust Securities in whole or in part, in which event the applicable AES Trust will redeem Preferred Securities and Common Securities on a Pro Rata Basis to the same extent as the Junior Subordinated Debt Trust Securities are redeemed. There can be no assurance as to the market prices for Preferred Securities or the Junior Subordinated Debt Trust Securities which may be distributed in exchange for Preferred Securities if a dissolution and 12 liquidation of the applicable AES Trust were to occur. Accordingly, the Preferred Securities that an investor may purchase, or the Junior Subordinated Debt Trust Securities that the investor may receive on dissolution and liquidation of the applicable AES Trust, may trade at a discount to the price that the investor paid to purchase the Preferred Securities offered hereby. Because holders of Preferred Securities may receive Junior Subordinated Debt Trust Securities upon the occurrence of a Special Event (as defined herein), prospective purchasers of Preferred Securities are also making an investment decision with regard to the Junior Subordinated Debt Trust Securities and should carefully review all the information regarding the Junior Subordinated Debt Trust Securities contained in any accompanying Prospectus Supplement relating to Junior Subordinated Debt Trust Securities. There can be no assurance that future federal legislative proposals will not prevent the Company from deducting interest on the Junior Subordinated Debt Trust Securities. This would constitute a Tax Event and could result in the distribution of any Junior Subordinated Debt Trust Securities to holders of the Preferred Securities or, in certain circumstances, the redemption of such securities by the Company and the distribution of the resulting cash in redemption of the Preferred Securities. See any accompanying Prospectus Supplement relating to Junior Subordinated Debt Trust Securities. "Tax Event" means that the Regular Trustees (as defined herein) shall have obtained an opinion of a nationally recognized independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that on or after the date of any accompanying Prospectus Supplement relating to Junior Subordinated Debt Trust Securities as a result of (a) any amendment to, or change in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to, or change in, an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the theretofore generally accepted position or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated, issued or effective or which interpretation or pronouncement is issued or announced or which action is taken, in each case on or after the date of such Prospectus Supplement, there is more than an insubstantial risk that (i) the applicable AES Trust is, or will be within 90 days of the date thereof, subject to United States federal income tax with respect to income accrued or received on the Junior Subordinated Debt Trust Securities, (ii) the applicable AES Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of other taxes, duties or other governmental charges or (iii) interest payable by the Company to the applicable AES Trust on the Junior Subordinated Debt Trust Securities is not, or within 90 days of the date thereof will not be, deductible by the Company for United States federal income tax purposes. "Investment Company Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent counsel experienced in practice under the Investment Company Act of 1940, as amended (the "1940 Act"), that as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), there is more than an insubstantial risk that an AES Trust is or will be considered an "investment company" which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of any accompanying Prospectus Supplement relating to Junior Subordinated Debt Trust Securities. "Special Event" means a Tax Event or an Investment Company Event. Limiting Voting Rights. Holders of Preferred Securities will have limited voting rights, but will not be able to appoint, remove or replace, or to increase or decrease the number of, Trustees, which rights are vested exclusively in the Common Securities (as defined herein under "The AES Trusts"). Trading Prices of Preferred Securities. The Preferred Securities constitute a new issue of securities with no established trading market. The Preferred Securities may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the underlying Junior Subordinated Debt Trust Securities. A holder who disposes of his Preferred Securities between record dates for payments of distributions thereon will be required to include 13 accrued but unpaid interest on the Junior Subordinated Debt Trust Securities through the date of disposition in income as ordinary income, and to add such amount to his adjusted tax basis in his pro rata share of the underlying Junior Subordinated Debt Trust Securities deemed disposed of. Accordingly, such a holder will recognize a capital loss to the extent the selling price (which may not fully reflect the value of accrued but unpaid interest) is less than the holders adjusted tax basis (which will include accrued but unpaid interest). Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. See any accompanying Prospectus Supplement relating to Junior Subordinated Debt Trust Securities. Potential Market Volatility During Extension Period. As described above, the Company has the right to extend an interest payment period on the Junior Subordinated Debt Trust Securities from time to time for a period not exceeding 20 consecutive quarterly interest periods. If the Company determines to extend an interest payment period, or if the Company thereafter extends an Extension Period or prepays interest accrued during an Extension Period as described above, the market price of the Preferred Securities is likely to be affected. In addition, as a result of such rights, the market price of the Preferred Securities (which represent an undivided interest in Junior Subordinated Debt Trust Securities) may be more volatile than other securities on which original issue discount accrues that do not have such rights. A holder that disposes of its Preferred Securities during an Extension Period, therefore, may not receive the same return on its investment as a holder that continues to hold its Preferred Securities. See any accompanying Prospectus Supplement relating to Junior Subordinated Debt Trust Securities. No Prior Public Market--Possible Price Volatility of the Securities. Prior to the offering, there has been no public market for the Securities. There can be no assurance that an active trading market for the Securities will develop or be sustained. If such a market were to develop, the Securities, could trade at prices that may be higher or lower than their offering price depending upon many factors, including prevailing interest rates, the Company's operating results and the markets for similar securities. Historically, the market for non-investment grade debt has demonstrated substantial volatility in the prices of securities similar to the Securities. There can be no assurance that the future market for the Securities will not be subject to similar volatility. Accordingly, no assurance can be given as to the liquidity of the Securities. Shares Eligible for Future Sale. Certain credit facilities of AES subsidiaries are secured by the pledge of 34.6 million shares of the AES Common Stock held by a subsidiary of AES. The sale of a substantial number of such shares in the public market upon any foreclosure or otherwise could have an adverse effect on the market price of the AES Common Stock and thereby an adverse effect on the market price of any Preferred Securities that are convertible to AES Common Stock. 14 THE AES TRUSTS Each of the AES Trust III, AES Trust IV and AES Trust V is a statutory business trust formed, in the case of AES Trust III, on November 13, 1996, and in the case of AES Trust IV and AES Trust V, on November 5, 1997, in each case under the Delaware Business Trust Act (the "Business Trust Act") pursuant to a separate declaration of trust among the Trustees (as defined herein) of such AES Trust and the Company and the filing of a certificate of trust with the Secretary of State of the State of Delaware. Such declaration will be amended and restated in its entirety (as so amended and restated, the "Declaration") substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus forms a part, as of the date the Preferred Securities of such AES Trust are initially issued. Each Declaration will be qualified under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). This description summarizes the material terms of the Declarations and is qualified in its entirety by reference to the form of Declaration, which has been filed as an exhibit to the Registration Statement of which this Prospectus is a part, and the Trust Indenture Act. TRUST SECURITIES Upon issuance of any Preferred Securities by an AES Trust, the holders thereof will own all of the issued and outstanding Preferred Securities of such AES Trust. The Company will acquire securities representing common undivided beneficial interests in the assets of each AES Trust (the "Common Securities" and, together with the Preferred Securities, the "Trust Securities") in an amount equal to at least 3% of the total capital of such AES Trust and will own, directly or indirectly, all of the issued and outstanding Common Securities of each AES Trust. The Preferred Securities and the Common Securities will rank pari passu with each other and will have equivalent terms; provided that (i) if a Declaration Event of Default (as defined herein under "--Events of Default") under the Declaration of an AES Trust occurs and is continuing, the holders of Preferred Securities of such AES Trust will have a priority over holders of the Common Securities of such AES Trust with respect to payments in respect of distributions and payments upon liquidation, redemption and maturity and (ii) holders of Common Securities have the exclusive right (subject to the terms of the Declaration) to appoint, remove or replace the Trustees and to increase or decrease the number of Trustees. Each AES Trust exists for the purpose of (a) issuing its Preferred Securities, (b) issuing its Common Securities to the Company, (c) investing the gross proceeds from the sale of the Trust Securities in Junior Subordinated Debt Trust Securities of the Company and (d) engaging in only such other activities as are necessary, convenient or incidental thereto. The rights of the holders of the Preferred Securities, including economic rights, rights to information and voting rights, are set forth in the applicable Declaration, the Business Trust Act and the Trust Indenture Act. POWERS AND DUTIES OF TRUSTEES The number of trustees (the "Trustees") of each AES Trust shall initially be five. Three of such Trustees (the "Regulator Trustees") are individuals who are employees or officers of the Company. The fourth such trustee will be The First National Bank of Chicago, which is unaffiliated with the Company and which will serve as the property trustee (the "Property Trustee") and act as the indenture trustee for purposes of the Trust Indenture Act. The fifth such trustee is First Chicago Delaware Inc. that has its principal place of business in the State of Delaware (the "Delaware Trustee"). Pursuant to each Declaration, legal title to the Junior Subordinated Debt Trust Securities purchased by an AES Trust will be held by the Property Trustee for the benefit of the holders of the Trust Securities of such AES Trust, and the Property Trustee will have the power to exercise all rights, powers and privileges under the Indenture (as defined under "Description of the Junior Subordinated Debt Trust Securities") with respect to the Junior Subordinated Debt Trust Securities. In addition, the Property Trustee will maintain exclusive control of a segregated non-interest bearing bank account (the "Property Account") to hold all payments in respect of the Junior Subordinated Debt Trust Securities purchased by an AES Trust for the benefit of the holders of Trust Securities. The Property Trustee will promptly make distributions to the holders of the Trust Securities out of funds from the Property Account. The Preferred Securities Guarantees are separately qualified under the Trust Indenture Act and will be held by The First National Bank of Chicago, acting in its capacity as indenture trustee with respect thereto, for the benefit of the holders of the applicable Preferred Securities. As used in this Prospectus and any accompanying Prospectus Supplement, the 15 term "Property Trustee" with respect to an AES Trust refers to The First National Bank of Chicago acting either in its capacity as a Trustee under the relevant Declaration and the holder of legal title to the Junior Subordinated Debt Trust Securities purchased by that Trust or in its capacity as indenture trustee under, and the holder of, the applicable Preferred Securities Guarantee, as the context may require. The Company, as the direct or indirect owner of all of the Common Securities of each AES Trust, will have the exclusive right (subject to the terms of the related Declaration) to appoint, remove or replace Trustees and to increase or decrease the number of Trustees, provided that the number of Trustees shall be, except under certain circumstances, at least five and the majority of Trustees shall be Regular Trustees. The term of an AES Trust will be set forth in the Prospectus Supplement, but may terminate earlier as provided in such Declaration. The duties and obligations of the Trustees of an AES Trust shall be governed by the Declaration of such AES Trust, the Business Trust Act and the Trust Indenture Act. Under its Declaration, each AES Trust shall not, and the Trustees shall cause such AES Trust not to, engage in any activity other than in connection with the purposes of such AES Trust or other than as required or authorized by the related Declaration. In particular, each AES Trust shall not and the Trustees shall cause each AES Trust not to (a) invest any proceeds received by such AES Trust from holding the Junior Subordinated Debt Trust Securities purchased by such AES Trust but shall promptly distribute from the Property Account all such proceeds to holders of Trust Securities pursuant to the terms of the related Declaration and of the Trust Securities; (b) acquire any assets other than as expressly provided in the related Declaration; (c) possess Trust property for other than a Trust purpose; (d) make any loans, other than loans represented by the Junior Subordinated Debt Trust Securities; (e) possess any power or otherwise act in such a way as to vary the assets of such AES Trust or the terms of its Trust Securities in any way whatsoever; (f) issue any securities or other evidences of beneficial ownership of, or beneficial interests in, such AES Trust other than its Trust Securities; (g) incur any indebtedness for borrowed money or (h)(i) direct the time, method and place of exercising any trust or power conferred upon the Indenture Trustee (as defined under "Description of the Junior Subordinated Debt Trust Securities") with respect to the Junior Subordinated Debt Trust Securities deposited in that AES Trust as trust assets or upon the Property Trustee of that AES Trust with respect to its Preferred Securities, (ii) waive any past default that is waivable under the Indenture or the Declaration, (iii) exercise any right to rescind or annul any declaration that the principal of all of the Junior Subordinated Debt Trust Securities deposited in that AES Trust as trust assets shall be due and payable or (iv) consent to any amendment, modification or termination of the Indenture or such Junior Subordinated Debt Trust Securities, in each case where such consent shall be required, unless in the case of this clause (h) the Property Trustee shall have received an unqualified opinion of nationally recognized independent tax counsel recognized as expert in such matters to the effect that such action will not cause such AES Trust to be classified for United States federal income tax purposes as an association taxable as a corporation or a partnership and that such AES Trust will continue to be classified as a grantor trust for United States federal income tax purposes. BOOKS AND RECORDS The books and records of each AES Trust will be maintained at the principal office of such AES Trust and will be open for inspection by a holder of Preferred Securities of such AES Trust or his representative for any purpose reasonably related to his interest in such AES Trust during normal business hours. Each holder of Preferred Securities will be furnished annually with unaudited financial statements of the applicable AES Trust as soon as available after the end of such AES Trust's fiscal year. VOTING Holders of Preferred Securities will have limited voting rights, but will not be able to appoint, remove or replace, or to increase or decrease the number of, Trustees, which rights are vested exclusively in the Common Securities. 16 THE PROPERTY TRUSTEE The Property Trustee, for the benefit of the holders of the Trust Securities of an AES Trust, is authorized under each Declaration to exercise all rights under the Indenture with respect to the Junior Subordinated Debt Trust Securities deposited in such AES Trust as trust assets, including its rights as the holder of such Junior Subordinated Debt Trust Securities to enforce the Company's obligations under such Junior Subordinated Debt Trust Securities upon the occurrence of an Indenture Event of Default (as defined herein under "Description of the Junior Subordinated Debt Trust Securities--Indenture Events of Default"). The Property Trustee shall also be authorized to enforce the rights of holders of Preferred Securities of an AES Trust under the related Preferred Securities Guarantee. If any AES Trust's failure to make distributions on the Preferred Securities of an AES Trust is a consequence of the Company's exercise of any right under the terms of the Junior Subordinated Debt Trust Securities deposited in such AES Trust as trust assets to extend the interest payment period for such Junior Subordinated Debt Trust Securities, the Property Trustee will have no right to enforce the payment of distributions on such Preferred Securities until a Declaration Event of Default shall have occurred. Holders of at least a majority in liquidation amount of the Preferred Securities held by an AES Trust will have the right to direct the Property Trustee for that AES Trust with respect to certain matters under the Declaration for that AES Trust and the related Preferred Securities Guarantee. If the Property Trustee fails to enforce its rights under the Indenture or fails to enforce the Preferred Securities Guarantee, to the extent permitted by applicable law, any holder of Preferred Securities may, after a period of 30 days has elapsed from such Holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding against the Company to enforce such rights or the Preferred Securities Guarantee, as the case may be. In addition, the holders of at least 25% in aggregate liquidation preference of the outstanding Preferred Securities would have the right to directly institute proceedings for enforcement of payments to such holders of principal of, or premium, if any, or interest on the Junior Subordinated Debt Trust Securities having a principal amount equal to the aggregate liquidation preference of the Preferred Securities of such holders (a "Direct Action"). In connection with such Direct Action, the Company will be subrogated to the rights of such holder of Preferred Securities under the Declaration to the extent of any payment made by the Company to such holders of Preferred Securities in such Direct Action. Notwithstanding the foregoing, if an Event of Default under the applicable Declaration has occurred and is continuing and such event is attributable to the failure of the Company to pay interest or principal on the applicable series of Junior Subordinated Debt Trust Securities on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a holder of Preferred Securities of such AES Trust may directly institute a proceeding for enforcement of payment to such holder of the principal of or interest on the applicable series of Junior Subordinated Debt Trust Securities having a principal amount equal to the aggregate liquidation amount of the Preferred Securities of such holder (a "Holder Direct Action") on or after the respective due date specified in the applicable series of Junior Subordinated Debt Trust Securities. In connection with such Holder Direct Action, the Company will be subrogated to the rights of such holder of Preferred Securities under the applicable Declaration to the extent of any payment made by the Company to such holder of Preferred Securities in such Holder Direct Action. DISTRIBUTIONS Pursuant to each Declaration, distributions on the Preferred Securities of an AES Trust must be paid on the dates payable to the extent that the Property Trustee for that AES Trust has cash on hand in the applicable Property Account to permit such payment. The funds available for distribution to the holders of the Preferred Securities of an AES Trust will be limited to payments received by the Property Trustee in respect of the Junior Subordinated Debt Trust Securities that are deposited in the AES Trust as trust assets. If the Company does not make interest payments on the Junior Subordinated Debt Trust Securities deposited in an AES Trust as trust assets, the Property Trustee will not make distributions on the Preferred Securities of such AES Trust. Under the Declaration, if and to the extent the Company does make interest payments on the Junior Subordinated Debt Trust Securities deposited in an AES Trust as trust assets, the Property Trustee is obligated to make distributions on the Trust Securities of such AES Trust on a Pro Rata Basis (as defined below). The payment of distributions on the Preferred Securities of an AES Trust is guaranteed by AES on a subordinated basis as and to the extent set forth under "Description of the Preferred Securities Guarantee." A Preferred Securities Guarantee is a guarantee from the time of issuance of the applicable Preferred Securities, but the Preferred Securities Guarantee covers distributions and other payments on the applicable Preferred Securities only if 17 and to the extent that the Company has made a payment to the Property Trustee of interest or principal on the Junior Subordinated Debt Trust Securities deposited in the AES Trust as trust assets. As used in this Prospectus, the term "Pro Rata Basis" shall mean pro rata to each holder of Trust Securities of an AES Trust according to the aggregate liquidation amount of the Trust Securities of such AES Trust held by the relevant holder in relation to the aggregate liquidation amount of all Trust Securities of such AES Trust outstanding unless, in relation to a payment, a Declaration Event of Default under the Declaration has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each holder of the Preferred Securities of such AES Trust pro rata according to the aggregate liquidation amount of the Preferred Securities held by the relevant holder in relation to the aggregate liquidation amount of all the Preferred Securities of such AES Trust outstanding, and only after satisfaction of all amounts owed to the holders of such Preferred Securities, to each holder of Common Securities of such AES Trust pro rata according to the aggregate liquidation amount of such Common Securities held by the relevant holder in relation to the aggregate liquidation amount of all Common Securities of such AES Trust outstanding. EVENTS OF DEFAULT If an Indenture Event of Default occurs and is continuing with respect to Junior Subordinated Debt Trust Securities deposited in an AES Trust as trust assets, an Event of Default under the Declaration (a "Declaration Event of Default") of such AES Trust will occur and be continuing with respect to any outstanding Trust Securities of such AES Trust. In such event, each Declaration provides that the holders of Common Securities of such AES Trust will be deemed to have waived any such Declaration Event of Default with respect to the Common Securities until all Declaration Events of Default with respect to the Preferred Securities of such AES Trust have been cured or waived. Until all such Declaration Events of Default with respect to the Preferred Securities of such AES Trust have been so cured or waived, the Property Trustee will be deemed to be acting solely on behalf of the holders of the Preferred Securities of such AES Trust and only the holders of such Preferred Securities will have the right to direct the Property Trustee with respect to certain matters under such Declaration and consequently under the Indenture. In the event that any Declaration Event of Default with respect to the Preferred Securities of such AES Trust is waived by the holders of the Preferred Securities of such AES Trust as provided in the Declaration, the holders of Common Securities pursuant to such Declaration have agreed that such waiver also constitutes a waiver of such Declaration Event of Default with respect to the Common Securities for all purposes under the Declaration without any further act, vote or consent of the holders of the Common Securities RECORD HOLDERS Each Declaration provides that the Trustees of such AES Trust may treat the person in whose name a Certificate representing its Preferred Securities is registered on the books and records of such AES Trust as the sole holder thereof and of the Preferred Securities represented thereby for purposes of receiving distributions and for all other purposes and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such certificate or in the Preferred Securities represented thereby on the part of any person, whether or not such AES Trust shall have actual or other notice thereof. Preferred Securities will be issued in fully registered form. Unless otherwise specified in a Prospectus Supplement, Preferred Securities will be represented by a global certificate registered on the books and records of such AES Trust in the name of a depositary (the "Depositary") named in an accompanying Prospectus Supplement or its nominee. Under each Declaration: (i) such AES Trust and the Trustees thereof shall be entitled to deal with the Depositary (or any successor depositary) for all purposes, including the payment of distributions and receiving approvals, votes or consents under the related Declaration, and except as set forth in the related Declaration with respect to the Property Trustee, shall have no obligation to persons owning a beneficial interest in Preferred Securities ("Preferred Security Beneficial Owners") registered in the name of and held by the Depositary or its nominee; and (ii) the rights of Preferred Security Beneficial Owners shall be exercised only through the Depositary (or any successor depositary) and shall be limited to those established by law and agreements between such Preferred Security Beneficial Owners and the Depositary and/or its participants. With respect to Preferred Securities 18 registered in the name of and held by the Depositary or its nominee, all notices and other communications required under each Declaration shall be given to, and all distributions on such Preferred Securities shall be given or made to, the Depositary (or its successor). The specific terms of the depositary arrangement with respect to the Preferred Securities will be disclosed in the applicable Prospectus Supplement. DEBTS AND OBLIGATIONS In each Declaration, the Company has agreed to pay for all debts and obligations (other than with respect to the Trust Securities) and all costs and expenses of the applicable AES Trust, including the fees and expenses of its Trustees and any taxes and all costs and expenses with respect thereto, to which such AES Trust may become subject, except for United States withholding taxes. The foregoing obligations of the Company under each Declaration are for the benefit of, and shall be enforceable by, any person to whom any such debts, obligations, costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor has received notice thereof. Any such Creditor may enforce such obligations of the Company directly against the Company and the Company has irrevocably waived any right or remedy to require that any such Creditor take any action against any AES Trust or any other person before proceeding against the Company. The Company has agreed in each Declaration to execute such additional agreements as may be necessary or desirable in order to give full effect to the foregoing. 19 DESCRIPTION OF THE PREFERRED SECURITIES Each AES Trust may issue, from time to time, only one series of Preferred Securities having terms described in the Prospectus Supplement relating thereto. The Declaration of each AES Trust authorizes the Regular Trustees of such AES Trust to issue on behalf of such AES Trust one series of Preferred Securities. Each Declaration will be qualified as an indenture under the Trust Indenture Act. The Preferred Securities will have such terms, including distributions, redemption, voting, liquidation rights and such other preferred, deferred or other special rights or such restrictions as shall be set forth in the related Declaration or made part of such Declaration by the Trust Indenture Act. Reference is made to the Prospectus Supplement relating to the Preferred Securities of an AES Trust for specific terms, including (i) the specific designation of such Preferred Securities, (ii) the number of Preferred Securities issued by such AES Trust, (iii) the annual distribution rate (or method of calculation thereof) for Preferred Securities issued by such AES Trust, the date or dates upon which such distributions shall be payable and the record date or dates for the payment of such distributions, (iv) whether distributions on Preferred Securities issued by such AES Trust shall be cumulative, and, in the case of Preferred Securities having such cumulative distribution rights, the date or dates or method of determining the date or dates from which distribution on Preferred Securities issued by such AES Trust shall be cumulative, (v) the amount or amounts which shall be paid out of the assets of such AES Trust to the holders of Preferred Securities of such AES Trust upon voluntary or involuntary dissolution, winding-up or termination of such AES Trust, (vi) the obligation or right, if any, of such AES Trust to purchase or redeem Preferred Securities issued by such AES Trust and the price or prices at which, the period or periods within which and the terms and conditions upon which Preferred Securities issued by such AES Trust shall or may be purchased or redeemed, in whole or in part, pursuant to such obligation or right, (vii) the voting rights, if any, of Preferred Securities issued by such AES Trust in addition to those required by law, including the number of votes per Preferred Security and any requirement for the approval by the holders of Preferred Securities, or of Preferred Securities issued by one or more AES Trusts, or of both, as a condition to specified actions or amendments to the Declaration of such AES Trust, (viii) terms for any conversion or exchange into other securities and (ix) any other relevant rights, preferences, privileges, limitations or restrictions of Preferred Securities issued by such AES Trust consistent with the Declaration of such AES Trust or with applicable law. All Preferred Securities offered hereby will be guaranteed by the Company as and to the extent set forth below under "Description of the Preferred Securities Guarantees." Certain United States federal income tax considerations applicable to any offering of Preferred Securities will be described in the Prospectus Supplement relating thereto. In connection with the issuance of Preferred Securities, each AES Trust will issue one series of Common Securities. The Declaration of each AES Trust authorizes the Regular Trustees of such trust to issue on behalf of such AES Trust one series of Common Securities having such terms including distributions, redemption, voting, liquidation rights or such restrictions as shall be set forth therein. The terms of the Common Securities issued by an AES Trust will be substantially identical to the terms of the Preferred Securities issued by such AES Trust and the Common Securities will rank pari passu, and payments will be made thereon on a Pro Rata Basis with the Preferred Securities except that if a Declaration Event of Default occurs and is continuing, the rights of the holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and maturity will be subordinated to the rights of the holders of such Preferred Securities. Except in certain limited circumstances, the Common Securities issued by an AES Trust will also carry the right to vote and to appoint, remove or replace any of the Trustees of that AES Trust. All of the Common Securities of an AES Trust will be directly or indirectly owned by the Company. 20 DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES Set forth below is a summary of information concerning the Preferred Securities Guarantees that will be executed and delivered by the Company for the benefit of the holders from time to time of Preferred Securities. Each Preferred Security Guarantee will be separately qualified under the Trust Indenture Act and will be held by The First National Bank of Chicago, acting in its capacity as indenture trustee with respect thereto, for the benefit of holders of the Preferred Securities of the applicable AES Trust. The terms of each Preferred Securities Guarantee will be those set forth in such Preferred Securities Guarantee and those made part of such Guarantee by the Trust Indenture Act. This description summarizes the material terms of the Preferred Securities Guarantees and is qualified in its entirety by reference to the form of Preferred Securities Guarantee, which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part, and the Trust Indenture Act. Section and Article references used herein are references to the provisions of the form of Preferred Securities Guarantee. GENERAL Pursuant to each Preferred Securities Guarantee, the Company will irrevocably and unconditionally agree, to the extent set forth therein, to pay in full, to the holders of the Preferred Securities issued by an AES Trust, the Guarantee Payments (as defined herein) (without duplication of amounts theretofore paid by such AES Trust), to the extent not paid by such AES Trust, regardless of any defense, right of set-off or counterclaim that such AES Trust may have or assert. The following payments or distributions with respect to Preferred Securities issued by an AES Trust to the extent not paid or made by such AES Trust (the "Guarantee Payments"), will be subject to the Preferred Securities Guarantee (without duplication): (i) any accrued and unpaid distributions on such Preferred Securities, and the redemption price, including all accrued and unpaid distributions to the date of redemption, with respect to any Preferred Securities called for redemption by such AES Trust but if and only to the extent that in each case the Company has made a payment to the related Property Trustee of interest or principal on the Junior Subordinated Debt Trust Securities deposited in such AES Trust as trust assets and (ii) upon a voluntary or involuntary dissolution, winding-up or termination of such AES Trust (other than in connection with the distribution of such Junior Subordinated Debt Trust Securities to the holders of Preferred Securities or the redemption of all of the Preferred Securities upon the maturity or redemption of such Junior Subordinated Debt Trust Securities) the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid distributions on such Preferred Securities to the date of payment, to the extent such AES Trust has funds available therefor or (b) the amount of assets of such AES Trust remaining available for distribution to holders of such Preferred Securities in liquidation of such AES Trust. The Company's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Company to the holders of Preferred Securities or by causing the applicable AES Trust to pay such amounts to such holders. The Preferred Securities Guarantee is a guarantee from the time of issuance of the applicable Preferred Securities, but the Preferred Securities Guarantee covers distributions and other payments on such Preferred Securities only if and to the extent that the Company has made a payment to the Property Trustee of interest or principal on the Junior Subordinated Debt Trust Securities deposited in the applicable AES Trust as trust assets. If the Company does not make interest or principal payments on the Junior Subordinated Debt Trust Securities deposited in the applicable AES Trust as trust assets, the Property Trustee will not make distributions of the Preferred Securities of such AES Trust and the AES Trust will not have funds available therefor. The Company's obligations under the Declaration for each Trust, the Preferred Securities Guarantee issued with respect to Preferred Securities issued by that Trust, the Junior Subordinated Debt Trust Securities purchased by that Trust and the related Indenture (as defined below) in the aggregate will provide a full and unconditional guarantee on a subordinated basis by the Company of payments due on the Preferred Securities issued by that Trust. 21 CERTAIN COVENANTS OF THE COMPANY In each Preferred Securities Guarantee, the Company will covenant that, so long as any Preferred Securities issued by the applicable AES Trust remain outstanding, the Company will not (A) declare or pay any dividends on, or redeem, purchase, acquire or make a distribution or liquidation payment with respect to, any of its common stock or preferred stock or make any guarantee payment with respect thereto or (B) make any payment of interest, premium (if any) or principal on any debt securities issued by the Company which rank pari passu with or junior to the Junior Subordinated Debt Trust Securities, if at such time (i) the Company shall be in default with respect to its Guarantee Payments or other payment obligations under the Preferred Securities Guarantee, (ii) there shall have occurred any Declaration Event of Default under the related Declaration or (iii) in the event that Junior Subordinated Debt Trust Securities are issued to an AES Trust in connection with the issuance of Trust Securities by such AES Trust, the Company shall have given notice of its election to defer payments of interest on such Junior Subordinated Debt Trust Securities by extending the interest payment period as provided in the terms of the Junior Subordinated Debt Trust Securities and such period, or any extension thereof, is continuing: provided that (a) the Company will be permitted to pay accrued dividends (and cash in lieu of fractional shares) upon the conversion of Preferred Stock of the Company as may be outstanding from time to time, in each case in accordance with the terms of such stock and (ii) the foregoing will not apply to stock dividends paid by the Company. In addition, so long as any Preferred Securities remain outstanding, the Company has agreed (i) to remain the sole direct or indirect owner of all of the outstanding Common Securities issued by the applicable AES Trust and shall not cause or permit the Common Securities to be transferred except to the extent permitted by the related Declaration; provided that any permitted successor of the Company under the Indenture may succeed to the Company's ownership of the Common Securities issued by the applicable AES Trust and (ii) to use reasonable efforts to cause such AES Trust to continue to be treated as a grantor trust for United States federal income tax purposes except in connection with a distribution of Junior Subordinated Debt Trust Securities. AMENDMENTS AND ASSIGNMENT Except with respect to any changes that do not adversely affect the rights of holders of Preferred Securities (in which case no consent will be required), each Preferred Securities Guarantee may be amended only with the prior approval of the holders of not less than 662/3% in liquidation amount of the outstanding Preferred Securities issued by the applicable AES Trust. The manner of obtaining any such approval of holders of such Preferred Securities will be set forth in an accompanying Prospectus Supplement. All guarantees and agreements contained in a Preferred Securities Guarantee shall bind the successors, assignees, receivers, trustees and representatives of the Company and shall inure to the benefit of the holders of the Preferred Securities of the applicable AES Trust then outstanding. Except in connection with a consolidation, merger or sale involving the Company that is permitted under the Indenture, the Company may not assign its obligations under any Preferred Securities Guarantee. TERMINATION OF THE PREFERRED SECURITIES GUARANTEES Each Preferred Securities Guarantee will terminate and be of no further force and effect as to the Preferred Securities issued by the applicable AES Trust upon full payment of the redemption price of all Preferred Securities of such AES Trust, or upon distribution of the Junior Subordinated Debt Trust Securities to the holders of the Preferred Securities of such AES Trust in exchange for all of the Preferred Securities issued by such AES Trust, or upon full payment of the amounts payable upon liquidation of such AES Trust. Notwithstanding the foregoing, each Preferred Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of Preferred Securities issued by the applicable AES Trust must restore payment of any sums paid under such Preferred Securities or such Guarantee. STATUS OF THE PREFERRED SECURITIES GUARANTEES The Company's obligations under each Preferred Securities Guarantee to make the Guarantee Payments will constitute an unsecured obligation of the Company and will rank (i) subordinate and junior in right of payment to all other liabilities of the Company, including the Junior Subordinated Debt Trust Securities, except those made pari passu 22 or subordinate by their terms, and (ii) senior to all capital stock now or hereafter issued by the Company and to any guarantee nor or hereafter entered into by the Company in respect of any of its capital stock. The Company's obligations under each Preferred Securities Guarantee will rank pari passu with each other Preferred Securities Guarantee. Because the Company is a holding company, the Company's obligations under each Preferred Securities Guarantee are also effectively subordinated to all existing and future liabilities, including trade payables, of the Company's subsidiaries, except to the extent that the Company is a creditor of the subsidiaries recognized as such. Each Declaration provides that each holder of Preferred Securities issued by the applicable AES Trust by acceptance thereof agrees to the subordination provisions and other terms of the related Preferred Securities Guarantee. Each Preferred Securities Guarantee will constitute a guarantee of payment and not of collection (that is, the guaranteed party may institute a legal proceeding directly against the guarantor to enforce its rights under the guarantee without first instituting a legal proceeding against any other person or entity). Each Preferred Securities Guarantee will be deposited with The First National Bank of Chicago, as indenture trustee, to be held for the benefit of the holders of the Preferred Securities issued by the applicable AES Trust. The First National Bank of Chicago shall enforce the Preferred Securities Guarantee on behalf of the holders of the Preferred Securities issued by the applicable AES Trust. The holders of not less than a majority in aggregate liquidation amount of the Preferred Securities issued by the applicable AES Trust have the right to direct the time, method and place of conducting any proceeding for any remedy available in respect of the related Preferred Securities Guarantee, including the giving of directions to The First National Bank of Chicago . If The First National Bank of Chicago fails to enforce such Preferred Securities Guarantee as above provided, any holder of Preferred Securities issued by the applicable AES Trust may institute a legal proceeding directly against the Company to enforce its rights under such Preferred Securities Guarantee, without first instituting a legal proceeding against the applicable AES Trust or any other person or entity. Notwithstanding the foregoing, if the Company has failed to make a guarantee payment, a holder of Preferred Securities may directly institute a proceeding against the Company for enforcement of the Preferred Securities Guarantee for such payment. MISCELLANEOUS The Company will be required to provide annually to The First National Bank of Chicago a statement as to the performance by the Company of certain of its obligations under the Preferred Securities Guarantees and as to any default in such performance. The Company is required to file annually with The First National Bank of Chicago an officer's certificate as to the Company's compliance with all conditions under Preferred Securities Guarantees. The First National Bank of Chicago, prior to the occurrence of a default, undertakes to perform only such duties as are specifically set forth in the applicable Preferred Securities Guarantee and, after default with respect to a Preferred Securities Guarantee, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provision, The First National Bank of Chicago is under no obligation to exercise any of the powers vested in it by a Preferred Securities Guarantee at the request of any holder of Preferred Securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. GOVERNING LAW The Guarantees will be governed by, and construed in accordance with, the laws of the State of New York. 23 DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT TRUST SECURITIES Junior Subordinated Debt Trust Securities may be issued from time to time in one or more series under an Indenture (the "Indenture") between the Company and The First National Bank of Chicago, as trustee (the "Indenture Trustee"). The form of Junior Subordinated Debt Trust Securities Indenture has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part. The following description summarizes the material terms of the Indenture, and is qualified in its entirety by reference to the Indenture and the Trust Indenture Act. Whenever particular provisions or defined terms in the Indenture are referred to herein, such provisions or defined terms are incorporated by reference herein. Section and article references used herein are references to provisions of the Indenture. GENERAL The Junior Subordinated Debt Trust Securities will be unsecured, junior subordinated obligation of the Company. The Indenture does not limit the amount of additional indebtedness the Company or any of its subsidiaries may incur. Since the Company is a holding company, the Company's rights and the rights of its creditors, including the holders of Junior Subordinated Debt Securities, to participate in the assets of any subsidiary upon the latter's liquidation or recapitalization will be subject to the prior claims of the subsidiary's creditors, except to the extent that the Company may itself be a creditor with recognized claims against the subsidiary. The Indenture does not limit the aggregate principal amount of indebtedness which may be issued thereunder and provides that Junior Subordinated Debt Trust Securities may be issued thereunder from time to time in one or more series. The Junior Subordinated Debt Trust Securities are issuable in one or more series pursuant to an indenture supplemental to the Indenture. In the event Junior Subordinated Debt Trust Securities are issued to an AES Trust or a Trustee of such trust in connection with the issuance of Trust Securities by such AES Trust, such Junior Subordinated Debt Trust Securities subsequently may be distributed pro rata to the holders of such Trust Securities in connection with the dissolution of such AES Trust upon the occurrence of certain events described in the Prospectus Supplement relating to such Trust Securities. Only one series of Junior Subordinated Debt Trust Securities will be issued to an AES Trust or a trustee of such trust in connection with the issuance of Trust Securities by such AES Trust. Reference is made to the Prospectus Supplement which will accompany this Prospectus for the following terms of the series of Junior Subordinated Debt Trust Securities being offered thereby (to the extent such terms are applicable to the Junior Subordinated Debt Trust Securities): (i) the specific designation of such Junior Subordinated Debt Trust Securities, aggregate principal amount, purchase price and premium, if any; (ii) any limit on the aggregate principal amount of such Junior Subordinated Debt Trust Securities; (iii) the date or dates on which the principal of such Junior Subordinated Debt Trust Securities is payable and the right, to extend or defer such date or dates; (iv) the rate or rates at which such Junior Subordinated Debt Trust Securities will bear interest or the method of calculating such rate or rates, if any; (v) the date or dates from which such interest shall accrue, the interest payment dates on which such interest will be payable or the manner of determination of such interest payment dates and the record dates for the determination of holders to whom interest is payable on any such interest payment dates; (vi) the right, if any, to extend the interest payment periods and the duration of such extension; (vii) the period or periods within which, the price or prices at which, and the terms and conditions upon which, such Junior Subordinated Debt Trust Securities may be redeemed, in whole or in part, at the option of the Company; (viii) the obligation, if any of the Company to redeem or purchase such Junior Subordinated Debt Trust Securities pursuant to any sinking fund or analogous provisions or at the option of the holder thereof and the period or periods for which, the price or prices at which, and the terms and conditions upon which, such Junior Subordinated Debt Trust Securities shall be redeemed or purchased, in whole or part, pursuant to such obligation; (ix) any exchangeability, conversion or prepayment provisions of the Junior Subordinated Debt Trust Securities; (x) any applicable United States federal income tax consequences, including whether and under what circumstances the Company will pay additional amounts on the Junior Subordinated Debt Trust Securities held by a person who is not a U.S. person in respect of any tax, assessment or governmental charge withheld 24 or deducted and, if so, whether the Company will have the option to redeem such Junior Subordinated Debt Trust Securities rather than pay such additional amounts; (xi) the form of such Junior Subordinated Debt Trust Securities; (xii) if other than denominations of $25 or any integral multiple thereof, the denominations in which such Junior Subordinated Debt Trust Securities shall be issuable; (xiii) any and all other terms with respect to such series, including any modification of or additions to the events of default or covenants provided for with respect to such series, including any modification of or additions to the events of default or covenants provided for with respect to the Junior Subordinated Debt Trust Securities, and any terms which may be required by or advisable under applicable laws or regulations not inconsistent with the Indenture; and (xiv) whether such Junior Subordinated Debt Trust Securities are issuable as a global security, and in such case, the identity of the depositary. Unless otherwise indicated in the Prospectus Supplement relating thereto, the Junior Subordinated Debt Trust Securities will be issued in United States dollars in fully registered form without coupons in denominations of $25 or integral multiples thereof. Junior Subordinated Debt Trust Securities may be presented for exchange and Junior Subordinated Debt Trust Securities in registered form may be presented for transfer in the manner, at the places and subject to the restrictions set forth in the Junior Subordinated Debt Trust Securities and the Prospectus Supplement. Such services will be provided without charge, other than any tax or other governmental charge payable in connection therewith, but subject to the limitations provided in the Junior Subordinated Debt Trust Securities. Junior Subordinated Debt Trust Securities in bearer form and the coupons, if any, appertaining thereto will be transferable by delivery. Junior Subordinated Debt Trust Securities may bear interest at a fixed rate or a floating rate. Junior Subordinated Debt Trust Securities bearing no interest or interest at a rate that at the time of issuance is below the prevailing market rate will be sold at a discount below their stated principal amount. Special United States federal income tax considerations applicable to any such discounted Junior Subordinated Debt Trust Securities or to certain Junior Subordinated Debt Trust Securities issued at par which are treated as having been issued at a discount for United States federal income tax purposes will be described in the relevant Prospectus Supplement. CERTAIN COVENANTS OF THE COMPANY APPLICABLE TO THE JUNIOR SUBORDINATED DEBT SECURITIES If Junior Subordinated Debt Trust Securities are issued to an AES Trust in connection with the issuance of Trust Securities by such AES Trust, the Company will covenant in the Indenture that, so long as the Preferred Securities issued by the applicable AES Trust remain outstanding, the Company will not declare or pay any dividends on, or redeem, purchase, acquire or make a distribution or liquidation payment with respect to, any of its common stock or preferred stock or make any guarantee payment with respect to, any of its common stock or preferred stock or make any guarantee payment with respect thereto if at such time (i) the Company shall be in default with respect to its Guarantee Payments or other payment obligations under the related Preferred Securities Guarantee, (ii) there shall have occurred any Indenture Event of Default with respect to the Junior Subordinated Debt Trust Securities or (iii) in the event that Junior Subordinated Debt Trust Securities are issued to an AES Trust in connection with the issuance of Trust Securities by such AES Trust, the Company shall have given notice of its election to defer payments of interest on such Junior Subordinated Debt Trust Securities by extending the interest payment period as provided in the terms of such Junior Subordinated Debt Trust Securities and such period, or any extension thereof, is continuing; provided that (x) the Company will be permitted to pay accrued dividends (and cash in lieu of fractional shares) upon the conversion of any Preferred Stock of the Company as may be outstanding from time to time, in each case in accordance with the terms of such stock and (y) the foregoing will not apply to any stock dividends paid by the Company. In addition, if Junior Subordinated Debt Trust Securities are issued to an AES Trust in connection with the issuance of Trust Securities by such AES Trust, for so long as the Preferred Securities issued by the applicable AES Trust remain outstanding, the Company has agreed (i) to remain the sole direct or indirect owner of all of the outstanding Common Securities issued by the applicable AES Trust and not to cause or permit the Common Securities to be transferred except to the extent permitted by the related Declaration; provided that any permitted successor of the Company under the Indenture may succeed to the Company's ownership of the Common Securities issued by the applicable AES Trust, (ii) to comply fully with all of its obligations and agreements contained in the related Declaration and (iii) not to take any action which would cause the applicable AES Trust to cease to be treated as a grantor trust for United States federal income tax purposes, except in connection with a distribution of Junior Subordinated Debt Trust Securities. 25 SUBORDINATION The payment of principal of, premium, if any, and interest on the Junior Subordinated Trust Securities will, to the extent and in the manner set forth in the Indenture, be subordinated in right of payment to the prior payment in full, in cash or cash equivalents, of all Senior and Subordinated Debt of the Company. Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, receivership, reorganization, assignment for the benefit of creditors, marshaling of assets and liabilities or any bankruptcy, insolvency or similar proceedings of the Company, the holders of all Senior and Subordinated Debt will first be entitled to receive payment in full of all amounts due or to become due thereon before the holders of the Junior Subordinated Debt Trust Securities will be entitled to receive any payment in respect of the principal of, premium, if any, or interest on the Junior Subordinated Debt Trust Securities. No payments on account of principal, premium, if any, or interest in respect of the Junior Subordinated Debt Trust Securities may be made by the Company if there shall have occurred and be continuing a default in any payment with respect to Senior and Subordinated Debt or during certain periods when an event of default under certain Senior and Subordinated Debt permits the lenders thereunder to accelerate the maturity of such Senior and Subordinated Debt. In addition, during the continuance of any other event of default (other than a payment default) with respect to Designated Senior and Subordinated Debt pursuant to which the maturity thereof may be accelerated, from and after the date of receipt by the Trustee of written notice from holders of such Designated Senior and Subordinated Debt or from an agent of such holders, no payments on account of principal, premium, if any, or interest in respect of the Junior Subordinated Debt Trust Securities may be made by the Company during a period (the "Payment Blockage Period") commencing on the date of delivery of such notice and ending 179 days thereafter (unless such Payment Blockage Period shall be terminated by written notice to the Trustee from the holders of such Designated Senior and Subordinated Debt or from an agent of such holders, or such event of default has been cured or waived or has ceased to exist). Only one Payment Blockage Period may be commenced with respect to the Junior Subordinated Debt Trust Securities during any period of 360 consecutive days. No event of default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior and Subordinated Debt initiating such Payment Blockage Period shall be or be made the basis for the commencement of any subsequent Payment Blockage Period by the holders of such Designated Senior and Subordinated Debt, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days. By reason of such subordination, in the event of insolvency, funds that would otherwise be payable to holders of Junior Subordinated Debt Trust Securities will be paid to the holders of Senior and Subordinated Debt of the Company to the extent necessary to pay such Debt in full, and the Company may be unable to meet fully its obligations with respect to the Junior Subordinated Debt Trust Securities. "Debt" is defined to mean, with respect to any person at any date of determination (without duplication), (i) all indebtedness of such person for borrowed money, (ii) all obligations of such person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such person in respect of letters of credit or bankers' acceptance or other similar instruments (or reimbursement obligations with respect thereto), (iv) all obligations of such person to pay the deferred purchase price of property or services, except trade payables, (v) all obligations of such person as lessee under capitalized leases, (vi) all Debt of others secured by a lien on any asset of such person, whether or not such Debt is assumed by such person; provided that, for purposes of determining the amount of any Debt of the type described in this clause, if recourse with respect to such Debt is limited to such asset, the amount of such Debt shall be limited to the lesser of the fair market value of such asset or the amount of such Debt, (vii) all Debt of others guaranteed by such person to the extent such Debt is guaranteed by such person, (viii) all redeemable stock valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends and (ix) to the extent not otherwise included in this definition, all obligations of such person under currency agreements and interest rate agreements. 26 "Designated Senior and Subordinated Debt" is defined to mean (i) Debt under the Credit Agreement dated as of May 20, 1996 (the "Credit Agreement") among the Company, the Banks named on the signature pages thereof and the Morgan Guaranty Trust Company of New York, as agent for the banks, as such Credit Agreement has been and may be amended, restated, supplemented or otherwise modified from time to time and (ii) Debt constituting Senior and Subordinated Debt which, at the time of its determination, (A) has an aggregate principal amount of at least $30 million and (B) is specifically designated in the instrument evidencing such Senior and Subordinated Debt as "Designated Senior and Subordinated Debt" by the Company. "Senior and Subordinated Debt" is defined to mean the principal of (and premium, if any) and interest on all Debt of the Company whether created, incurred or assumed before, on or after the date of the Indenture; provided that such Senior and Subordinated Debt shall not include (i) Debt of the Company to any Affiliate, (ii) Debt of the Company that, when incurred and without respect to any election under Section 1111(b) of Title 11, U.S. Code, was without recourse, (iii) any other Debt of the Company which by the terms of the instrument creating or evidencing the same are specifically designated as not being senior in right of payment to the Junior Subordinated Debt Trust Securities, and in particular the Junior Subordinated Debt Trust Securities shall rank pari passu with all other debt securities and guarantees issued to any trust, partnership or other entity affiliated with the Company which is a financing vehicle of the Company in connection with an issuance of preferred securities by such financing entity, and (iv) redeemable stock of the Company. INDENTURE EVENTS OF DEFAULT The Indenture provides that any one or more of the following described events, which has occurred and is continuing, constitutes an "Indenture Event of Default" with respect to each series of Junior Subordinated Debt Securities: (a) failure for 30 days to pay interest on the Junior Subordinated Debt Trust Securities of such series when due; provided that a valid extension of the interest payment period by the Company shall not constitute a default in the payment of interest for this purpose; (b) failure to pay principal of or premium, if any, on the Junior Subordinated Debt Trust Securities of such series when due whether at maturity, upon redemption, by declaration or otherwise; (c) failure to observe or perform any other covenant contained in the Indenture with respect to such series for 90 days after written notice to the Company from the Indenture Trustee or the holders of at least 25% in principal amount of the outstanding Junior Subordinated Debt Trust Securities of such series; or (d) certain events in bankruptcy, insolvency or reorganization of the Company. In each and every such case, unless the principal of all the Junior Subordinated Debt Trust Securities of that series shall have already become due and payable, either the Indenture Trustee or the holders of not less than 25% in aggregate principal amount of the Junior Subordinated Debt Trust Securities of that series then outstanding, by notice in writing to the Company (and to the Indenture Trustee if given by such holders), may declare the principal of all the Junior Subordinated Debt Trust Securities of that series to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable. The holders of a majority in aggregate outstanding principal amount of the Junior Subordinated Debt Trust Securities of that series have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee. (Section 6.06) The Indenture Trustee or the holders of not less than 25% in aggregate outstanding principal amount of the Junior Subordinated Debt Trust Securities of that series may declare the principal due and payable immediately upon an Indenture Event of Default with respect to such series, but the holders of a majority in aggregate outstanding principal amount of Junior Subordinated Debt Trust Securities of such series may annul such declaration and waive the default if the default has been cured and a sum sufficient to pay all matured 27 installments of interest and principal otherwise than by acceleration and any premium has been deposited with the Indenture Trustee. The holders of a majority in aggregate outstanding principal amount of the Junior Subordinated Debt Trust Securities of that series may, on behalf of the holders of all the Junior Subordinated Debt Trust Securities of that series, waive any past default, except a default in the payment of principal, premium, if any, or interest (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal otherwise than by acceleration and any premium has been deposited with the Indenture Trustee) or a call for redemption of Junior Subordinated Debt Trust Securities. The Company is required to file annually with the Indenture Trustee a certificate as to whether or not the Company is in compliance with all the conditions and covenants under the Indenture. If Junior Subordinated Debt Trust Securities are issued to an AES Trust in connection with the issuance of Trust Securities of such AES Trust, then under the applicable Declaration an Indenture Event of Default with respect to such series of Junior Subordinated Debt Trust Securities will constitute a Declaration Event of Default. MODIFICATION OF THE INDENTURE The Indenture contains provisions permitting the Company and the Indenture Trustee, with the consent of the holders of not less than a majority in principal amount of the outstanding Junior Subordinated Debt Trust Securities of each series affected, to modify the Indenture or any supplemental indenture affecting the rights of the holders of such Junior Subordinated Debt Securities; provided that no such modification may, without the consent of the holder of each outstanding Junior Subordinated Debt Trust Security affected thereby, (i) extend the fixed maturity of any Junior Subordinated Debt Trust Securities of any series, reduce the principal amount thereof, reduce the rate or extent the time of payment of interest thereon, reduce any premium payable upon the redemption thereof, without the consent of the holder of each Junior Subordinated Debt Trust Security so affected or (ii) reduce the percentage of Junior Subordinated Debt Trust Securities, the holders of which are required to consent to any such modification, without the consent of the holders of each Junior Subordinated Debt Trust Security then outstanding and affected thereby. BOOK-ENTRY AND SETTLEMENT If any Junior Subordinated Debt Trust Securities of a series are represented by one or more global securities (each, a "Global Security"), the applicable Prospectus Supplement will describe the circumstances, if any, under which beneficial owners of interests in any such Global Security may exchange such interests for Junior Subordinated Debt Trust Securities of such series and of like tenor and principal amount in any authorized form and denomination. Principal of and any premium and interest on a Global Security will be payable in the manner described in the applicable Prospectus Supplement. The specific terms of the depositary arrangement with respect to any portion of a series of Junior Subordinated Debt Trust Securities to be represented by a Global Security will be described in the applicable Prospectus Supplement. CONSOLIDATION, MERGER AND SALE The Indenture will provide that the Company may not consolidate with or merge into any other person or transfer or lease its properties and assets substantially as an entirety to any person and may not permit any person to merge into or consolidate with the Company unless (i) either the Company will be the resulting or surviving entity or any successor or purchaser is a corporation organized under the laws of the United States of America, any State or the District of Columbia, and any such successor or purchaser expressly assumes the Company's obligations under the Indenture and (ii) immediately after giving effect to the transaction no Event of Default shall have occurred and be continuing. (Section 10.01) 28 DEFEASANCE AND DISCHARGE Under the terms of the Indenture, the Company will be discharged from any and all obligations in respect of the Junior Subordinated Debt Trust Securities of a series (except in each case for certain obligations to register the transfer or exchange of such Junior Subordinated Debt Trust Securities, replace stolen, lost or mutilated Junior Subordinated Debt Trust Securities of that series, maintain paying agencies and hold moneys for payment in trust) if (i) the Company irrevocably deposits with the Indenture Trustee cash or U.S. Government Obligations, as trust funds in an amount certified to be sufficient to pay at maturity (or upon redemption) the principal of, premium, if any, and interest on all outstanding Junior Subordinated Debt Trust Securities of such series; (ii) such deposit will not result in a breach or violation of, or constitute a default under, any agreement or instrument to which the Company is a party or by which it is bound; (iii) the Company delivers to the Indenture Trustee an opinion of counsel to the effect that the holders of the Junior Subordinated Debt Trust Securities of such series will not recognize income, gain or loss for United States federal income tax purposes as a result of such defeasance and that defeasance will not otherwise alter holders' United States federal income tax treatment of principal, premium and interest payments on such Junior Subordinated Debt Trust Securities of such series (such opinion must be based on a ruling of the Internal Revenue Service or a change in United States federal income tax law occurring after the date of such Junior Subordinated Debt Trust Securities Indenture, since such a result would not occur under current tax law); (iv) the Company has delivered to the Indenture Trustee an Officer's Certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to the defeasance contemplated by such provision have been complied with; and (v) no event or condition shall exist that, pursuant to the subordination provisions applicable to such series, would prevent the Company from making payments of principal of, premium, if any, and interest on the Junior Subordinated Debt Trust Securities of such series at the date of the irrevocable deposit referred to above. GOVERNING LAW The Indenture and the Junior Subordinated Debt Trust Securities will be governed by the laws of the State of New York. INFORMATION CONCERNING THE INDENTURE TRUSTEE The Indenture Trustee, prior to default, undertakes to perform only such duties as are specifically set forth in the Indenture and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provision, the Indenture Trustee is under no obligation to exercise any of the powers vested in it by the Junior Subordinated Debt Trust Securities Indenture at the request of any holder of Junior Subordinated Debt Trust Securities, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities that might be incurred thereby. The Indenture Trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. The Company and its subsidiaries maintain ordinary banking and trust relationships with The First National Bank of Chicago and its affiliates. MISCELLANEOUS The Company will have the right at all times to assign any of its rights or obligations under the Indenture to a direct or indirect wholly-owned subsidiary of the Company; provided that, in the event of any such assignment, the Company will remain jointly and severally liable for all such obligations. Subject to the foregoing, the Indenture will be binding upon and inure to the benefit of the parties thereto and their respective successors and assigns. The Indenture provides that it may not otherwise be assigned by the parties thereto other than by the Company to a successor or purchaser pursuant to a consolidation, merger or sale permitted by the Indenture. 29 PLAN OF DISTRIBUTION The Company may sell any series of Junior Subordinated Debt Trust Securities and the AES Trusts may sell the Preferred Securities being offered hereby in any of three ways (or in any combination thereof): (i) through underwriters or dealers; (ii) directly to a limited number of purchasers or to a single purchaser; or (iii) through agents. The Prospectus Supplement with respect to any Offered Securities will set forth the terms of the offering of such Offered Securities, including the name or names of any underwriters, dealers or agents and the respective amounts of such Offered Securities underwritten or purchased by each of them, the initial public offering price of such Offered Securities and the proceeds to the Company from such sale, any discounts, commissions or other items constituting compensation from the Company and any discounts, commissions or concessions allowed or reallowed or paid to dealers and any securities exchanges on which such Offered Securities may be listed. Any public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. If underwriters are used in the sale of any Offered Securities, such Offered Securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. Such Offered Securities may be either offered to the public through underwriting syndicates represented by managing underwriters, or directly by underwriters. Unless otherwise set forth in the Prospectus Supplement, the obligations of the underwriters to purchase such Offered Securities will be subject to certain conditions precedent and the underwriters will be obligated to purchase all of such Offered Securities if any are purchased. Offered Securities may be sold directly by the Company or through agents designated by the Company from time to time. Any agent involved in the offer or sale of Offered Securities in respect of which this Prospectus is delivered will be named, and any commissions payable by the Company to such agent will be set forth, in the Prospectus Supplement. Unless otherwise indicated in the Prospectus Supplement, any such agent will be acting on a best efforts basis for the period of its appointment. If so indicated in the Prospectus Supplement, the Company will authorize underwriters, dealers or agents to solicit offers by certain purchasers to purchase Offered Securities from the Company at the public offering price set forth in the Prospectus Supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. Such contracts will be subject only to those conditions set forth in the Prospectus Supplement, and the Prospectus Supplement will set forth the commission payable for solicitation of such contracts. Agents and underwriters may be entitled under agreements entered into with the Company to indemnification by the Company against certain civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments which the agents or underwriters may be required to make in respect thereof. Agents and underwriters may be customers of, engage in transactions with, or perform services for the Company in the ordinary course of business. LEGAL MATTERS Unless otherwise indicated in the applicable Prospectus Supplement, certain matters of Delaware law relating to the validity of the Preferred Securities will be passed upon by Richards, Layton & Finger, Wilmington. The legality of the Junior Subordinated Debt Trust Securities and the Preferred Securities offered hereby will be passed upon for the Company by Davis Polk & Wardwell, New York, New York. EXPERTS The financial statements as of December 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1996 incorporated by reference in this Prospectus from the Company's Current Report on Form 8-K filed on November 6, 1997 and the related financial statement schedules incorporated by reference in the Registration 30 Statement from the Company's Annual Report on Form 10-K have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports which are incorporated by reference herein, and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The financial statements of Companhia Energetica de Minas Gerais -- CEMIG for the years ended December 31, 1996 and 1995, prepared in accordance with accounting principles generally accepted in Brazil, incorporated by reference in this Prospectus from Item 7 of the Current Report on Form 8-K of The AES Corporation filed July 16, 1997, have been audited by Price Waterhouse Auditores Independentes, Belo Horizonte, Brazil, independent accountants, as stated in their report, which is incorporated herein by reference, and has been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 31 ================================================================================ NO PERSON HAS BEEN AUTHORIZED TO GIVE $1,500,000,000 ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE THE AES CORPORATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS JUNIOR SUBORDINATED SUPPLEMENT, IN CONNECTION WITH ANY DEBT SECURITIES OFFERING CONTEMPLATED HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR AES TRUST III REPRESENTATIONS MUST NOT BE RELIED UPON AES TRUST IV AS HAVING BEEN AUTHORIZED BY THE AES TRUST V COMPANY, ANY UNDERWRITER, AGENT OR DEALER. NEITHER THE DELIVERY OF THIS PREFERRED SECURITIES PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR ----------------------- THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS PROSPECTUS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR ----------------------- THEREOF. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT SHALL CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. ----------------------- TABLE OF CONTENTS PAGE ---- Available Information................. 1 Incorporation of Certain Information by Reference........................ 1 Use of Proceeds....................... 2 Ratios of Earnings to Fixed Charges... 2 The Company........................... 3 Risk Factors.......................... 6 The AES Trusts........................14 Description of Preferred Securities...19 Description of Preferred Securities Guarantees...........................20 Description of Junior Subordinated Debt Trust Securities................23 Plan of Distribution..................29 Legal Matters.........................29 Experts...............................29 ,1997 ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the expenses in connection with the issuance and distribution of the securities being registered, other than underwriting discounts and commissions. All of the amounts shown are estimates, except the SEC registration fee. SEC Registration filing fee............................$ 454,545 Printing and engraving expenses........................$ 150,000 Blue sky fees and expenses (including counsel).........$ 10,000 Legal fees and expenses................................$ 500,000 Fees of accountants....................................$ 150,000 Fees of trustee........................................$ 15,000 ------------ Total...............................................$ 1,279,545 ============ ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Under the Company's By-Laws, and in accordance with Section 145 of the Delaware General Corporation Law ("GCL"), the Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than any action or suit by or in the right of the Company to procure a judgment in its favor, which is hereinafter referred to as a "derivative action") by reason of the fact that such person is or was a director, officer or employee of the Company, or is or was serving in such capacity or as an agent at the request of the Company for another entity, to the full extent authorized by Delaware law, against expenses (including, but not limited to, attorneys' fees), judgments, fines and amounts actually and reasonably incurred in connection with the defense or settlement of such action, suit or proceeding if such person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe was unlawful. Agents of the Company may be similarly indemnified, at the discretion of the Board of Directors. Under Section 145 of the GCL, a similar standard of care is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with the defense or settlement of such an action and then, where the person is adjudged to be liable to the Company, only if and to the extent that the Court of Chancery of the State of Delaware or the court in which such action was brought determines that such person is fairly and reasonably entitled to such indemnity and only for such expenses as the court shall deem proper. Pursuant to Company's By-Laws, a person eligible for indemnification may have the expenses incurred in connection with any matter described above paid in advance of a final disposition by the Company. However, such advances will only be made upon the delivery of an undertaking by or on behalf of the indemnified person to repay all amounts so advanced if it is ultimately determined that such person is not entitled to indemnification. In addition, under the Company's By-Laws, the Company may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company or of another corporation against any liability asserted against and incurred by such person in such capacity, or arising out of the person's status as such II-1 whether or not the Company would have the power or the obligation to indemnify such person against such liability under the provisions of the Company's By-Laws. ITEM 16. EXHIBITS. EXHIBITS DESCRIPTION OF EXHIBIT - -------- ---------------------- 1.1 Form of Underwriting Agreement (Debt Securities) (incorporated by reference to Exhibit 1.1 of Amendment No. 1 to Registration Statement No. 333-15487 on Form S-3 filed on November 18, 1996) 1.2 Form of Underwriting Agreement (Common Stock and Preferred Stock) (incorporated by reference to Exhibit 1.2 of Amendment No. 1 to Registration Statement No. 333-15487 on Form S-3 filed on November 18, 1996) 1.3 Form of Underwriting Agreement (Stock Purchase Contracts and Stock Purchase Units) (incorporated by reference to Exhibit 1.3 of Amendment No. 1 to Registration Statement No. 333-15487 on Form S-3 filed on November 18, 1996) 1.4 Form of Underwriting Agreement (Preferred Securities) 4.1 Form of Senior Debt Securities Indenture between the Company and The First National Bank of Chicago (incorporated by reference to Exhibit 4.1 of Registration Statement No. 333-15487 on Form S-3 filed on November 4, 1996) 4.2 Senior Subordinated Debt Securities Indenture dated as of July 1, 1996 between the Company and The First National Bank of Chicago (incorporated by reference to Exhibit 4.2 of Registration Statement No. 333-15487 on Form S-3 filed on November 4, 1996) 4.3 Form of Junior Subordinated Debt Securities Indenture between the Company and The First National Bank of Chicago (incorporated by reference to Exhibit 4.3 of Registration Statement No. 333-15487 on Form S-3 filed on November 4, 1996) 4.4 Form of Junior Subordinated Debt Trust Securities Indenture between the Company and The First National Bank of Chicago (incorporated by reference to Exhibit 4.4 of Registration Statement No. 333-15487 on Form S-3 filed on November 4, 1996) 4.5 Declaration of Trust of AES Trust III (incorporated by reference to Exhibit 4.14 of Amendment No. 1 to Registration Statement No. 333-15487 on Form S-3 filed on November 18, 1996) 4.6 Certificate of Trust of AES Trust III (incorporated by reference to Exhibit 4.15 of Amendment No. 1 to Registration Statement No. 333-15487 on Form S-3 filed on November 18, 1996) 4.7 Form of Amended and Restated Declaration of Trust for AES Trust III, AES Trust IV and AES Trust V (incorporated by reference to Exhibit 4.9 of Amendment No. 2 to Registration Statement No. 333- 15487 on Form S-3 filed on November 27, 1996) 4.8 Form of Preferred Security (included in Exhibit 4.7) 4.9 Form of Supplemental Indenture to be used in connection with issuance of Junior Subordinated Debt Trust Securities and Preferred Securities (incorporated by reference to Exhibit 4.11 of Registration Statement No. 333-15487 on Form S-3 filed on November 4, 1996) 4.10 Form of Junior Subordinated Debt Trust Security (included in Exhibit 4.9) 4.11 Form of Preferred Securities Guarantee with respect to Preferred Securities (incorporated by reference to Exhibit 4.13 of Amendment No. 2 to Registration Statement No. 333-15487 on Form S-3 filed on November 27, 1996) 4.12 Declaration of Trust of AES Trust IV 4.13 Certificate of Trust of AES Trust IV 4.14 Declaration of Trust of AES Trust V 4.15 Certificate of Trust of AES Trust V 4.16 Form of Purchase Contract Agreement (incorporated by reference to Exhibit 41.6 of Amendment No. 1 to Registration Statement No. 333-15487 on Form S-3 filed on November 18, 1996) 4.17 Form of Pledge Agreement (incorporated by reference to Exhibit 4.17 of Amendment No. 1 to Registration Statement No. 333-15487 on Form S-3 filed on November 18, 1996) 5.1 Opinion of Davis Polk & Wardwell + II-2 EXHIBITS DESCRIPTION OF EXHIBIT - -------- ---------------------- 5.2 Opinion of Delaware counsel + 12.1 Statement re: Computation of ratio of earnings to fixed charges 23.1 Consent of Deloitte & Touche LLP 23.2 Consent of Price Waterhouse 23.3 Consent of Davis Polk & Wardwell (included in Exhibit 5.1) 23.4 Consent of Delaware counsel (included in Exhibit 5.2) 24.1 Powers of Attorney for the Company + 24.2 Powers of Attorney for the Company as sponsor, to sign the Registration Statement on behalf of AES Trust III, AES Trust IV and AES Trust V (included in Exhibits 4.5, 4.7, 4.12 and 4.14) 25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Senior Debt Securities Indenture + 25.2 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Senior Subordinated Debt Securities Indenture + 25.3 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Junior Subordinated Debt Securities Indenture + 25.4 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Junior Subordinated Debt Trust Securities Indenture + 25.5 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Preferred Securities of AES Trust III + 25.6 Statement of Eligibility under The Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Preferred Securities of AES Trust IV + 25.7 Statement of Eligibility under The Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Preferred Securities of AES Trust V + 25.8 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Preferred Securities Guarantee of the Company with respect to the Preferred Securities of AES Trust III + 25.9 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Preferred Securities Guarantee of the Company with respect to the Preferred Securities of AES Trust IV + 25.10 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Preferred Securities Guarantee of the Company with respect to the Preferred Securities of AES Trust V + - --------------------------- + To be filed by Amendment. ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made of the securities registered hereby, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; II-3 provided, however, that the undertakings set forth in paragraphs (1)(i) and (1)(ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are incorporated by reference in this registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions described under Item 15 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrar of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that is has reasonable grounds to believe that it meets all of the requirements for filing on Forms S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Arlington, State of Virginia on November 7, 1997. THE AES CORPORATION By: /s/ Dennis W. Bakke --------------------------------------- Dennis W. Bakke President and Chief Executive Officer The Registrant and each person whose signature appears below constitutes and appoints Dennis W. Bakke and William R. Luraschi and any agent for service named in this Registration Statement and each of them, his, her or its true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him, her or it and in his, her, or its name, place and stead, in any and all capacities, to sign and file any and all amendments (including post-effective amendments) to this Registration Statement, to sign any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he, she, or it might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated on November 7, 1997. SIGNATURE TITLE DATE --------- ----- ----- * - ------------------------- Chairman-of-the-Board November 7, 1997 Roger W. Sant /s/ Dennis W. Bakke - ------------------------- President,-Chief-Executive November 7, 1997 Dennis W. Bakke Officer and Director (Principal Executive Officer) * - ------------------------- Director November 7, 1997 Vicki-Ann Assevero II-5 * - ------------------------- Director November 7, 1997 Dr. Alice F. Emerson * - ------------------------- Director November 7, 1997 Robert F. Hemphill, Jr. * - ------------------------- Director November 7, 1997 Frank Jungers * - ------------------------- Director November 7, 1997 Dr. Henry R. Linden * - ------------------------- Director November 7, 1997 John H. McArthur * - ------------------------- Director November 7, 1997 Hazel O'Leary * - ------------------------- Director November 7, 1997 Thomas I. Unterberg * - ------------------------- Director November 7, 1997 Robert H. Waterman, Jr. /s/ Barry J. Sharp - ------------------------- Vice-President and November 7, 1997 Barry J. Sharp Chief Financial Officer (Principal Financial and Accounting Officer) By: /s/ William R. Luraschi ---------------------- November 7, 1997 William R. Luraschi Attorney-in-Fact II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, AES Trust III, AES Trust IV and AES Trust V each certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Forms S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Arlington, State of Virginia on November 7, 1997. AES TRUST III By: The AES Corporation, as Sponsor By: /s/ William R. Luraschi ------------------------------------------ Name: William R. Luraschi Title: General Counsel and Secretary AES TRUST IV By: The AES Corporation, as Sponsor By: /s/ William R. Luraschi ----------------------------------------- Name: William R. Luraschi Title: General Counsel and Secretary AES TRUST V By: The AES Corporation, as Sponsor By: /s/ William R. Luraschi ----------------------------------------- Name: William R. Luraschi Title: General Counsel and Secretary II-7 EXHIBIT INDEX SEQUENTIALLY EXHIBITS DESCRIPTION OF EXHIBIT NUMBERED PAGE 1.1 Form of Underwriting Agreement (Debt Securities)* 1.2 Form of Underwriting Agreement (Common Stock and Preferred Stock)* 1.3 Form of Underwriting Agreement (Stock Purchase Contracts and Stock Purchase Units)* 1.4 Form of Underwriting Agreement (Preferred Securities) 4.1 Form of Senior Debt Securities Indenture between the Company and The First National Bank of Chicago* 4.2 Senior Subordinated Debt Securities Indenture dated as of July 1, 1996 between the Company and The First National Bank of Chicago* 4.3 Form of Junior Subordinated Debt Securities Indenture between the Company and The First National Bank of Chicago* 4.4 Form of Junior Subordinated Debt Trust Securities Indenture between the Company and The First National Bank of Chicago* 4.5 Declaration of Trust of AES Trust III* 4.6 Certificate of Trust of AES Trust III* 4.7 Form of Amended and Restated Declaration of Trust for each of AES Trust III, AES Trust IV and AES Trust V* 4.8 Form of Preferred Security (included in Exhibit 4.7) 4.9 Form of Supplemental Indenture to be used in connection with issuance of Junior Subordinated Debt Trust Securities and Preferred Securities* 4.10 Form of Junior Subordinated Debt Trust Security (included in Exhibit 4.9) 4.11 Form of Preferred Securities Guarantee with respect to Preferred Securities* 4.12 Declaration of Trust of AES Trust IV 4.13 Certificate of Trust of AES Trust IV 4.14 Declaration of Trust of AES Trust V 4.15 Certificate of Trust of AES Trust V 4.16 Form of Purchase Contract Agreement* 4.17 Form of Pledge Agreement * 5.1 Opinion of Davis Polk & Wardwell 5.2 Opinion of Delaware counsel 12.1 Statement re: Computation of ratio of earnings to fixed charges 23.1 Consent of Deloitte & Touche LLP 23.2 Consent of Price Waterhouse 23.3 Consent of Davis Polk & Wardwell (included in Exhibit 5.1) 23.4 Consent of Delaware counsel (included in Exhibit 5.2) 24.1 Powers of Attorney for the Company 24.2 Powers of Attorney for the Company as sponsor, to sign the Registration Statement on behalf of AES Trust III, AES Trust IV and AES Trust V (included in Exhibits 4.5, 4.7, 4.12 and 4.14) 25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Senior Debt Securities Indenture 25.2 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Senior Subordinated Debt Securities Indenture 25.3 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Junior Subordinated Debt Securities Indenture II-8 SEQUENTIALLY EXHIBITS DESCRIPTION OF EXHIBIT NUMBERED PAGE 25.4 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Junior Subordinated Debt Trust Securities Indenture 25.5 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Preferred Securities of AES Trust III 25.6 Statement of Eligibility under The Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Preferred Securities of AES Trust IV 25.7 Statement of Eligibility under The Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Preferred Securities of AES Trust V 25.8 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Preferred Securities Guarantee of the Company with respect to the Preferred Securities of AES Trust III 25.9 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Preferred Securities Guarantee of the Company with respect to the Preferred Securities of AES Trust IV 25.10 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Preferred Securities Guarantee of the Company with respect to the Preferred Securities of AES Trust V - --------------------------- * Incorporated by reference to other documents (see Item 16) and not included herein. II-9 EX-1.4 2 EXHIBIT 1.4 EXHIBIT 1.4 [FORM OF PREFERRED SECURITIES UNDERWRITING AGREEMENT] $___________ THE AES CORPORATION ______ Preferred Securities AES Trust [-] Guaranteed by ------------------ UNDERWRITING AGREEMENT _______, 199_ Dear Sirs: AES Trust [_] (the "Trust"), a statutory business trust organized under the Business Trust Act (the "Delaware Act") of the State of Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. ss.3801 et seq.), proposes to issue and sell ____________ shares of its ___% preferred trust securities (the "Firm Securities") to the several underwriters named in Schedule I hereto (the "Underwriters"). The Trust also proposes to issue and sell to the several Underwriters not more than _______ additional shares of its ___% preferred trust securities (the "Additional Securities") if requested by the Underwriters as provided in Section 2 hereof. The Firm Securities and the Additional Securities are herein collectively called the "Securities". The Securities will be guaranteed by The AES Corporation, a Delaware corporation (the "Company") to the extent set forth in the Prospectus (as defined herein). It is understood that substantially contemporaneously with the offering and sale of the Firm Securities to the Underwriters contemplated hereby, (i) the Trust, its trustees (the "Trustees") and the Company shall take all necessary action to adopt an Amended and Restated Declaration of Trust in substantially the form of the Form of Amended and Restated Declaration of Trust incorporated by reference as Exhibit 4.7 to the Registration Statement referred to below, (as so amended and restated, the "Declaration") pursuant to which the Trust shall (x) issue and sell the Securities to the Underwriters pursuant hereto and (y) issue [_] shares of its [___]% common securities [(and up to an additional [_] shares of such securities in connection with the issuance and sale of the Additional Securities)] (the "Common Securities" and, together with the Securities, the "Trust Securities") to the Company, in each case with such rights and obligations as shall be set forth in such Declaration, (ii) the Company and The Bank of New York, as Trustee, shall enter into an Indenture in substantially the form of the Form of the Junior Subordinated Debt Trust Securities Indenture incorporated by reference as Exhibit 4.4 to the Registration Statement referred to below (as supplemented by the Supplemental Indenture substantially in the form incorporated by reference as Exhibit 4.9 to the Registration Statement referred to below, the "Indenture") providing for the issuance of $[____________] in aggregate principal amount of the Company's Junior Subordinated Debt Trust Securities Debentures, Series [_], due 20[__] (the "Debentures"), (iii) the Company shall deposit such Debentures in the Trust in conjunction with the consummation of the sale of the Securities to the Underwriters contemplated hereby and (iv) the Company and _________________________, as Guarantee Trustee, shall enter into a Guarantee Agreement in substantially the form of the Form of Guarantee with respect to Securities incorporated by reference as Exhibit 4.11 of the Registration Statement referred to below (the "Guarantee") for the benefit of holders from time to time of the Securities. 1 Registration Statement and Prospectus. The Trust and the Company have prepared and filed with the Securities and Exchange Commission (the "Commission") in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively called the "Securities Act"), a registration statement on Form S-3, including a prospectus, relating to, among other things, certain preferred securities of AES Trust III, IV and V, certain junior subordinated debt and guarantees of preferred securities of AES Trust III, IV and V (collectively, the "Shelf Securities"). The Trust and the Company also have filed with, or propose to file with, the Commission pursuant to Rule 424 under the Securities Act a prospectus supplement specifically relating to the Securities. The registration statement as amended to the date of this Agreement is hereinafter referred to as the "Base Registration Statement" and any registration statement filed pursuant to Rule 462(b) under the Securities Act relating to the Securities is herein referred to as the "Additional Registration Statement", and, together with the Base Registration Statement, the "Registration Statement". The related prospectus covering the Shelf Securities in the form first used to confirm sales of the Securities is hereinafter referred to as the "Basic Prospectus". The Basic Prospectus as supplemented by the prospectus supplement specifically relating to the Securities in the form first used to confirm sales of the Securities is hereinafter referred to as the "Prospectus". Any reference in this Agreement to the Registration Statement, the Basic Prospectus, any preliminary form of Prospectus 2 (a "preliminary prospectus") previously filed with the Commission pursuant to Rule 424 or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Securities Act which were filed under the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Exchange Act") on or before the date of this Agreement or the date of the Basic Prospectus, any preliminary prospectus or the Prospectus, as the case may be; and any reference to "amend", "amendment" or "supplement" with respect to the Registration Statement, the Basic Prospectus, any preliminary prospectus or the Prospectus shall be deemed to refer to and include any documents filed under the Exchange Act after the date of this Agreement, or the date of the Basic Prospectus, any preliminary prospectus or the Prospectus, as the case may be, which are deemed to be incorporated by reference therein. 2 Agreements to Sell and Purchase. On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to issue and sell and each Underwriter agrees, severally and not jointly, to purchase from the Trust at a price per share of $_____ (the "Purchase Price"), the number of Firm Securities set forth opposite the name of such Underwriter in Schedule I hereto. On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Trust agrees to issue and sell the Additional Securities and the Underwriters shall have the right to purchase, severally and not jointly, up to _______ Additional Securities from the Trust at the Purchase Price. Additional Securities may be purchased solely for the purpose of covering over-allotments made in connection with the offering of the Firm Securities. The Underwriters may exercise their right to purchase Additional Securities in whole or in part from time to time by giving written notice thereof to the Company within 30 days after the date of this Agreement. You shall give any such notice on behalf of the Underwriters and such notice shall specify the aggregate number of Additional Securities to be purchased pursuant to such exercise and the date for payment and delivery thereof. The date specified in any such notice shall be a business day (i) no earlier than the Closing Date (as hereinafter defined), (ii) no later than ten business days after such notice has been given and (iii) no earlier than two business days after such notice has been given. If any Additional Securities are to be purchased, each Underwriter, severally and not jointly, agrees to purchase from the Trust the number of Additional Securities (subject to such adjustments to eliminate fractional shares as you may determine) which bears the same proportion to the total number of Additional Securities to be purchased from the Trust as the number of Firm Securities set forth opposite the name of such Underwriter in Schedule I bears to the total number of Firm Securities. In view of the fact that the proceeds of the sale of the Securities will be used to purchase Debentures, the Company agrees to pay as compensation 3 ("Underwriter's Compensation") for the Underwriters' arranging the investment therein of such proceeds an amount in immediately available funds of $ per Security purchased hereunder. [The Trust and the Company hereby agree not to offer, sell, contract to sell, grant any option to purchase, or otherwise dispose of any preferred trust securities or any securities convertible into or exercisable or exchangeable for such preferred trust securities or in any other manner transfer all or a portion of the economic consequences associated with the ownership of any such preferred trust securities, except to the Underwriters pursuant to this Agreement, for a period of ___ days after the date of the Prospectus without the prior written consent of ____________________________.] 3 Terms of Public Offering. The Company is advised by you that the Underwriters propose (i) to make a public offering of their respective portions of the Securities as soon after the effective date of the Registration Statement as in your judgment is advisable and (ii) initially to offer the Securities upon the terms set forth in the Prospectus. 4 Delivery and Payment. Delivery to the Underwriters of and payment for the Firm Securities and payment of the related Underwriters' Compensation shall be made at 10:00 A.M., New York City time, on ______, 199_, or at such other time or such other date as the Underwriters and the Company may agree upon in writing. The time and date of such payment are referred to herein as the "Closing Date". As used herein, the term "Business Day" means any day other than a day on which banks are permitted or required to be closed in New York City. Delivery to the Underwriters of and payment for any Additional Securities to be purchased by the Underwriters and payment of the related Underwriters' Compensation shall be made at such place as you shall designate at 10:00 A.M., New York City time, on the date specified in the applicable exercise notice given by you pursuant to Section 2 (an "Option Closing Date"). Any such Option Closing Date and the location of delivery of and the form of payment for such Additional Securities may be varied by agreement between you and the Company. Certificates for the Securities shall be registered in such names and issued in such denominations as you shall request in writing not later than two full business days prior to the Closing Date or an Option Closing Date, as the case may be. Such certificates shall be made available to you for inspection not later than 9:30 A.M., New York City time, on the business day next preceding the Closing Date or the applicable Option Closing Date, as the case may be. Certificates in definitive form evidencing the Securities shall be delivered to you on the Closing Date or the applicable Option Closing Date, as the case may be with any transfer taxes thereon duly paid by the Company, for the respective accounts of the several Underwriters, against payment of the Purchase 4 Price therefor by wire transfer in immediately available funds to the account specified by the Company to the Underwriters (no later than noon the Business Day prior to the Closing Date or the applicable Option Closing Date, as the case may be) at the office of Davis Polk & Wardwell, counsel to the Company. 5 Agreements of the Company. The Company agrees with you: (a) To file the Prospectus in a form approved by you with the Commission within the time periods specified by Rule 424; and to file promptly all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Securities; and to furnish copies of the Prospectus to the Underwriters in New York City prior to 10:00 a.m., New York City time, on the Business Day next succeeding the date of this Agreement in such quantities as the Underwriters may reasonably request; (b) To advise you promptly and, if requested by you, to confirm such advice in writing, (i) when any post-effective amendment to the Registration Statement has been filed or becomes effective, (ii) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the suspension of qualification of the Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for such purposes, and (iv) of the happening of any event during the period referred to in paragraph (e) below which makes any statement of a material fact made in the Registration Statement or the Prospectus untrue or which requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company will make every reasonable effort to obtain the withdrawal or lifting of such order at the earliest possible time. (c) To furnish to you three signed copies of the Registration Statement as first filed with the Commission and of each amendment to it, including all exhibits thereto and documents incorporated by reference therein, and to furnish to you and each Underwriter designated by you such number of conformed copies of the Registration Statement as so filed and of each amendment to it, without exhibits thereto and documents incorporated by reference therein, as you may reasonably request. 5 (d) Not to file any amendment or supplement to the Registration Statement, whether before or after the time when it becomes effective, or to make any amendment or supplement to the Prospectus of which you shall not previously have been advised or to which you shall reasonably object; and to prepare and file with the Commission, promptly upon your reasonable request, any amendment to the Registration Statement or supplement to the Prospectus which may be necessary or advisable in connection with the distribution of the Securities by you, and to use its best efforts to cause the same to become promptly effective. (e) Promptly after the Registration Statement becomes effective, and from time to time thereafter for such period as in the opinion of counsel for the Underwriters a prospectus is required by law to be delivered in connection with sales by an Underwriter or a dealer, to furnish to each Underwriter and dealer as many copies of the Prospectus (and of any amendment or supplement to the Prospectus) as such Underwriter or dealer may reasonably request. (f) If during the period specified in paragraph (e) any event shall occur as a result of which, in the opinion of counsel for the Underwriters, it becomes necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if it is necessary to amend or supplement the Prospectus to comply with any law, forthwith to prepare and file with the Commission an appropriate amendment or supplement to the Prospectus so that the statements in the Prospectus, as so amended or supplemented, will not in the light of the circumstances when it is so delivered, be misleading, or so that the Prospectus will comply with law, and to furnish to each Underwriter and to such dealers as you shall specify, such number of copies thereof as such Underwriter or dealers may reasonably request. (g) Prior to any public offering of the Securities, to cooperate with you and counsel for the Underwriters in connection with the registration or qualification of the Securities for offer and sale by the several Underwriters and by dealers under the state securities or Blue Sky laws of such jurisdictions as you may request, to continue such qualification in effect so long as required for distribution of the Securities and to file such consents to service of process or other documents as may be necessary in order to effect such registration or qualification. (h) To mail and make generally available to its securityholders as soon as reasonably practicable an earnings statement covering a period of at least twelve months after the effective date of the Registration Statement (but in no event commencing later than 90 days after such date) which shall satisfy the 6 provisions of Section 11(a) of the Securities Act, and to advise you in writing when such statement has been so made available. (i) During the period of five years after the date of this Agreement, or for such shorter period if the Securities no longer remain outstanding, (i) to mail as soon as reasonably practicable after the end of each fiscal year to the record holders of its Securities a financial report of the Company and its subsidiaries on a consolidated basis (and a similar financial report of all unconsolidated subsidiaries, if required by Regulation S-X), all such financial reports to include a consolidated balance sheet, a consolidated statement of operations, a consolidated statement of cash flows and a consolidated statement of shareholders' equity as of the end of and for such fiscal year, together with comparable information as of the end of and for the preceding year, certified by independent certified public accountants, and (ii) to mail and make generally available as soon as practicable after the end of each quarterly period (except for the last quarterly period of each fiscal year) to such holders, a consolidated balance sheet, a consolidated statement of operations and a consolidated statement of cash flows (and similar financial reports of all unconsolidated subsidiaries, if required by Regulation S-X) as of the end of and for such period, and for the period from the beginning of such year to the close of such quarterly period, together with comparable information for the corresponding periods of the preceding year. (j) During the period referred to in paragraph (i), to furnish to you as soon as available a copy of each report or other publicly available information of the Company mailed to the securityholders of the Company or filed with the Commission and such other publicly available information concerning the Company and its subsidiaries as you may reasonably request. (k) To pay all costs, expenses, fees and taxes incident to the performance of its obligations hereunder, including without limiting the generality of the foregoing, all costs and expenses incident to (i) the preparation, issuance, and delivery of the certificates for the Securities, including any expenses of the Trustee, (ii) the preparation, printing, filing and distribution under the Securities Act of the Registration Statement (including financial statements and exhibits), each preliminary prospectus and all amendments and supplements to any of them prior to or during the period specified in paragraph (e), (iii) the printing and delivery of the Prospectus and any Preliminary Prospectus and all amendments or supplements to it during the period specified in paragraph (e), (iv) the printing and delivery of this Agreement, the Indenture, Preliminary and Supplemental Blue Sky Memoranda and all other agreements, memoranda, correspondence and other documents printed and delivered in connection with the offering of the Securities (including in each case any disbursements of counsel for the Underwriters relating to such printing and delivery), (v) the registration or qualification of the Securities 7 for offer and sale under the securities or Blue Sky laws of the several states (including in each case the fees and disbursements of counsel for the Underwriters relating to such registration or qualification and memoranda relating thereto), (vi) filings and clearance with the National Association of Securities Dealers, Inc. in connection with the offering, (vii) furnishing such copies of the Registration Statement, the Prospectus and all amendments and supplements thereto as may be requested for use in connection with the offering or sale of the Securities by the Underwriters or by dealers to whom Securities may be sold and (viii) the rating of the Securities including, without limitation, fees payable to rating agencies in connection therewith. (l) To use its best efforts to do and perform all things required or necessary to be done and performed under this Agreement by the Company prior to the Closing Date and to satisfy all conditions precedent to the delivery of the Securities. 6 Representations and Warranties of the Company. The Company represents and warrants to each Underwriter that: (a) The Registration Statement has been declared effective by the Commission under the Securities Act; no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose has been instituted or, to the knowledge of the Company, threatened by the Commission; and the Registration Statement and Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) comply, or will comply, as the case may be, in all material respects with the Securities Act and the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Trust Indenture Act"), and do not and will not, as of the applicable effective date as to the Registration Statement and any amendment thereto and as of the date of the Prospectus and any amendment or supplement thereto, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and the Prospectus, as amended or supplemented at the Closing Date, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; except that the foregoing representations and warranties shall not apply to (i) that part of the Registration Statement which constitutes the Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of the Trustee, and (ii) statements or omissions in the Registration Statement or the Prospectus made in reliance upon and in conformity 8 with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use therein; (b) The documents incorporated by reference in the Prospectus, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and any further documents so filed and incorporated by reference in the Prospectus, when such documents are filed with the Commission will conform in all material respects to the requirements of the Exchange Act, as applicable, and will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (c) The Company and each of its subsidiaries and each of its affiliates which meets the criteria in the definition of "significant subsidiary" pursuant to Rule 1-02(w) of Regulation S-X under the Securities Act (each, a "Principal Subsidiary") has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority required to carry on its business as it is currently being conducted and to own, lease and operate its properties, and each is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the business, financial condition or results of operations of the Company and the Principal Subsidiaries, taken as a whole. (d) Except as set forth in the Registration Statement or on Annex I hereto, all of the outstanding shares of capital stock of, or other ownership interests in, the Principal Subsidiaries have been duly and validly authorized and issued and are fully paid and non-assessable, and are owned by the Company or one of the Principal Subsidiaries, free and clear of any security interest, claim, lien, encumbrance or adverse interest of any nature. (e) As of the Closing Date, the Trust Securities will have been duly authorized by the Declaration and (x) when the Securities are issued in accordance with the terms of this Agreement and delivered to and paid for by the Underwriters and (y) the Common Securities are issued against payment therefor as provided in the Declaration, such Trust Securities will be duly and validly is sued and (subject to the terms of the Declaration) will be fully paid and nonassess- 9 able undivided beneficial interests in the assets of the Trust, not subject to any preemptive or similar rights. Holders of Trust Securities will be entitled to the same limitation of personal liability extended to stockholders of private corpora tions for profit organized under the General Corporation Law of the State of Delaware. (f) As of the Closing Date, the Declaration will have been duly authorized, executed and delivered by the Company and the Trustees and will be a valid and binding obligation of the Company and the Trustees, enforceable against the Company and the Trustees in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (g) The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Act, is and will be treated as a "grantor trust" for Federal income tax purposes under existing law, has the business trust power and authority to conduct its business as presently conducted and as described in the Registration Statement and Prospectus, and is not required to be authorized to do business in any other jurisdiction. (h) The Indenture has been duly qualified under the Trust Indenture Act and has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable in accordance with its terms except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by equitable principles of general applicability; the Debentures have been duly authorized and when executed and authenticated in accordance with the provisions of the Indenture and delivered to the Trust against payment therefore as provided in the Prospectus will be entitled to the benefits of the Indenture and the Indenture and the Debentures will conform in all respects to statements relating thereto contained in the Registration Statement and the Prospectus. (i) The Guarantee has been duly qualified under the Trust Indenture Act of 1939, as amended, and, as of the Closing Date, assuming due authori zation, execution and delivery by the Company thereunder, of the Guarantee, the Guarantee will be a valid and binding agreement of the Company, enforceable in accordance with its terms subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). 10 (j) This Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company (except as rights to indemnity and contribution hereunder may be limited by applicable law). (k) The Securities conform as to legal matters to the description thereof contained in the Registration Statement and the Prospectus. (l) The Company is not in violation of its Restated Certificate of Incorporation or its By-laws and neither the Trust nor the Principal Subsidiaries are in violation of, as applicable, their respective Declaration, charter or, except for any such violations which would not have a material adverse effect on the Trust, the Company and its subsidiaries taken as a whole, their by-laws, nor is the Trust, the Company or any of the Principal Subsidiaries, except as set forth in the Registration Statement, in default in, as applicable, the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any other agreement, indenture or instrument to which the Trust, the Company or any of the Principal Subsidiaries is a party or by which the Trust, the Company or any of the Principal Subsidiaries or their respective property is bound except for any such defaults which, individually or in the aggregate, would not have a material adverse effect on the business, financial condition or results of operations of the Company and the Principal Subsidiaries, taken as a whole. (m) The execution, delivery and performance of this Agreement, the Indenture, the Debentures, the Guarantee, the Declaration and the Securities and the compliance by the Trust and the Company with all the provisions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not require any consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body (except such as may be required under the Securities Act, the Exchange Act, the Trust Indenture Act, or other securities or Blue Sky laws) and will not conflict with or constitute a breach of any of the terms or provisions of, or a default under, the Declaration, charter or by-laws, as applicable, or any agreement, indenture or other instrument to which the Trust, the Company or any of the Principal Subsidiaries is a party or by which the Trust, the Company or any of the Principal Subsidiaries or their respective property is bound, or violate or conflict with any laws, administrative regulations or rulings or court decrees applicable to the Trust, the Company, any of the Principal Subsidiaries or their respective property (except state securities or Blue Sky laws). (n) Except as set forth in the Registration Statement, there are no material legal or governmental proceedings pending to which the Trust, the Company or any of the Principal Subsidiaries is a party or to which any of their 11 respective property is the subject, and, to the best of the Company's knowledge, no such proceedings are threatened or contemplated. No contract or document of a character required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement is not so described or filed as required. (o) Except as set forth in the Registration Statement, neither the Company nor any of the Principal Subsidiaries has violated any U.S. federal or state law relating to discrimination in the hiring, promotion or pay of employees nor any applicable U.S. federal or state wages and hours laws, or any provisions of the Employee Retirement Income Security Act or the rules and regulations promulgated thereunder, which in each case could result in any material adverse change in the business, financial condition or results of operations of the Company and the Principal Subsidiaries, taken as a whole. (p) Except as set forth in the Registration Statement, the Company and each of the Principal Subsidiaries has good and marketable title, free and clear of all liens, claims, encumbrances and restrictions which are required to be described in the Registration Statement except liens for taxes not yet due and payable, to all property and assets described in the Registration Statement as being owned by it. All leases to which the Company or any of the Principal Subsidiaries is a party are valid and binding and no default by the Company or any such Principal Subsidiary, or, to the best of the Company's knowledge, by any other party to any such leases, has occurred or is continuing thereunder, which could result in any material adverse change in the business, financial condition or results of operations of the Trust, the Company and the Principal Subsidiaries taken as a whole, and the Company and the Principal Subsidiaries enjoy peaceful and undisturbed possession under all such leases to which any of them is a party as lessee with such exceptions as do not materially interfere with the use made by the Company or such Principal Subsidiary. (q) Deloitte & Touche are independent public accountants with respect to the Company as required by the Securities Act. (r) The financial statements, together with related schedules and Notes forming part of the Registration Statement and the Prospectus (and any amendment or supplement thereto), present fairly the consolidated financial position, results of operations and statements of cash flow of the Company and its subsidiaries on the basis stated in the Registration Statement at the respective dates and for the respective periods to which they apply; such statements and related schedules and Notes have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein; and the other financial and statistical 12 information and data set forth in the Registration Statement and the Prospectus (and any amendment or supplement thereto), in all material respects, present fairly the information purported to be shown thereby at the respective dates or for the respective periods to which they apply and have been prepared on a basis consistent with such financial statements and the books and records of the Company. (s) Each of the Company and the Principal Subsidiaries has such permits, licenses, franchises and authorizations of governmental or regulatory authorities ("permits") which are required to have been obtained by it prior to the date hereof and which are material to the ownership or leasing and operation of or construction of its respective properties and to the conduct of its business in the manner described in the Prospectus, except for any such permits, the failure of which to have, individually or in the aggregate, would not have a material adverse effect on the business, financial condition or results of operations of the Company and the Principal Subsidiaries, taken as a whole, and subject to such qualifications as may be set forth in the Registration Statement; each of the Company and the Principal Subsidiaries has fulfilled and performed all of its material obligations with respect to such permits required to have been fulfilled and performed prior to the date hereof and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or result in any other material impairment of the rights of the holder of any such permit, subject in each case to such qualification as may be set forth in the Registration Statement; and, except as described in the Registration Statement, such permits do not materially interfere with the use or operation of the electric power generation facilities of the Principal Subsidiaries as currently used or operated or as contemplated to be used or operated. (t) Each of the AES Beaver Valley, the AES Deepwater, the AES Placerita, the AES Shady Point, the AES Barbers Point and the AES Thames facilities (each as defined in the Registration Statement) is a "qualifying cogeneration facility" under the Federal Power Act ("FPA"), as amended by Section 201 of the Public Utility Regulatory Policies Act of 1978 ("PURPA") and the FERC's regulations promulgated thereunder, and each such facility's current use, operation and ownership are consistent with such facility's status as a "qualifying cogeneration facility". (u) None of the Trust, the Company or any of the Principal Subsidiaries is (i) subject to regulation as a "holding company" or a "subsidiary company" of a holding company or a "public utility company" under Section 2(a) of the Public Utility Holding Company Act of 1935 ("PUHCA"), except that the Company and its subsidiary in the United Kingdom, Applied Energy Services Electric Limited, are exempt holding companies under Section 3(a)(5) of PUHCA 13 by order of the Commission, (ii) subject to regulation under the FPA, other than as contemplated by 18 C.F.R. Section 292.601(c), or (iii) except as described in the Registration Statement (other than contained in the exhibits thereto), subject to regulation by any state law with respect to rates or the financial or organizational regulation of electric utilities. (v) Neither the Trust nor the Company is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (w) Except as set forth in the Registration Statement, each of the Company, each Principal Subsidiary, and any other subsidiary or entity which the Company may be deemed to operate (together with the Principal Subsidiaries, the "Subsidiaries") is in compliance with all applicable foreign, federal, state and local environmental (including, without limitation, the Comprehensive Environmental Response, Compensation & Liability Act of 1980, as amended), safety or similar law, rule and regulation, and there are no costs or liabilities associated with any such law, rule or regulation, except for any such noncompliances, costs or liabilities which, individually or in the aggregate, would not have a material adverse effect on the business, financial condition or results of operations of the Company and the Subsidiaries, taken as a whole. (x) The Trust and the Company have complied with all provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida). 7 Indemnification. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages, liabilities and judgments (i) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (other than that part of the Registration Statement that constitutes the Form T-1) or the Prospectus (as amended or supplemented if the Trust and the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished in writing to the Company by or on behalf of any Underwriter through you expressly for use therein; provided, however, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, claims, damages, liabilities or judgments purchased Securities, or any person controlling such Underwriter, if a copy of the Prospectus (as then amended 14 or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Underwriter to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Securities to such person, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages, liabilities or judgments. (b) In case any action shall be brought against any Underwriter or any person controlling such Underwriter, based upon any preliminary prospectus, the Registration Statement or the Prospectus or any amendment or supplement thereto and with respect to which indemnity may be sought against the Company, such Underwriter shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such indemnified party and payment of all fees and expenses. Any Underwriter or any such controlling person shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Underwriter or such controlling person unless (i) the employment of such counsel has been specifically authorized in writing by the Company, (ii) the Company has failed to assume the defense and employ counsel or (iii) the named parties to any such action (including any impleaded parties) include both such Underwriter or such controlling person and the Company and such Underwriter or such controlling person shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the Company (in which case the Company shall not have the right to assume the defense of such action on behalf of such Underwriter or such controlling person, it being understood, however, that the Company shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all such Underwriters and controlling persons, which firm shall be designated in writing by __________________ and that all such fees and expenses shall be reimbursed as they are incurred). The Company shall not be liable for any settlement of any such action effected without the written consent of the Company but if settled with the written consent of the Company, the Company agrees to indemnify and hold harmless any Underwriter and any such controlling person from and against any loss or liability by reason of such settlement. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second sentence of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 10 business days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. 15 No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (c) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless (i) the Trust, the Trustees, its officers who sign the Registration Statement and any person controlling the Trust within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act and (ii) the Company, its directors, its officers who sign the Registration Statement and any person controlling the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, in each such case to the same extent as the foregoing indemnity from the Company to each Underwriter but only with reference to information relating to such Underwriter furnished in writing by or on behalf of such Underwriter through you expressly for use in the Registration Statement, the Prospectus, any preliminary prospectus or any amendment or supplement thereto. In case any action shall be brought against the Trust, the Trustees, its officers who sign the Registration Statement or any person controlling the Trust or against the Company, any of its directors, any such officer or any person controlling the Company based on the Registration Statement, the Prospectus or any preliminary prospectus or any amendment or supplement thereto and in respect of which indemnity may be sought against any Underwriter, the Underwriter shall have the rights and duties given to the Company (except that if the Company shall have assumed the defense thereof, such Underwriter shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of such Underwriter), and the Trust, the Trustees, its officers who sign the Registration Statement and any person controlling the Trust, the Company, its directors, any such officers and any person controlling the Company shall have the rights and duties given to the Underwriter, by Section 7(b) hereof. (d) If the indemnification provided for in this Section 7 is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Trust and the Company on the one hand and the Underwriters on the other hand from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Trust, the Company and the Underwriters in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable 16 considerations. The relative benefits received by the Trust, the Company and the Underwriters shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Trust and the Company, and the total underwriting discounts and commissions received by the Underwriters, bear to the total price to the public of the Securities, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Trust, the Company and the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Trust, the Company or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Trust, the Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7(d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public was offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 7(d) are several in proportion to the respective number of Securities purchased by each of the Underwriters hereunder and not joint. 8 Conditions of Underwriters' Obligations. The several obligations of the Underwriters to purchase the Firm Securities under this Agreement are subject to the satisfaction of each of the following conditions: (a) All the representations and warranties of the Company contained in this Agreement shall be true and correct on the Closing Date with the same force and effect as if made on and as of the Closing Date. (b) No stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have 17 been commenced or shall be pending before or, to the best of the Company's knowledge, contemplated by the Commission. (c) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date, there shall not have been any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded to any of the Company's or the Trust's securities or to any securities of any other AES Trust that is organized in substantially the form of, and for substantially the same purpose as, the Trust and whose common equity capital is wholly owned by the Company or any subsidiary, by any "nationally recognized statistical rating organization", as such term is defined for purposes of Rule 436(g)(2) under the Securities Act. (d)(i) Since the date of the latest balance sheet included in the Registration Statement, there shall not have been any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, affairs or business prospects, whether or not arising in the ordinary course of business, of the Company and the Principal Subsidiaries, taken as a whole, from that described in the Registration Statement, (ii) since the date of the latest balance sheet included in the Registration Statement there shall not have been any material change, or any development involving a prospective material adverse change, in the capital stock or in the long-term debt of the Company from that set forth in the Registration Statement, (iii) the Trust and the Company shall have no liability or obligation, direct or contingent, which is material to the Trust, the Company and the Principal Subsidiaries, taken as a whole, other than those reflected in the Registration Statement and (iv) on the Closing Date you shall have received a certificate dated the Closing Date, signed by such executive officers of the Company as you may designate, and such other certificates of executive officers and key personnel of the Principal Subsidiaries as you may specify confirming the matters set forth in paragraphs (a), (b), (c) and (d) of this Section 8. (e) You shall have received on the Closing Date an opinion (satisfactory to you and counsel for the Underwriters), dated the Closing Date, of William R. Luraschi, General Counsel of AES, to the effect that: (i) the Company and each of the Principal Subsidiaries (other than Principal Subsidiaries that are incorporated or organized outside of the United States as to which Mr. Luraschi expresses no opinion) has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate 18 power and authority required to carry on its business as it is currently being conducted and to own its properties; (ii) the Company and each of the Principal Subsidiaries (other than Principal Subsidiaries that are incorporated or organized outside of the United States as to which Mr. Luraschi expresses no opinion) is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the Company and the Principal Subsidiaries, taken as a whole; (iii) except as set forth in the Registration Statement or otherwise set forth on Annex I, all of the outstanding shares of capital stock of, or other ownership interests in, the Principal Subsidiaries have been duly and validly authorized and issued and are fully paid and non-assessable, and are owned of record, and to the knowledge of such counsel, after due inquiry, beneficially, by the Company or the Principal Subsidiary as set forth in such opinion; and such counsel, after due inquiry, is not aware of any security interest, claim, lien, encumbrance or adverse interest of any nature on such shares or other ownership interests except as set forth in the Registration Statement or in Annex I; (iv) the Company is not in violation of its Restated Certificate of Incorporation or in violation of its By-laws and none of the Principal Subsidiaries is in violation of its respective charter or their by-laws, except for any such violations which would not have a material adverse effect on the Trust, the Company and its subsidiaries taken as a whole; (v) the execution, delivery and performance of this Agreement, the Indenture, Debentures, Guarantee and Declaration by the Company, compliance by the Trust and the Company with all the provisions hereof and thereof, issuance of the Securities and the consummation of the transactions contemplated hereby and thereby will not require any consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body (except such as may be required under the Securities Act, the Exchange Act, the Trust Indenture Act or other securities or Blue Sky laws) and will not conflict with or constitute a breach of any of the terms or provisions of, or a default under, the Declaration, charter or by-laws of the Trust, the Company or any of the Principal Subsidiaries or any agreement, indenture or other instrument known to such counsel, to which the Trust, the Company or any of the Principal Subsidiaries is a party or by which the Trust, the Company or 19 any of the Principal Subsidiaries or their respective properties are bound that is material to the Trust, the Company and its Principal Subsidiaries, taken as a whole, or violate or conflict with any laws, administrative regulations or rulings or court decrees known to such counsel, after due inquiry, applicable to the Trust, the Company or any of the Principal Subsidiaries or their respective properties; (vi) such counsel does not know of any legal or governmental proceeding pending or threatened to which the Trust, the Company or any of the Principal Subsidiaries is a party or to which any of their respective property is subject which is required to be described in the Registration Statement or the Prospectus and is not so described, or of any contract or other document which is required to be described in the Registration Statement or the Prospectus or is required to be filed as an exhibit to the Registration Statement which is not described or filed as required; (vii) each of the applicable Principal Subsidiaries has obtained all permits, licenses, franchises and authorizations of governmental or regulatory authorities ("permits") which are required to have been obtained by it prior to the date hereof and which are material to the construction, ownership or leasing and operation of each of the Principal Subsidiaries, as the case may be, as contemplated by the Registration Statement, except for any such permits, the failure to have obtained which, individually or in the aggregate would not have a material adverse effect on the business, financial condition or results of operations of the Trust, the Company and the Principal Subsidiaries, taken as a whole, and subject to such qualifications as may be set forth in the Registration Statement, and all such permits are in full force and effect; and such counsel has no reason to believe that any other permits which may be material to the construction, ownership or leasing and operation of such facilities will not be obtained in due course; (viii) each of the AES Beaver Valley, the AES Deepwater, the AES Placerita, the AES Shady Point, the AES Barbers Point and the AES Thames facilities is a "qualifying cogeneration facility" under the FPA, as amended by Section 201 of PURPA and the FERC regulations promulgated thereunder, and, to the best of such counsel's knowledge, after due inquiry, each such facility's current use, operation and ownership are consistent with such facility's status as a "qualifying cogeneration facility"; (ix) none of the Trust, the Company nor any of the Principal Subsidiaries is (i) subject to regulation as a "holding company" or a 20 "subsidiary company" of a holding company or an "affiliate" of a subsidiary or holding company or a "public utility company" under Section 2(a) of PUHCA, except that the Company and its subsidiary in the United Kingdom, Applied Energy Services Electric Limited, are exempt holding companies under Section 3(a)(5) of PUHCA by order of the Commission, (ii) subject to regulation under the FPA, other than as contemplated by 18 C.F.R. Section 292.601(c), or (iii) except as described in the Registration Statement, subject to regulation under any state law with respect to the rates or the financial or organizational regulation of electric utilities; and (x) neither the Trust nor the Company is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (f) You shall have received on the Closing Date an opinion (satisfactory to you and counsel for the Underwriters), dated the Closing Date, of Davis Polk & Wardwell, counsel for the Company, to the effect that: (i) the Debentures have been duly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Trust as set forth in the Prospectus, will be entitled to the benefits of the Indenture and will be valid and binding obligations of the Company enforceable in accordance with their terms except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws affecting creditors' rights generally and by equitable principles of general applicability; (ii) this Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company (except as rights to indemnity and contribution hereunder may be limited by applicable law); (iii) the Indenture and the Guarantee have been duly qualified under the Trust Indenture Act, and the Indenture, Declaration and Guarantee have been duly authorized, executed and delivered by the Company and (assuming the due authorization, execution and delivery thereof by the respective Trustees) are valid and binding agreements of the Company, enforceable in accordance with their terms except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws 21 affecting creditors' rights generally and be equitable principles of general applicability; (iv) the Securities conform in all material respects as to legal matters to the description thereof contained in the Registration Statement and the Prospectus; (v) the Registration Statement has become effective under the Securities Act (assuming compliance with clause (2) of Rule 462(b) in the case of the Additional Registration Statement) and, to the best of such counsel's knowledge, no stop order suspending its effectiveness has been issued and no proceedings for that purpose are pending before or contemplated by the Commission; (vi) the statements under the captions "____________" in the Prospectus, insofar as such statements constitute a summary of the legal matters, documents or proceedings specifically referred to therein, fairly present all the material information called for with respect to such legal matters, documents or proceedings; (vii) except for the order of the Commission making the Registration Statement effective and permits and similar authorizations required under the securities or Blue Sky laws of certain states, no consent, approval, authorization or other order of any regulatory body, administrative agency or other governmental body is legally required for the valid issuance and sale of [the Securities to the Underwriters as contemplated by this Agreement or the public offering of the Securities contemplated by the Prospectus]; and (viii) the Registration Statement and the Prospectus and any supplement or amendment thereto (except for financial statements and other financial and statistical information included or incorporated by reference therein as to which no opinion need be expressed) comply as to form in all material respects with the Securities Act. In addition, Davis Polk & Wardwell will deliver a separate letter to the effect that such counsel has participated in conferences with directors, officers and other representatives of the Company and representatives of the independent public accountants for the Company, at which conferences the contents of the Registration Statement and related matters were discussed, and, although such counsel has not independently verified and is not passing upon and assume no responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement, except as specified, no facts have come to 22 such counsel's attention which lead such counsel to believe that the Registration Statement (other than any financial statements or other financial or statistical information included or incorporated by reference therein and that part of the Registration Statement that constitutes the Form T-1 as to which no opinion is expressed) at its effective date contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements contained therein not misleading, or that the Prospectus as of its date or the Closing Date (other than any financial statements or other financial or statistical information included or incorporated by reference therein as to which no opinion is expressed), contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. In rendering their opinions above, Davis Polk & Wardwell may rely as to factual matters on such certificates of the Company's officers or of governmental officials as they may deem relevant or necessary for such opinions and as to matters governed by other than federal or New York law or by the General Corporation Law of Delaware on opinions of local counsel. In addition, Mr. Luraschi will deliver a separate letter to the effect that such counsel has participated in conferences with directors, officers and other representatives of the Company and representatives of the independent public accountants for the Company, at which conferences the contents of the Registration Statement and related matters were discussed, and, although such counsel has not independently verified and is not passing upon and assume no responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement, except as specified, no facts have come to such counsel's attention which lead such counsel to believe that the Registration Statement (other than any financial statements or other financial or statistical information included or incorporated by reference therein and that part of the Registration Statement that constitutes the Form T-1 as to which no opinion is expressed) at its effective date contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements contained therein not misleading, or that the Prospectus as of its date or the Closing Date (other than any financial statements or other financial or statistical information included or incorporated by reference therein as to which no opinion is expressed), contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. 23 In rendering the opinions above, Mr. Luraschi may rely as to factual matters on such certificates of the Company's officers or of governmental officials as he may deem relevant or necessary for such opinions and as to matters governed by other than federal or New York law or by the General Corporation Law of Delaware on opinions of local counsel. (g) You shall have received on the Closing Date an opinion, dated the Closing Date, of ___________, counsel for the Underwriters, as to the matters referred to in clauses (i), (ii), (iii), (vi) (but only with respect to the statements under the captions "Description of __________" and "Underwriting") and (viii) of the foregoing paragraph (f). With respect to subparagraph (viii) of paragraph (f) above and the final subparagraph of this paragraph (g), __________ may state that their opinion and belief is based upon their participation in the preparation of the Registration Statement and the Prospectus and any amendments or supplements thereto (but not including documents incorporated therein by reference) and review and discussion of the contents thereof (including documents incorporated therein by reference), but is without independent check or verification except as specified. (h) You shall have received on the Closing Date an opinion (satisfactory to you and counsel for the Underwriters), dated the Closing Date of Richards, Layton & Finger, special counsel for the Trust, to the effect that: (i) the Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Act and under the Declara tion and the Delaware Act has the business trust power and authority to conduct its business as described in the Registration Statement and Prospectus; (ii) assuming due authorization, execution and delivery of the Declaration by the Company and the Trustees, the Declaration is a legal, valid and binding agreement of the Company and the Trustees, enforceable against the Company and the Trustees in accordance with its terms, except as (a) the enforceability thereof may be limited by bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation, fraudulent conveyance or other similar laws relating to or affecting the rights and remedies of creditors generally and (b) principles of equity, including applicable laws relating to fiduciary duties (regardless of whether considered and applied in a proceeding in equity or at law); (iii) under the Declaration and the Delaware Act, the execution and delivery of this Agreement by the Trust, and the performance by the 24 Trust of its obligations hereunder, have been duly authorized by all business trust action on the part of the Trust; (iv) the Trust Securities have been duly authorized by the Declaration and (x) when the Securities are issued in accordance with the terms of this Agreement and delivered to and paid for by the Underwriters and (y) the Common Securities are issued against payment therefor as provided in the Declaration, such Trust Securities will be duly and validly issued and, will be fully paid and nonassessable undivided beneficial interests in the assets of the Trust; the holders of Trust Securities, as beneficial owners of the Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware; (v) under the Declaration and the Delaware Act, the issuance of the Trust Securities is not subject to preemptive rights; and (vi) the statements in the Prospectus under the caption "_____________________" insofar as such statements constitute a summary of legal matters or documents referred to therein, fairly present the information called for with respect to such legal matters and documents. In rendering such opinion, such counsel may note that holders of Trust Securities may be obligated, pursuant to the Declaration, to (i) provide indemnity and security in connection with and pay taxes or other governmental charges arising from transfers of certificates for Trust Securities and the issuance of replacement certificates for Trust Securities, (ii) provide security and indemnity in connection with requests of or directions to the Property Trustee to exercise its rights and remedies under the Declaration and (iii) undertake as a party litigant to pay costs in any suit for the enforcement of any right or remedy under the Declaration or against the Property Trustee, to the extent provided in the Declaration. In rendering such opinion such counsel may also note that the Company, in its capacity as Sponsor and not in its capacity as a holder, has undertaken certain payment obligations as set forth in the Declaration. (i) You shall have received a letter on and as of the Closing Date, in form and substance satisfactory to you, from Deloitte & Touche, independent public accountants, with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus and substantially in the form and substance of the letter delivered to you by Deloitte & Touche on the date of this Agreement. 25 (j) The Company and the Trust shall not have failed at or prior to the Closing Date to perform or comply with any of the agreements herein contained and required to be performed or complied with by the Company or the Trust at or prior to the Closing Date. 9 Effective Date of Agreement and Termination. This Agreement shall become effective upon the later of (i) execution of this Agreement and (ii) when notification of the effectiveness of the Registration Statement has been released by the Commission. This Agreement may be terminated at any time prior to the Closing Date by you by written notice to the Company if any of the following has occurred: (i) since the respective dates as of which information is given in the Registration Statement and the Prospectus, any adverse change or development involving a prospective adverse change in the condition, financial or otherwise, of the Company, any Principal Subsidiary or the earnings, affairs, or business prospects of the Company or any Principal Subsidiary, whether or not arising in the ordinary course of business, which would, in your reasonable judgment, make it impracticable to market the Securities on the terms and in the manner contemplated in the Prospectus, (ii) any outbreak or escalation of hostilities or other national or international calamity or crisis or material change in economic conditions, if the effect of such outbreak, escalation, calamity, crisis or change on the financial markets of the United States or elsewhere would, in your reasonable judgment, make it impracticable to market the Securities on the terms and in the manner contemplated in the Prospectus, (iii) the suspension or material limitation of trading in securities on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market System or limitation on prices for securities on any such exchange or National Market System, (iv) the enactment, publication, decree or other promulgation of any federal or state statute, regulation, rule or order of any court or other governmental authority which in your reasonable judgment materially and adversely affects, or will materially and adversely affect, the business or operations of the Company, (v) the declaration of a banking moratorium by either federal or New York State authorities or (vi) the taking of any action by any federal, state or local government or agency in respect of its monetary or fiscal affairs which in your reasonable judgment has a material adverse effect on the financial markets in the United States. If on the Closing Date or on an Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase the Securities which it or they have agreed to purchase hereunder on such date and the aggregate Firm Securities or Additional Securities, as the case may be, which such defaulting Underwriter or Underwriters, as the case may be, agreed but failed or refused to purchase is not more than one-tenth of the total number of Securities to be purchased by all Underwriters, each non-defaulting Underwriter shall be obligated severally, in the proportion which the number of Securities set forth opposite its name in Schedule I bears 26 to the aggregate number of Securities which all the non-defaulting Underwriters, as the case may be, have agreed to purchase, or in such other proportion as you may specify, to purchase the Securities which such defaulting Underwriter or Underwriters, as the case may be, agreed but failed or refused to purchase on such date; provided that in no event shall the number of Firm Securities or Additional Securities, as the case may be, which any Underwriter has agreed to purchase pursuant to Section 2 hereof be increased pursuant to this Section 9 by an amount in excess of one-ninth of such number of Firm Securities or Additional Securities, as the case may be, without the written consent of such Underwriter. If on the Closing Date or on an Option Closing Date, as the case may be, any Underwriter or Underwriters shall fail or refuse to purchase Securities and the aggregate number of Firm Securities or Additional Securities, as the case may be, with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Securities to be purchased on such date by all Underwriters in the event of a default by a Underwriter and arrangements satisfactory to you and the Company for purchase of such Securities are not made within 48 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter and the Company. In any such case which does not result in termination of this Agreement, either you or the Company shall have the right to postpone the Closing Date or on an Option Closing Date, as the case may be, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and the Prospectus or any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of any such Underwriter under this Agreement. 10 Miscellaneous. Notices given pursuant to any provision of this Agreement shall be addressed as follows: (a) if to the Trust, to AES Trust, [ ], c/o The AES Corporation, 1001 N. 19th Street, Arlington, Virginia 22209, Attention: General Counsel; (b) if to the Company, to The AES Corporation, 1001 N. 19th Street, Arlington, Virginia 22209, Attention: General Counsel and (C) if to any Underwriter or to you, to you c/o ____________________________, Attention: Syndicate Department, or in any case to such other address as the person to be notified may have requested in writing. The respective indemnities, contribution agreements, representations, warranties and other statements of the Company, its officers and directors of the Trust, the Trustee and its officers and of the several Underwriters set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, and will survive delivery of and payment for the Securities, regardless of (i) any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter or by or on behalf of the Company, the officers or directors of the Company or any controlling person of the Company or by or on behalf of the Trust, the Trustees or the officers or any controlling person of the Trust, (ii) acceptance of the Securities and payment for them hereunder and (iii) termination of this Agreement. 27 If this Agreement shall be terminated by the Underwriters because of any failure or refusal on the part of the Trust or the Company to comply with the terms or to fulfill any of the conditions of this Agreement, the Company agrees to reimburse the several Underwriters for all out-of-pocket expenses (including the fees and disbursements of counsel) reasonably incurred by them. Except as otherwise provided, this Agreement has been and is made solely for the benefit of and shall be binding upon the Trust, the Company, the Underwriters, any controlling persons referred to herein and their respective successors and assigns, all as and to the extent provided in this Agreement, and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include a purchaser of any of the Securities from any of the several Underwriters merely because of such purchase. This Agreement shall be governed and construed in accordance with the laws of the State of New York. This Agreement may be signed in various counterparts which together shall constitute one and the same instrument. 28 Please confirm that the foregoing correctly sets forth the agreement among the Trust, the Company and the Underwriters. Very truly yours, AES TRUST [_______], a Delaware statutory business trust By: THE AES CORPORATION, as Sponsor By ------------------------------------- Title: THE AES CORPORATION By ------------------------------------- Title: Acting severally on behalf of itself and the several Underwriters named above By -------------------------------- SCHEDULE I ---------- Number of Firm Securities Underwriters to be Purchased ------------ --------------- Total $ Annex I ------- Principal Subsidiaries ---------------------- Ownership Security Name Interest Interest - ---- -------- -------- EX-4.12 3 EXHIBIT 4.12 Exhibit 4.12 DECLARATION OF TRUST, dated as of November 5, 1997, between The AES Corporation, a Delaware corporation, as Sponsor, and The First National Bank of Chicago, not in its individual capacity but solely as trustee (the "PROPERTY TRUSTEE"), First Chicago Delaware Inc., not in its individual capacity but solely as trustee (the "DELAWARE TRUSTEE"), and William R. Luraschi, Willard Hoagland and Barry J. Sharp, each not in his individual capacity but solely as trustee (the Property Trustee, Delaware Trustee and each such individual as trustee, collectively the "TRUSTEES"). The Sponsor and the Trustees hereby agree as follows: 1. The trust created hereby shall be known as "AES TRUST IV", in which name the Trustees, or the Sponsor to the extent provided herein, may conduct the business of the Trust, make and execute contracts, and sue and be sued. 2. The Sponsor hereby assigns, transfers, conveys and sets over to the Trust the sum of $10. The Trust hereby acknowledges receipt of such amount in trust from the Sponsor, which amount shall constitute the initial trust estate. It is the intention of the parties hereto that the Trust created hereby constitute a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code ss. 3801 et seq. (the "BUSINESS TRUST ACT"), and that this document constitute the governing instrument of the Trust. The Trustees are hereby authorized and directed to execute and file a certificate of trust with the Secretary of State of the State of Delaware in the form attached hereto. The Trust is hereby established by the Sponsors and the Trustees for the purposes of (i) issuing preferred securities representing undivided beneficial interests in the assets of the Trust ("PREFERRED SECURITIES") in exchange for cash and investing the proceeds thereof in junior subordinated debentures of the Sponsor, (ii) issuing and selling common securities representing undivided beneficial interest in the assets of the Trust to the Sponsor in exchange for cash and investing the proceeds thereof in additional junior subordinated debentures of the Sponsor and, (iii) engaging in such other activities as are necessary, convenient or incidental thereto. 3. The Sponsor and the Trustees will enter into an amended and restated Declaration of Trust, satisfactory to each such party and substantially in the form included as an exhibit to the 1933 Act Registration Statement referred to below, to provide for the contemplated operation of the Trust created hereby and the issuance of the Preferred Securities and Common Securities referred to therein. Prior to the execution and delivery of such amended and restated Declaration of Trust, the Trustees shall not have any duty or obligation hereunder or with respect to the trust estate, except as otherwise required by applicable law or as may be necessary to obtain prior to such execution and delivery any licenses, consents or approvals required by applicable law or otherwise. 4. The Sponsor and the Trustees hereby authorize and direct the Sponsor, as the sponsor of the Trust, (i) to prepare and file with the Securities and Exchange Commission (the "COMMISSION") and execute, in each case on behalf of the Trust, (a) a Registration Statement on Form S-3 (the "1933 ACT REGISTRATION STATEMENT") including any pre-effective or post-effective amendments to such Registration Statement, relating to the registration under the Securities Act of 1933, as amended, of the Preferred Securities of the Trust and (b) a Registration Statement on Form 8-A (the "1934 ACT REGISTRATION STATEMENT") (including all pre-effective and post-effective amendments thereto) relating to the registration of the Preferred Securities of the Trust under Section 12(b) of the Securities Exchange Act of 1934, as amended; (ii) to prepare and file with the New York Stock Exchange and execute on behalf of the Trust a listing application and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Preferred Securities to be listed on the New York Stock Exchange; (iii) to prepare and file and execute on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as shall be necessary or desirable to register the Preferred Securities under the securities or "BLUE SKY" laws of such jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or desirable and (iv) to negotiate the terms of and execute on behalf of the Trust an underwriting agreement among the Trust, the Sponsor and any underwriter, dealer or agent relating to the Preferred Securities, substantially in the form included as Exhibit 1.3 to the 1933 Act Registration Statement. In the event that any filing referred to in clauses (i)-(iii) above is required by the rules and regulations of the Commission, the New York Stock Exchange or state securities or blue sky laws, to be executed on behalf of the Trust by the Trustees, William R. Luraschi, Willard Hoagland and Barry J. Sharp, in their capacities as Trustees of the Trust, are hereby authorized and directed to join in any such filing and to execute on behalf of the Trust any and all of the foregoing, it being understood that The First National Bank of Chicago and First Chicago Delaware Inc., in their capacities as Trustees of the Trust, shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by the rules and regulations of the Commission, the New York Stock Exchange or state securities or blue sky laws. In connection with all of the foregoing, the Sponsor and each Trustee, solely in its capacity as Trustee of the Trust, hereby constitutes and appoints Willard Hoagland, Diane Crockett, William R. Luraschi, Dennis W. Bakke and Barry J. Sharp, and each of them, his, her or its, as the case may be, true and lawful attorneys-in-fact, and agents, with full power of substitution and resubstitution, for the Sponsor or such Trustee and in the Sponsor's or such 2 Trustee's name, place and stead, in any and all capacities, to sign and file (i) any and all amendments (including post-effective amendments) to the 1933 Act Registration Statement and the 1934 Act Registration Statement with all exhibits thereto, and other documents in connection therewith, and (ii) a registration statement, and any and all amendments thereto, relating thereto filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended with the Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as the Sponsor or such Trustee might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, shall do or cause to be done by virtue hereof. 5. This Declaration of Trust may be executed in one or more counterparts. 6. The number of Trustees initially shall be five (5) and thereafter the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by the Sponsor which may increase or decrease the number of Trustees; provided, however, that the number of Trustees shall in no event be less than five (5); and provided, further that to the extent required by the Business Trust Act, one Trustee shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware and meets other requirements imposed by applicable law. Subject to the foregoing, the Sponsor is entitled to appoint or remove without cause any Trustee at any time. The Trustees may resign upon thirty days prior notice to the Sponsor. 7. First Chicago Delaware Inc., in its capacity as Trustee, shall not have any of the powers or duties of the Trustees set forth herein and shall be a Trustee of the Trust for the sole purpose of satisfying the requirements of section 3807 of the Business Trust Act. 8. The Trust shall terminate before the issuance of any Preferred Securities at the election of the Sponsor. 3 IN WITNESS WHEREOF, the parties hereto have caused this Declaration of Trust to be duly executed as of the day and year first above written. The AES Corporation, as Sponsor By:/s/ William R. Luraschi ----------------------------------------- Name: William R. Luraschi Title: General Counsel and Secretary The First National Bank of Chicago, not in its individual capacity but solely as Property Trustee By:/s/ Melissa G. Weisman ----------------------------------------- Name: Melissa G. Weisman Title: Vice President First Chicago Delaware Inc., not in its individual capacity but solely as Delaware Trustee By:/s/ Melissa G. Weisman ----------------------------------------- Name: Melissa G. Weisman Title: Vice President /s/ William R. Luraschi -------------------------------------------- William R. Luraschi, not in his individual capacity but solely as Trustee /s/ Willard Hoagland -------------------------------------------- Willard Hoagland, not in his individual capacity but solely as Trustee /s/ Barry J. Sharp -------------------------------------------- Barry J. Sharp, not in his individual capacity but solely as Trustee 4 EX-4.13 4 EXHIBIT 4.13 Exhibit 4.13 CERTIFICATE OF TRUST OF AES TRUST IV THIS Certificate of Trust of AES Trust IV (the "Trust"), dated as of November 5, 1997, is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. Code ss. 3801 et seq.). 1. Name. The name of the business trust being formed hereby is AES Trust IV. 2. Delaware Trustee. The name and business address of the trustee of the Trust with a principal place of business in the State of Delaware is First Chicago Delaware Inc., 300 King Street, Wilmington, Delaware 19801 . 3. Effective Date. This Certificate of Trust shall be effective as of its filing. IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust, have executed this Certificate of Trust as of the date first above written. First Chicago Delaware Inc., as Delaware Trustee By: /s/ Melissa G. Weisman --------------------------------- Name: Melissa G. Weisman Title: Vice President The First National Bank of Chicago, as Property Trustee By: /s/ Melissa G. Weisman --------------------------------- Name: Melissa G. Weisman Title: Vice President /s/ William R. Luraschi ------------------------------------ William R. Luraschi as Trustee /s/ William Hoagland ------------------------------------ Willard Hoagland as Trustee /s/ Barry J. Sharp ------------------------------------ Barry J. Sharp as Trustee 2 EX-4.14 5 EXHIBIT 4.14 Exhibit 4.14 DECLARATION OF TRUST, dated as of November 5, 1997, between The AES Corporation, a Delaware corporation, as Sponsor, and The First National Bank of Chicago, not in its individual capacity but solely as trustee (the "PROPERTY TRUSTEE"), First Chicago Delaware Inc., not in its individual capacity but solely as trustee (the "DELAWARE TRUSTEE"), and William R. Luraschi, Willard Hoagland and Barry J. Sharp, each not in his individual capacity but solely as trustee (the Property Trustee, Delaware Trustee and each such individual as trustee, collectively the "TRUSTEES"). The Sponsor and the Trustees hereby agree as follows: 1. The trust created hereby shall be known as "AES TRUST V", in which name the Trustees, or the Sponsor to the extent provided herein, may conduct the business of the Trust, make and execute contracts, and sue and be sued. 2. The Sponsor hereby assigns, transfers, conveys and sets over to the Trust the sum of $10. The Trust hereby acknowledges receipt of such amount in trust from the Sponsor, which amount shall constitute the initial trust estate. It is the intention of the parties hereto that the Trust created hereby constitute a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code ss. 3801 et seq. (the "BUSINESS TRUST ACT"), and that this document constitute the governing instrument of the Trust. The Trustees are hereby authorized and directed to execute and file a certificate of trust with the Secretary of State of the State of Delaware in the form attached hereto. The Trust is hereby established by the Sponsors and the Trustees for the purposes of (i) issuing preferred securities representing undivided beneficial interests in the assets of the Trust ("PREFERRED SECURITIES") in exchange for cash and investing the proceeds thereof in junior subordinated debentures of the Sponsor, (ii) issuing and selling common securities representing undivided beneficial interest in the assets of the Trust to the Sponsor in exchange for cash and investing the proceeds thereof in additional junior subordinated debentures of the Sponsor and, (iii) engaging in such other activities as are necessary, convenient or incidental thereto. 3. The Sponsor and the Trustees will enter into an amended and restated Declaration of Trust, satisfactory to each such party and substantially in the form included as an exhibit to the 1933 Act Registration Statement referred to below, to provide for the contemplated operation of the Trust created hereby and the issuance of the Preferred Securities and Common Securities referred to therein. Prior to the execution and delivery of such amended and restated Declaration of Trust, the Trustees shall not have any duty or obligation hereunder or with respect to the trust estate, except as otherwise required by applicable law or as may be necessary to obtain prior to such execution and delivery any licenses, consents or approvals required by applicable law or otherwise. 4. The Sponsor and the Trustees hereby authorize and direct the Sponsor, as the sponsor of the Trust, (i) to prepare and file with the Securities and Exchange Commission (the "COMMISSION") and execute, in each case on behalf of the Trust, (a) a Registration Statement on Form S-3 (the "1933 ACT REGISTRATION STATEMENT") including any pre-effective or post-effective amendments to such Registration Statement, relating to the registration under the Securities Act of 1933, as amended, of the Preferred Securities of the Trust and (b) a Registration Statement on Form 8-A (the "1934 ACT REGISTRATION STATEMENT") (including all pre-effective and post-effective amendments thereto) relating to the registration of the Preferred Securities of the Trust under Section 12(b) of the Securities Exchange Act of 1934, as amended; (ii) to prepare and file with the New York Stock Exchange and execute on behalf of the Trust a listing application and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Preferred Securities to be listed on the New York Stock Exchange; (iii) to prepare and file and execute on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as shall be necessary or desirable to register the Preferred Securities under the securities or "BLUE SKY" laws of such jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or desirable and (iv) to negotiate the terms of and execute on behalf of the Trust an underwriting agreement among the Trust, the Sponsor and any underwriter, dealer or agent relating to the Preferred Securities, substantially in the form included as Exhibit 1.3 to the 1933 Act Registration Statement. In the event that any filing referred to in clauses (i)-(iii) above is required by the rules and regulations of the Commission, the New York Stock Exchange or state securities or blue sky laws, to be executed on behalf of the Trust by the Trustees, William R. Luraschi, Willard Hoagland and Barry J. Sharp, in their capacities as Trustees of the Trust, are hereby authorized and directed to join in any such filing and to execute on behalf of the Trust any and all of the foregoing, it being understood that The First National Bank of Chicago and First Chicago Delaware Inc., in their capacities as Trustees of the Trust, shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by the rules and regulations of the Commission, the New York Stock Exchange or state securities or blue sky laws. In connection with all of the foregoing, the Sponsor and each Trustee, solely in its capacity as Trustee of the Trust, hereby constitutes and appoints Willard Hoagland, Diane Crockett, William R. Luraschi, Dennis W. Bakke and Barry J. Sharp, and each of them, his, her or its, as the case may be, true and lawful attorneys-in-fact, and agents, with full power of substitution and resubstitution, for the Sponsor or such Trustee and in the Sponsor's or such 2 Trustee's name, place and stead, in any and all capacities, to sign and file (i) any and all amendments (including post-effective amendments) to the 1933 Act Registration Statement and the 1934 Act Registration Statement with all exhibits thereto, and other documents in connection therewith, and (ii) a registration statement, and any and all amendments thereto, relating thereto filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended with the Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as the Sponsor or such Trustee might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, shall do or cause to be done by virtue hereof. 5. This Declaration of Trust may be executed in one or more counterparts. 6. The number of Trustees initially shall be five (5) and thereafter the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by the Sponsor which may increase or decrease the number of Trustees; provided, however, that the number of Trustees shall in no event be less than five (5); and provided, further that to the extent required by the Business Trust Act, one Trustee shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware and meets other requirements imposed by applicable law. Subject to the foregoing, the Sponsor is entitled to appoint or remove without cause any Trustee at any time. The Trustees may resign upon thirty days prior notice to the Sponsor. 7. First Chicago Delaware Inc., in its capacity as Trustee, shall not have any of the powers or duties of the Trustees set forth herein and shall be a Trustee of the Trust for the sole purpose of satisfying the requirements of section 3807 of the Business Trust Act. 8. The Trust shall terminate before the issuance of any Preferred Securities at the election of the Sponsor. 3 IN WITNESS WHEREOF, the parties hereto have caused this Declaration of Trust to be duly executed as of the day and year first above written. The AES Corporation, as Sponsor By:/s/ William R. Luraschi ----------------------------------------- Name: William R. Luraschi Title: General Counsel and Secretary The First National Bank of Chicago, not in its individual capacity but solely as Property Trustee By:/s/ Melissa G. Weisman ----------------------------------------- Name: Melissa G. Weisman Title: Vice President First Chicago Delaware Inc., not in its individual capacity but solely as Delaware Trustee By:/s/ Melissa G. Weisman ----------------------------------------- Name: Melissa G. Weisman Title: Vice President /s/ William R. Luraschi -------------------------------------------- William R. Luraschi, not in his individual capacity but solely as Trustee /s/ Willard Hoagland -------------------------------------------- Willard Hoagland, not in his individual capacity but solely as Trustee /s/ Barry J. Sharp -------------------------------------------- Barry J. Sharp, not in his individual capacity but solely as Trustee 4 EX-4.15 6 EXHIBIT 4.15 Exhibit 4.15 CERTIFICATE OF TRUST OF AES TRUST V THIS Certificate of Trust of AES Trust V (the "Trust"), dated as of November 5, 1997, is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. Code ss. 3801 et seq.). 1. Name. The name of the business trust being formed hereby is AES Trust V. 2. Delaware Trustee. The name and business address of the trustee of the Trust with a principal place of business in the State of Delaware is First Chicago Delaware Inc., 300 King Street, Wilmington, Delaware 19801 . 3. Effective Date. This Certificate of Trust shall be effective as of its filing. IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust, have executed this Certificate of Trust as of the date first above written. First Chicago Delaware Inc., as Delaware Trustee By: /s/ Melissa G. Weisman ---------------------------------- Name: Melissa G. Weisman Title: Vice President The First National Bank of Chicago, as Property Trustee By: /s/ Melissa G. Weisman ---------------------------------- Name: Melissa G. Weisman Title: Vice President /s/ William R. Luraschi ------------------------------------ William R. Luraschi as Trustee /s/ William Hoagland ------------------------------------ Willard Hoagland as Trustee /s/ Barry J. Sharp ------------------------------------ Barry J. Sharp as Trustee 2 EX-12.1 7 EXHIBIT 12.1 EXHIBIT 12.1 THE AES CORPORATION AND SUBSIDIARIES STATEMENT RE: CALCULATIONS OF RATIO OF EARNINGS TO FIXED CHARGES (In millions, unaudited)
Six Months Ended Year Ended December 31, June 30, 1992 1993 1994 1995 1996 1997 ----- ----- ----- ----- ----- ----- Actual: COMPUTATION OF EARNINGS: Income from continuing operations $ 65 $ 89 $ 142 $ 164 $ 185 $ 117 before income taxes Adjustment for undistributed equity earnings, net of distributions (3) (11) (6) 3 (20) (4) Interest expense 97 125 122 122 138 87 Depreciation of previously capitalized interest 4 4 4 4 4 2 Net amortization of issuance costs 3 3 4 5 6 5 ----- ----- ----- ----- ----- ----- Earnings $ 166 $ 210 $ 266 $ 298 $ 313 $ 207 ===== ===== ===== ===== ===== ===== COMPUTATION OF FIXED CHARGES: Interest expensed and capitalized amounts (including construction related fixed charges) $ 118 $ 127 $ 124 $ 132 $ 165 $ 116 Net amortization of issuance costs (including capitalized amounts) 3 3 4 5 6 5 ----- ----- ----- ----- ----- ----- Fixed charges $ 121 $ 130 $ 128 $ 137 $ 171 $ 121 ===== ===== ===== ===== ===== ===== Ratio of earnings to fixed charges 1.37x 1.62x 2.08x 2.18x 1.83x 1.71x
EX-23.1 8 EXHIBIT 23.1 Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of The AES Corporation on Form S-3 of our report dated January 30, 1997, except for the penultimate paragraph of Note 6, as to which the date is March 13, 1997, the pre-penultimate paragraph of Note 6, as to which the date is August 8, 1997, the subsequent event paragraph of Note 7, as to which the date is July 15, 1997, and Note 13, as to which the date is October 27, 1997, appearing in The Company's Current Report on Form 8-K, dated November 6, 1997, and of our report on the consolidated financial statement schedules dated January 30, 1997, appearing in the Annual Report on Form 10-K of The AES Corporation, for the year ended December 31, 1996 and to the reference to us under the headings "Experts" in each Prospectus, which is part of such Registration Statement. /s/ Deloitte & Touche LLP - ------------------------------ Washington, D.C. November 7, 1997 EX-23.2 9 EXHIBIT 23.2 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statement on Form S-3 of The AES Corportion of our report dated February 28, 1997 relating to the financial statements of Companhia Energetica de Minas Gerais - CEMIG as at and for the years ended December 31, 1996 and 1995 prepared in accordance with accounting principles generally accepted in Brazil, which appears in Item 7 of the Current Report on Form 8-K of The AES Corporation dated July 16, 1997 and to the reference to us under the heading "Experts" in the Prospectus or Prospectus Supplement which are part of such Registration Statement. /s/ Price Waterhouse - ---------------------------- Auditores Independentes Belo Horizonte, MG-Brazil November 7, 1997 EX-24.1 10 EXHIBIT 24.1 EXHIBIT 24.1 POWER OF ATTORNEY The undersigned (other than Dennis W. Bakke and Barry J. Sharp), acting in the capacity or capacities stated opposite their respective names below, hereby constitute and appoint DENNIS W. BAKKE, BARRY J. SHARP and WILLIAM R. LURASCHI and each of them severally, the attorneys-in-fact of the undersigned with full power to them and each of them to sign for and in the name of the undersigned in the capacities indicated below the Registration Statement on Form S-3 relating to the Debt Securities of this Company to be filed and to become effective in accordance with Rule 462 (b) under the Securities Act of 1933, as amended, and any and all exhibits, amendments and supplements thereto, and any other documents necessary, appropriate or desirable in connection therewith, and to file the same and to do and perform each and every act and thing necessary, appropriate or desirable in connection therewith.
SIGNATURE POSITION WITH AES DATE - --------------------------- ---------------------------------------- ----------------- /s/ Roger W. Sant Chairman of the Board and Director October 14, 1997 - ------------------------- Roger W. Sant /s/ Dennis W. Bakke President, Chief Executive Officer and October 14, 1997 - ------------------------- Director (Principal Executive Officer) Dennis W. Bakke /s/ Vicki-Ann Assevero Director October 14, 1997 - ------------------------- Vicki-Ann Assevero /s/ Dr. Alice F. Emerson Director October 14, 1997 - ------------------------- Dr. Alice F. Emerson /s/ Robert F. Hemphill, Jr. Director October 14, 1997 - ------------------------- Robert F. Hemphill, Jr. /s/ Frank Jungers Director October 14, 1997 - ------------------------- Frank Jungers /s/ Dr. Henry R. Linden Director October 14, 1997 - ------------------------- Dr. Henry R. Linden /s/ John H. McArthur Director October 14, 1997 - ------------------------- John H. McArthur
/s/ Hazel O'Leary Director October 14, 1997 - ------------------------- Hazel O'Leary /s/ Thomas I. Unterberg Director October 14, 1997 - ------------------------- Thomas I. Unterberg /s/ Robert H. Waterman, Jr. Director October 14, 1997 - ------------------------- Robert H. Waterman, Jr. /s/ Barry J. Sharp Vice President and Chief Financial Officer October 14, 1997 - ------------------------- (Principal Financial and Accounting Barry J. Sharp Officer)
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