-----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, Q/90XDQzYtGg6ohlmUeazAKWeOIkh231j3oUCghDA4i3Jsi2Or+DxOo1dw+ndQD6 elvqhx9hmmeVDP6tm0qF9g== 0001005150-99-000653.txt : 19990810 0001005150-99-000653.hdr.sgml : 19990810 ACCESSION NUMBER: 0001005150-99-000653 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990809 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: 10-Q SEC ACT: SEC FILE NUMBER: 001-12291 FILM NUMBER: 99680586 BUSINESS ADDRESS: STREET 1: 1001 N 19TH ST STREET 2: STE 2000 CITY: ARLINGTON STATE: VA ZIP: 22209 BUSINESS PHONE: 7035221315 10-Q 1 FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-19281 THE AES CORPORATION ------------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 54-1163725 (State or Other Jurisdiction of Incorporation or (I.R.S. Employer Identification No.) Organization) 1001 NORTH 19TH STREET, ARLINGTON, VIRGINIA 22209 (Address of Principal Executive Offices) (Zip Code) (703) 522-1315 (Registrant's Telephone Number, Including Area Code) ---------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ The number of shares outstanding of Registrant's Common Stock, par value $0.01 per share, at July 30, 1999, was 192,027,295. ================================================================================ THE AES CORPORATION INDEX
Page PART I. FINANCIAL INFORMATION Item 1. Interim Financial Statements: Consolidated Statements of Operations 1 Consolidated Balance Sheets 2 Consolidated Statements of Cash Flow 4 Notes to Consolidated Financial Statements 5 Item 2. Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings 16 Item 2. Changes in Securities and Use of Proceeds 16 Item 3. Defaults Upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 17 Item 6. Exhibits and Reports on Form 8-K 17 Signatures 21
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. THE AES CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE PERIODS ENDED JUNE 30, 1998 AND 1999 - --------------------------------------------------------------------------------
(UNAUDITED) THREE THREE SIX SIX MONTHS MONTHS MONTHS MONTHS ENDED ENDED ENDED ENDED 6/30/98 6/30/99 6/30/98 6/30/99 - ------------------------------------------------------------------------------------------------------------------------- ($ in millions, except per share amounts) REVENUES: Sales and services $ 565 $ 640 $ 1,140 $ 1,278 OPERATING COSTS AND EXPENSES: Cost of sales and services 385 421 782 830 Selling, general and administrative expenses 12 15 27 31 Provision for (recovery of) contract receivables - (9) 15 - -------------- ---------------- ------------ ------------- TOTAL OPERATING COSTS AND EXPENSES 397 427 824 861 -------------- ---------------- ------------ ------------- OPERATING INCOME 168 213 316 417 OTHER INCOME AND (EXPENSE): Interest expense (99) (143) (202) (276) Interest and other income 17 17 31 33 Foreign currency transaction loss - (5) - (2) Equity in earnings (loss) before income tax 43 37 100 (54) (includes foreign currency transaction -------------- ----------------- ----------- ------------- losses of $1 and $12 for the 3 months ended June 30, 1998 & 1999, respectively, and $2 and $144 for the 6 months ended June 30, 1998 & 1999, respectively) INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 129 119 245 118 Income tax provision 36 34 69 28 Minority interest 22 14 40 32 -------------- ----------------- ----------- ------------- NET INCOME $ 71 $ 71 $ 136 $ 58 ============== ================= =========== ============= BASIC EARNINGS PER SHARE $ 0.41 $ 0.37 $ 0.77 $ 0.31 ============== ================= =========== ============= DILUTED EARNINGS PER SHARE $ 0.39 $ 0.36 $ 0.75 $ 0.31 ============== ================= =========== =============
See Notes to Consolidated Financial Statements. -1- THE AES CORPORATION CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND JUNE 30, 1999 - -------------------------------------------------------------------------------- (UNAUDITED) 12/31/98 6/30/99 - -------------------------------------------------------------------------------- ($ in millions) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 491 $ 391 Short-term investments 35 31 Accounts receivable, less provision to reduce contract receivables (1998-$52 and 1999-$42) 365 438 Inventory 119 123 Receivable from affiliates 18 9 Deferred income taxes 71 81 Prepaid expenses and other current assets 155 198 ---------- --------- Total current assets 1,254 1,271 PROPERTY, PLANT AND EQUIPMENT: Land 135 143 Electric generation and distribution assets 5,301 5,815 Accumulated depreciation and amortization (525) (626) Construction in progress 634 974 ---------- --------- Property, plant and equipment, net 5,545 6,306 OTHER ASSETS: Deferred financing costs, net 167 189 Project development costs 103 93 Investments in and advances to affiliates 1,933 1,721 Debt service reserves and other deposits 205 395 Electricity sales concessions and contracts 1,280 993 Goodwill 66 67 Other assets 228 202 ---------- --------- Total other assets 3,982 3,660 ---------- --------- TOTAL $ 10,781 $ 11,237 ========== ========= See Notes to Consolidated Financial Statements. -2- THE AES CORPORATION CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND JUNE 30, 1999 - --------------------------------------------------------------------------------
(UNAUDITED) 12/31/98 6/30/99 - -------------------------------------------------------------------------------- ($ in millions) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 215 $ 237 Accrued interest 113 156 Accrued and other liabilities 235 221 Other notes payable - current portion 8 - Project financing debt - current portion 1,405 676 ---------- ---------- Total current liabilities 1,976 1,290 LONG-TERM LIABILITIES: Project financing debt 3,597 4,651 Other notes payable 1,644 2,009 Deferred income taxes 268 239 Other long-term liabilities 220 211 ---------- ---------- Total long-term liabilities 5,729 7,110 MINORITY INTEREST 732 773 COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY TRUSTS HOLDING SOLELY JUNIOR SUBORDINATED DEBENTURES OF AES 550 550 STOCKHOLDERS' EQUITY: Common stock 2 2 Additional paid-in capital 1,243 1,757 Retained earnings 892 950 Accumulated other comprehensive loss (343) (1,195) ---------- ----------- Total stockholders' equity 1,794 1,514 ---------- ----------- TOTAL $ 10,781 $ 11,237 ========== ===========
See Notes to Consolidated Financial Statements. -3- THE AES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999
- ------------------------------------------------------------------------------------------------------------------------------------ (Unaudited) SIX SIX MONTHS MONTHS ENDED ENDED 6/30/98 6/30/99 - ---------------------------------------------------------------------------------------------------------------- ($ in millions) OPERATING ACTIVITIES: Net cash provided by operating activities $ 198 $ 159 INVESTING ACTIVITIES: Property additions (142) (298) Acquisitions, net of cash acquired (1,356) (1,374) Proceeds from the sales of assets 254 666 Sale of short-term investments 47 4 Affiliate advances and equity investments (181) (142) Project development costs (9) (31) Debt service reserves and other assets 56 (190) ------------ ------------ Net cash used in investing activities (1,331) (1,365) FINANCING ACTIVITIES: Borrowings (repayments) under the revolver 372 (173) Issuance of project financing debt and other coupon bearing securities 1,449 1,469 Repayments of project financing debt and other coupon bearing securities (458) (614) Payments for deferred financing costs (10) (30) Other liabilities (147) (57) Minority Interest Payments (18) (3) Sales of common stock 10 514 ------------ ------------ Net cash provided by financing activities 1,198 1,106 Increase in cash and cash equivalents 65 (100) Cash and cash equivalents, beginning 302 491 ------------ ------------ Cash and cash equivalents, ending $ 367 $ 391 ============ ============ SUPPLEMENTAL INTEREST AND INCOME TAXES DISCLOSURES: Cash payments for interest $ 156 $ 221 ============ ============ Cash payments for income taxes $ 37 $ 24 ============ ============
See Notes to Consolidated Financial Statements. -4- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Basis of Presentation The consolidated financial statements include the accounts of The AES Corporation, its subsidiaries and controlled affiliates (the "Company" or "AES"). Intercompany transactions and balances have been eliminated. Investments in 50% or less owned affiliates over which the Company has the ability to exercise significant influence, but not control, are accounted for using the equity method. In the Company's opinion, all adjustments necessary for a fair presentation of the unaudited financial statements for the periods ended June 30, 1998 and 1999, respectively, are included. All such adjustments are accruals of a normal and recurring nature. The results of operations for the period ended June 30, 1999 are not necessarily indicative of the results of operations to be expected for the full year. The financial statements are unaudited and should be read in conjunction with the Company's consolidated financial statements which are incorporated by reference in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 2. Foreign Currency Translation During early 1999, the Brazilian Real experienced a significant devaluation relative to the U.S. Dollar, declining from 1.21 Reais to the Dollar at December 31, 1998 to an average of 1.71 Reais to the Dollar for the six months ended June 30, 1999. This devaluation resulted in significant foreign currency translation and transaction losses for the Company for both the three months and the six months ended June 30, 1999. Non-cash charges of approximately $17 million and $146 million before income taxes were recorded during the three months and the six months ended June 30, 1999, respectively. The non-cash charges were approximately $13 million and $100 million after considering income taxes at the effective tax rate of 32% during the three months and the six months ended June 30, 1999, respectively. Excluding the effects of foreign currency transaction losses, the Company incurred net income of $84 million and diluted earnings per share of $0.43 for the three months ended June 30, 1999, and net income of $158 million and diluted earnings per share of $0.82 for the six months ended June 30, 1999. 3. Earnings Per Share Basic and diluted earnings per share computations are based on the weighted average number of shares of common stock and potential common stock outstanding during the period, after giving effect to stock splits. Potential common stock, for purposes of determining diluted earnings per share, includes the dilutive effects of stock options, warrants, deferred compensation arrangements and convertible securities. The effect of such potential common stock is computed using the treasury stock method or the if-converted method, in accordance with Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. See Exhibit 11 for the computation of the number of shares outstanding for basic earnings per share and diluted earnings per share in accordance with SFAS 128. 4. Investments in and Advances to Affiliates The Company is a party to joint venture/consortium agreements through which the Company has equity investments in several operating companies. The joint venture/consortium parties generally share operational control of the investee. The agreements prescribe ownership and voting percentages -5- as well as other matters. The Company records its share of earnings from its equity investees on a pre-tax basis. The Company's share of the investee's income taxes is recorded in income tax expense. The following table presents summarized financial information (in millions) for equity method affiliates on a combined 100% basis. Amounts presented include condensed income statement information of Northern/AES Energy (45% owned U.S. affiliate), NIGEN Ltd. (47% owned UK Affiliate), Medway Power Ltd. (25% owned UK affiliate), Elsta (50% owned Netherlands affiliate), Light (14% and 18%, in 1998 and 1999, respectively, owned Brazilian affiliate), CEMIG (9.45% owned Brazilian affiliate), affiliates of Chigen, and Kingston (50% owned Canadian affiliate) for the six months ended June 30, 1998 and 1999. In addition to the affiliates owned as of June 30, 1998, the Company purchased OPGC (49% owned Indian affiliate) in late December 1998 which is included in the table below for the six months ended June 30, 1999. Six Months Six Months Ended Ended 6/30/98 6/30/99 ------- ------- Revenues $2,328 $1,642 Operating Income 617 740 Net Income (Loss) 526 (381) 5. Litigation The U.S. Environmental Protection Agency ("EPA") has commenced an industry-wide investigation of coal-fired electric power generators to determine compliance with environmental requirements under the Clean Air Act associated with repairs, maintenance, modifications and operational changes made to the facilities over the years. The EPA's focus is on whether the changes were subject to new source review or new performance standards, and whether best available control technology was or should have been used. AES's Beaver Valley plant received a request for information pursuant to Section 114 of the Clean Air Act, and has been visited by EPA personnel. The Beaver Valley plant cooperated with the request and provided the requested information. On August 4, 1999, the EPA issued a notice of violation ("NOV") to the plant, generally alleging that the facility failed to obtain the necessary permits in connection with certain changes made to the facility in the mid-to-late 1980s. The Beaver Valley facility disagrees with the EPA's findings and may meet with the EPA to attempt to resolve the issues identified in the NOV. If a mutually acceptable resolution is not reached, the EPA may seek to enforce the NOV through a judicial process and seek monetary penalties and/or injunctive relief under the Clean Air Act. The Company believes that the Beaver Valley facility has meritorious defenses to such an action and expects the facility to vigorously defend itself if any action is brought against it. The Company does not believe that the ultimate resolution of this issue will have a material adverse effect on its financial position or results of operations. The Company is also involved in certain legal proceedings in the normal course of business. It is the opinion of the Company that none of the pending litigation is expected to have a material adverse effect on its results of operations or financial position. 6. Acquisitions In May 1999, a subsidiary of the Company acquired two gas-fired power plants totaling 966 MW from the government of Victoria, Australia for approximately $100 million. -6- In January 1999, a subsidiary of the Company acquired 49% of both Empresa de Generacion Chiriqui S.A. (EGE Chiriqui) and Empresa de Generacion Bayano (EGE Bayano), two hydroelectric generation companies in Panama, for approximately $91 million. AES controls the operations of both entities, and therefore, consolidates them. In December 1998, a subsidiary of the Company acquired a 75% interest in Telasi, the electricity distribution company of Tbilisi, Republic of Georgia, for approximately $26 million. In June 1998, a subsidiary of AES acquired approximately 90% of Empresa Distribuidora de La Plata S.A. ("EDELAP"), an electric distribution company in the province of Buenos Aires, Argentina for approximately $355 million. In May 1998, a subsidiary of the Company completed the purchase of three natural gas-fired electric generating stations located in Southern California for approximately $786 million. In February 1998, the Company acquired approximately 80% of Compania de Luz Electrica de Santa Ana ("CLESA"), an electricity distribution company in El Salvador, for approximately $96 million. The preceding acquisitions were accounted for as purchases and the accompanying statements of operations include the operating results for all of the acquired companies from the dates of their respective acquisitions. The following table presents supplemental unaudited pro forma operating information as if each of the acquisitions had occurred at the beginning of the periods presented (in millions, except per share amounts): Six Months Six Months Ended Ended 6/30/98 6/30/99 ------- ------- Revenues $1,247 $1,286 Net Income 138 58 Basic Earnings Per Share 0.77 0.31 Diluted Earnings Per Share 0.75 0.31 The pro forma results are based upon assumptions and estimates which the Company believes are reasonable. The pro forma results do not purport to be indicative of the results that actually would have been obtained had the acquisitions occurred at the beginning of the periods presented, nor are they intended to be a projection of future results. Net income and earnings per share for the six months ended June 30, 1999 include a non-cash charge of $100 million, net of tax, from foreign currency transaction losses. In May 1999, a subsidiary of the Company acquired six electric generating stations for a purchase price of approximately $953 million. These coal-fired electric generating stations have a total installed capacity of 1,424 MW. Concurrently, the subsidiary sold two of the plants to an unrelated third party for approximately $670 million and simultaneously entered into a leasing arrangement with the unrelated party. The former transaction was accounted for as a purchase of assets while the latter was accounted for as a sale-leaseback, with operating lease treatment. In June 1999, a subsidiary of the Company assumed long-term managerial and voting control of two regional electric distribution companies (RECs) in Kazakhstan as part of a settlement of receivables outstanding from the -7- government of Kazakhstan. The contractual rights received in this transaction were valued at approximately $26 million. The two distribution businesses serve approximately 1.8 million people. The purchase price allocations for recently completed acquisitions have been prepared on a preliminary basis subject to adjustments resulting from additional facts that may come to light when the engineering, environmental and legal analysis are completed during their respective allocation periods. 7. Comprehensive Income (Loss) Comprehensive income (loss) consists of net income and foreign currency translation adjustments. It includes $55 million and $110 million of foreign currency translation adjustment losses for the quarters ended June 30, 1998 and 1999, respectively, and $95 million and $852 million for the six months ended June 30, 1998 and 1999, respectively. Comprehensive income is $16 million for the quarter ended June 30, 1998, and comprehensive loss is $39 million for the quarter ended June 30, 1999. Comprehensive income is $41 million for the six months ended June 30, 1998, and comprehensive loss is $794 million for the six months ended June 30, 1999. 8. Segments Information about the Company's operations by segment is as follows (in millions):
Equity Operating Earnings Revenue (1) Income / (Loss) ---------------- ------------- ----------- QUARTER ENDED JUNE 30, 1998 Generation $ 331 $ 136 $ 1 Distribution 230 42 42 Corporate and services 4 (10) - ------------ ------------- ----------- Total $ 565 $ 168 $ 43 ============ ============= =========== QUARTER ENDED JUNE 30, 1999 Generation $ 406 $ 171 $ 11 Distribution 229 50 26 Corporate and services 5 (8) - ------------ ------------- ----------- Total $ 640 $ 213 $ 37 ============ ============= =========== SIX MONTHS ENDED JUNE 30, 1998 Generation $ 656 $ 248 $ 15 Distribution 476 94 85 Corporate and services 8 (26) - ------------ ------------- ----------- Total $ 1,140 $ 316 $ 100 ============ ============= =========== SIX MONTHS ENDED JUNE 30, 1999 Generation $ 791 $ 348 $ 26 Distribution 476 94 (80) Corporate and services 11 (25) - ----------- ------------- ----------- Total $ 1,278 $ 417 $ (54) ============ ============= ===========
(1) Intersegment revenues for the quarter ended June 30, 1998 and 1999 were $11 million and $21 million, respectively, and for six months ended June 30, 1998 and 1999 were $25 million and $45 million, respectively. -8- 9. Subsequent Events In July 1999, the Company acquired New Energy Ventures, an energy services provider formed to serve retail customers in the U.S. where competitive energy markets are emerging. The acquisition was valued at approximately $90 million, and financed through a combination of cash, debt and AES common stock. ITEM 2. DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. INTRODUCTION The AES Corporation (AES or the Company) is a global power company committed to serving the world's needs for electricity in a socially responsible way. The majority of the Company's revenues represent sales of electricity to customers (generally electric utilities or regional electric companies) for further resale to end users. This is referred to as the electricity "generation" business. AES's generation business represented 62% of total revenues for the -9- six months ended June 30, 1999. Sales by these generation companies are made under long-term contracts from power plants owned by the Company's subsidiaries and affiliates, as well as through direct sales into regional wholesale electricity markets without a contract. The Company owns plants that it has constructed ("greenfield" plants) as well as those that it has purchased. Because of the significant complexities associated with building new electric generating plants, construction periods often range from two to five years. AES currently expects that projects now under construction will reach commercial operation and begin to sell electricity at various dates through the year 2002. The completion of each plant in a timely manner is generally supported by a guarantee from the plant's construction contractor, although in certain cases, AES has assumed the risk of satisfactory construction completion. Due to changes in the economic, political, technological, regulatory or logistical circumstances involving each individual plant, however, commercial operations may be delayed. AES also sells electricity directly to end users such as commercial, industrial, governmental and residential customers. This is referred to as the electricity "distribution" business. Electricity sales by AES's distribution businesses are generally made pursuant to the provisions of long-term electricity sale concessions granted by governments. In certain cases, these distribution companies are "integrated", in that they also own electric power plants for the purpose of generating a portion of the electricity they sell. Each distribution company also purchases electricity from third party wholesale suppliers, which may include other subsidiaries of the Company. AES continues to believe that there is significant demand for more efficiently operated electricity generation and distribution businesses. As a result, and guided by its commitment to serve the world's needs for electricity, AES is pursuing additional greenfield development projects and acquisitions in many countries. Several of these, if consummated, would require the Company to obtain substantial additional financing, including both debt and equity financing. AES is also currently in the process of completing several acquisitions, including its agreement to acquire the outstanding shares of Cilcorp, Inc. an integrated distribution company in Illinois. Certain subsidiaries and affiliates of the Company (domestic and non-U.S.) have signed long-term contracts or made similar arrangements for the sale of electricity and are in various stages of developing the related greenfield power plants. Substantial risks accompany their successful completion, including, but not limited to, those relating to failures of siting, financing, construction, permitting, governmental approvals or termination of the power sales contract as a result of a failure to meet certain milestones. As of June 30, 1999, capitalized costs for projects under development and in early stage of construction were approximately $93 million. The Company believes that these costs are recoverable; however, no assurance can be given that changes in circumstances related to individual projects will not occur or that any of these projects will be completed and reach commercial operation. In May 1999, a subsidiary of the Company, AES Barry Limited, completed a $195 million non-recourse project refinancing for its 230 MW gas-fired combined cycle power plant in Barry, South Wales, United Kingdom. Also in May 1999, a subsidiary of the Company, AES Fifoots Point Ltd., completed the $202 million financing for the planned refurbishment, upgrade and environmental improvement of a 393 MW coal-fired plant in South Wales, United Kingdom. In June 1999, a subsidiary of the Company, AES Ironwood L.L.C., completed a $308.5 million non-recourse bond financing for the construction of a 705 MW natural gas-fired combined cycle plant to be located in South Lebanon Township, Pennsylvania. Completion of construction and commencement of operations is expected in the second quarter of 2001. All of the capacity, associated energy and ancillary services from the plant will be sold under a 20-year tolling agreement with Williams Energy Marketing & Trading Company, a subsidiary of The Williams Company. Also in June 1999, a subsidiary of the Company, AES Parana S.A., completed a $448 million financing for the construciton of a 826 MW (net) natural gas-fired combined cycle power plant in San Nicolas, Province of Buenos Aires, Argentina. The project company is owned by wholly-owned subsidiaries of The AES Corporation (66.67%) and PSEG Global Inc. (33.33%). The facility is to be sited adjacent to the 650 MW San Nicolas power facility on the Parana River west of Buenos Aires, which is owned by AES and PSEG Global. It may not always be possible to arrange project financing for specific potential acquisitions. Moreover, acquisitions or the commencement of construction on several greenfield developments could require the Company to obtain substantial additional financing including both debt and equity. In order to enhance its financial capabilities to respond to these more accelerated opportunities, the Company maintains a $600 million revolving line and letter of credit facility (the "Revolver"). The Company also currently has a "universal shelf" registration statement with the SEC, which allows for the public issuance of various additional debt and preferred or common equity securities, either individually or in -10- combination, and which currently represents approximately $2.5 billion in unused potential proceeds from the issuance of public securities. The Company wishes to caution readers that there are important factors and areas affecting the Company which involve risk and uncertainty. These factors are set forth in the Company's Annual Report on Form 10-K filed with the Commission for the year ended December 31, 1998 under the heading "Cautionary Statement and Risk Factors", and should be considered when reviewing the Company's business. Such factors are relied upon by AES in issuing any forward-looking statements and could affect AES's actual results and cause such results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, AES. Some or all of these factors may apply to the Company's business as currently maintained or to be maintained. SECOND QUARTER 1999 AND 1998 RESULTS OF OPERATIONS Revenues increased 13%, or approximately $75 million, to $640 million from the second quarter of 1998 to the second quarter of 1999. Revenues increased 12%, or approximately $138 million, to $1.3 billion from the six months ended June 30, 1998 to the six months ended June 30, 1999. Revenues increased primarily from the acquisition of new businesses and also from the completion of greenfield projects during both the second quarter of 1999 and the six months ended June 30, 1999. Acquisitions that contributed significantly to the overall increase in revenues include Southland, Edelap, Panama, Telasi, and certain of the New York plants. The start of commercial operations at Barry also contributed significantly to the overall increase in revenues. Several other businesses also experienced modest increases in revenues. Revenues were negatively impacted at Sul due to the effects of the devaluation of the Brazilian Real. A few other businesses, including Tiszai, also experienced modest decreases in revenues. Cost of sales and services increased 9%, or approximately $36 million, to $421 million from the second quarter of 1998 to the second quarter of 1999. Cost of sales and services increased 6%, or approximately $48 million, to $830 million from the six months ended June 30, 1998 to the six months ended June 30, 1999. Cost of sales and services generally varies with changes in revenues. During both the second quarter of 1999 and the six months ended June 30, 1999, the change in cost of sales and services was relative to the change in revenues as previously discussed. Gross margin, which represents total revenues reduced by cost of sales and services and the provision to reduce contract receivables, increased 27%, or approximately $48 million, to $228 million from the second quarter of 1998 to the second quarter of 1999. Gross margin as a percentage of revenues increased from 32% for the second quarter of 1998 to 36% for the second quarter of 1999. Gross margin increased 31%, or approximately $105 million, to $448 million from the six months ended June 30, 1998 to the six months ended June 30, 1999. Gross margin as a percentage of revenues increased from 30% for the six months ended June 30, 1998 to 35% for the six months ended June 30, 1999. The increase in gross margin as a percentage of revenues was due to higher relative gross margins at certain of the recently acquired businesses as well as improved gross margins at certain of the existing businesses. Gross margin as a percentage of revenues was favorably impacted by the settlement with the government of Kazakhstan which resulted in a reduction in the provision to reduce contract receivables. -11- Selling, general and administrative expenses increased 25%, or approximately $3 million, to $15 million from the second quarter of 1998 to the second quarter of 1999. Selling, general and administrative expenses as a percentage of revenues remained constant at 2% for both the second quarter of 1998 and the second quarter of 1999. Selling, general and administrative expenses increased 15%, or approximately $4 million, to $31 million from the six months ended June 30, 1998 to the six months ended June 30, 1999. Selling, general and administrative expenses as a percentage of revenues remained constant at 2% for both the six months ended June 30, 1998 and the six months ended June 30, 1999. The increase in selling, general and administrative expenses is consistent with the Company's overall growth. Operating income increased 27%, or approximately $45 million, to $213 million from the second quarter of 1998 to the second quarter of 1999. Operating income as a percentage of revenues increased from 30% for the second quarter of 1998 to 33% for the second quarter of 1999. Operating income increased 32%, or approximately $101 million, to $417 million from the six months ended June 30, 1998 to the six months ended June 30, 1999. Operating income as a percentage of revenues increased from 28% for the six months ended June 30, 1998 to 33% for the six months ended June 30, 1999. The increase in operating income is due primarily to the increase in gross margin. Interest expense increased 44%, or approximately $44 million, to $143 million from the second quarter of 1998 to the second quarter of 1999. Interest expense increased 37%, or approximately $74 million, to $276 million from the six months ended June 30, 1998 to the six months ended June 30, 1999. Interest expense increased primarily due to the interest at new businesses, additional project debt relating to CEMIG and additional corporate interest on the senior debt and convertible subordinated debentures issued within the past twelve months to finance new investments. Interest and other income remained constant at $17 million for both the second quarter of 1998 and the second quarter of 1999. Interest and other income increased 6%, or approximately $2 million, to $33 million from the six months ended June 30, 1998 to the six months ended June 30, 1999. Equity in earnings of affiliates (before income taxes) decreased 14%, or approximately $6 million, to $37 million from the second quarter of 1998 to the second quarter of 1999. Equity in earnings of affiliates (before income taxes) decreased approximately $154 million to a loss of $54 million from the six months ended June 30, 1998 to the six months ended June 30, 1999. Equity in earnings of affiliates (before income taxes) decreased primarily due to foreign currency transaction losses recorded at the Brazilian businesses from the devaluation of the Brazilian Real. Equity in earnings of affiliates (before income taxes) includes $12 million of foreign currency transaction losses for the second quarter of 1999 and $144 million of foreign currency transaction losses for the six months ended June 30, 1999. Excluding foreign currency transaction losses, equity in earnings of affiliates (before income taxes) increased 11% to approximately $49 million in the second quarter of 1999. The Company recorded an income tax provision of $36 million for the second quarter of 1998 and an income tax provision of $34 million for the second quarter of 1999. Excluding the foreign currency transaction losses, the income tax provision would have been $38 million for the second quarter of 1999. The Company recorded an income tax provision of $69 million for the six months ended June 30, 1998 and an income tax provision of $28 million for the six months ended June 30, 1999. Excluding the foreign currency transaction losses, the income tax provision would have been -12- $74 million for the six months ended June 30, 1999. Foreign currency transaction losses did not have a significant impact on the income tax provision for the quarter and the six months ended June 30, 1998. The Company's effective tax rate was 33% for 1998 and 32% for 1999. Minority interest decreased 36%, or approximately $8 million, to $14 million from the second quarter of 1998 to the second quarter of 1999. Minority interest decreased 20%, or approximately $8 million, to $32 million from the six months ended June 30, 1998 to the six months ended June 30, 1999. The decrease in minority interest is due mainly to a lower contribution from CEMIG during the second quarter of 1999. Net income remained constant at $71 million for both the second quarter of 1998 and the second quarter of 1999. Excluding foreign currency transaction losses, net income increased 17%, or approximately $12 million, to $84 million from the second quarter of 1998 to the second quarter of 1999. Net income decreased 57%, or approximately $78 million, to $58 million from the six months ended June 30, 1998 to the six months ended June 30, 1999. Excluding foreign currency transaction losses, net income increased 15%, or approximately $21 million, to $158 million from the six months ended June 30, 1998 to the six months ended June 30, 1999. The increase in net income excluding foreign currency transaction losses reflects the increased business activity during the second quarter of 1999 and the six months ended June 30, 1999. FINANCIAL POSITION, CASH FLOWS AND FOREIGN CURRENCY EXCHANGE RATES At June 30, 1999, cash and cash equivalents totaled approximately $391 million, as compared to $491 million at December 31, 1998. The $100 million decrease in cash, along with $1,106 million from financing activities and $159 million from operating activities were used to fund $1,365 million of investing activities. Significant investing activities included the acquisitions of two generation companies in Panama, six generation plants in New York (which also generated $660 million from the sale and leaseback of these assets,) two gas-fired plants in Australia, as well as continued construction activities at various projects. The net source of cash from financing activities was primarily the result of project finance borrowings of approximately $969 million, the issuance of $500 million in senior notes and proceeds from the sale of common stock of $514 million which were offset, in part, by repayment of approximately $614 million project financing debt. Unrestricted net cash flow of the parent company for the four quarters ended June 30, 1999 totaled approximately $381 million. Through its equity investments in foreign affiliates and subsidiaries, AES operates in jurisdictions with currencies other than the Company's functional currency, the U.S. dollar. Such investments and advances were made to fund equity requirements and to provide collateral for contingent obligations. Due primarily to the long-term nature of the investments and advances, the Company accounts for any adjustments resulting from translation of the financial statements of its foreign investments as a charge or credit directly to a separate component of stockholders' equity until such time as the Company realizes such charge or credit. At that time, any differences would be recognized in the statement of operations as gains or losses. In addition, certain of the Company's foreign subsidiaries have entered into obligations in currencies other than their own functional currencies or the U.S. dollar. These subsidiaries have attempted to limit potential foreign exchange exposure by entering into revenue contracts that adjust to changes in the foreign exchange rates. Certain foreign affiliates and subsidiaries operate in countries where the local inflation rates are greater than U.S. inflation rates. In such cases the foreign currency tends to devalue relative to the U.S. dollar over time. The Company's subsidiaries and affiliates have entered into revenue contracts which attempt to adjust for these differences, however, there can be no assurance that such adjustments will compensate for the full effect of currency devaluation, if any. The Company had approximately $1,195 million in cumulative foreign currency translation adjustment losses at June 30, 1999. In April 1999, AES Cayman Guaiba Limited, an indirect shareholder of AES Sul Distribuidora Gaucha de Energia S.A. refinanced its existing non-recourse project financing. The refinanced loan has a principal amount of $410 million, a three year term, and in connection therewith AES contributed $320 million as additional equity to AES Sul. In June 1999, AES Ocean Springs, Ltd, a subsidiary of AES and the shareholder of Empresa Distribuidora de Energia Norte S.A. ("EDEN") and Empresa Distribuidora de Energia Sur S.A. ("EDES"), together with EDEN and EDES, refinanced their existing non-recourse project financings. The refinanced loans have an aggregate principal amount of approximately $193 million, one year terms, and in connection therewith AES contributed approximately $39 million as additional equity. YEAR 2000 There are three main elements in the provision of electricity: generation, transmission and distribution, all of which form a tightly integrated "supplier chain." In addition, the Company's businesses are also dependent on various industries supplying water, fuel and other utility -13- services. AES, through its subsidiaries and affiliates, is involved in each aspect of the supplier chain in various countries throughout the world. Set forth below is information regarding AES's efforts to be prepared for the problems associated with the potential inability of many existing computer programs and/or embedded computer chips to recognize the year 2000, both those in AES's businesses as well as those that AES's businesses depend upon. Certain of these statements may constitute forward-looking information as contemplated by the Private Securities Litigation Reform Act of 1995, including those regarding AES's expected readiness to handle Year 2000 problems, expected capital expenditures in the areas of remediation and testing, the future costs associated with business disruption caused by supplier or customer Year 2000 problems and the success of any contingency plans. AES cautions that its predictions of the extent of potential problems and the effectiveness of measures designed to address them are based on numerous assumptions, like those regarding the accuracy of statements or certifications from critical third parties and vendors, the ability to identify and remediate or replace embedded computer chips in affected equipment, and resource availability, among other things, and readers should be aware that actual results might differ materially from those discussed below. AES's approach to analyzing Year 2000 issues is to (1) inventory all systems and equipment likely to be affected, (2) perform an inventory assessment, (3) conduct remediations, (4) test all equipment and systems, and (5) develop contingency plans to aid in business continuity. AES'S STATE OF READINESS. In 1998, AES established a readiness program, led by a senior executive and consisting of a team of AES people with extensive knowledge of AES's businesses and processes, as well as outside consultants who are being used as advisors to assist with third party analysis and contingency planning. Approximately 85-90% of the Company's businesses have completed a thorough Year 2000 readiness program. The remaining businesses have completed the testing phase, and are in the process of completing their contingency planning and remediation programs. The Company expects to have these complete by the end of the third quarter. This readiness program has included, where possible, actual Year 2000 simulations as well as off-line tests using dates occurring after the year 2000, and the development of contingency plans. These tests disclosed no material difficulties with recognizing and processing dates after 1999. The Company is still evaluating the status of certain newly-acquired subsidiaries such as New Energy and Empresa Distribuidora del Electricidad del Este, S.A. The Company's generation plants are also significantly dependent on transmission and distribution systems to carry the electricity to the ultimate end users. Due to the interdependent nature of the supply chain, the Company has extended its evaluation of Year 2000 issues to include key suppliers, transmission companies, customers and vendors, and has organized meetings and sought written assurance from these parties as to their Year 2000 readiness. COSTS OF ADDRESSING YEAR 2000 ISSUES. The Company has spent approximately $9 million to date to achieve full Year 2000 readiness, and expects to spend an additional $3-4 million (for a total of $12-13 million) to achieve full Year 2000 readiness company wide. These amounts reflect AES's portion of expected costs to make its businesses Year 2000 ready, but not necessarily the costs associated with post- Year 2000 corrective actions or damages, if any. The Company expects to fund these expenditures through internal sources. RISKS OF YEAR 2000 FAILURES. Failures by each of the Company's generation and distribution companies to address Year 2000 issues may lead to numerical errors that, if not addressed or mitigated, may cause system malfunctions resulting in the inability to deliver electricity or the inability to collect data necessary for proper billing and tariff calculations, among other things. -14- The Company's generation business may also be unable to deliver electricity because of the failure of the interconnected distribution companies to receive or transmit the electricity. Conversely, the Company's distribution companies may not receive sufficient electricity to deliver to their customers because of failures by supplying generators. In such instances of business interruption due to supplier or customer default, the Company will pursue all contractual remedies available to it to minimize the impact on its results of operations; however, the Company may be unable to recover damages arising from third party Year 2000 failures. CONTINGENCY PLANS. The Company (together with appropriate interested parties like transmission companies, independent system operators and government agencies) has identified and is testing appropriate contingency plans addressing emergency operations, disaster recovery, data preservation and business continuation plans, and intends to continue testing through the fourth quarter of 1999. In addition to our remediation programs, the Company's Year 2000 readiness efforts include evaluation of reasonably likely worst case scenarios and the development of contingency plans to address how we would respond to problems, should they occur. As part of the contingency planning process, the Company has addressed the scenarios recommended in the North American Electric Reliablity Council Year 2000 Contingency Planning Guide, as well as additional Company specified scenarios. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company believes that there have been no material changes in exposure to market risks during the second quarter of 1999 from those set forth in the Company's Annual Report filed with the Commission on Form 10-K for the year ended December 31, 1998. -15- PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See discussion of litigation in Part I, above. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. In April 1999, the Company sold 10,000,000 shares of its common stock for net proceeds of approximately $502 million. In June 1999, the Company issued $500,000,000 of 9.50% Senior Notes due 2009. The use of proceeds for these offerings was to meet short-term liquidity needs of the Company related to financing certain acquisitions, providing equity investments or other credit support to assist in certain project refinancings, repaying certain indebtedness, and otherwise for general corporate purpose. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Election of Directors Nominee For Against/Abstain Roger W. Sant 152,866,669 2,132,770 Dennis W. Bakke 152,804,533 2,194,906 Alice F. Emerson 151,742,148 3,257,291 Bob Hemphill 152,864,072 2,135,367 Frank Jungers 152,828,709 2,170,730 John McArthur 153,241,696 1,757,743 Hazel O'Leary 138,160,127 16,839,312 Thomas I. Unterberg 151,892,489 3,106,950 Robert H. Waterman, Jr. 152,872,771 2,126,668 Election of Certified Independent Accountants For Against Abstain 154,653,960 78,532 266,947 -16- ITEM 5. OTHER INFORMATION. In July 1999, La Plata Partners, L.P., the parent of Empresa Distribuidora La Plata S.A. a subsidiary of AES, refinanced its existing non-recourse project financing. The refinanced loan has a principal amount of $193 million, a three year term, and in connection therewith AES contributed approximately $50,000,000 as additional equity. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 3.1 Fifth Amended and Restated Certificate of Incorporation of The AES Corporation is incorporated here in by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q of the Registrant for the quarterly period ended June 30, 1998 filed August 14, 1998. 3.2 By-Laws of The AES Corporation, as amended is incorporated here in by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q of the Registrant for the quarterly period ended June 30, 1998 filed August 14, 1998. 4.1 Amended and Restated Declaration of Trust of AES Trust I, among The AES Corporation, The First National Bank of Chicago and First Chicago Delaware, Inc., to provide for the issuance of the $2.6875 Term Convertible Securities, Series A is incorporated herein by reference to Exhibit 4.1 to Annual Report on Form 10-K of the Registrant for the year ended December 31, 1997 filed March 30, 1998. 4.2 Junior Subordinated Indenture, between The AES Corporation and The First National Bank of Chicago, to provide for the issuance of the $2.6875 Term Convertible Securities, Series A is incorporated herein by reference to Exhibit 4.1 to Annual Report on Form 10-K of the Registrant for the year ended December 31, 1997 filed March 30, 1998. 4.3 First Supplemental Indenture to Junior Subordinated Indenture, between The AES Corporation and The First National Bank of Chicago, as trustee, to provide for the issuance of the $2.6875 Term Convertible Securities, Series A is incorporated herein by reference to Exhibit 4.1 to Annual Report on Form 10-K of the Registrant for the year ended December 31, 1997 filed March 30, 1998. 4.4 Guarantee Agreement, between The AES Corporation and The First National Bank of Chicago, as initial guarantee trustee, to provide for the issuance of the $2.6875 Term Convertible Securities, Series A is incorporated herein by reference to Exhibit 4.1 to -17- Annual Report on Form 10-K of the Registrant for the year ended December 31, 1997 filed March 30, 1998. 4.5 Second Supplemental Indenture dated as of October 13, 1997 between the Company and the First National Bank of Chicago, as trustee, to provide for the issuance from time to time of the 10.25% Senior Subordinated Notes Due 2006, is incorporated herein by reference to Exhibit 4.2.1 of the Registration Statement on Form S-3/A (Registration No. 333-39857) filed November 19, 1997. 4.6 Indenture dated as of October 29, 1997 between The AES Corporation and The First National Bank of Chicago, as trustee, to provide for the issuance from time to time of the 8.50% Senior Subordinated Notes due 2007 of the Company and the 8.875% Senior Subordinated Debentures due 2027, is incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form S-4 (Registration No. 333-44845) filed January 23, 1998. 4.7 First Supplemental Indenture dated as of November 21, 1997 between The AES Corporation and The First National Bank of Chicago, as trustee, to provide for the issuance from time to time of the 8.50% Senior Subordinated Notes due 2007 of the Company and the 8.875% Senior Subordinated Debentures due 2027, is incorporated herein by reference to Exhibit 4.1.2 to the Registration Statement on Form S-4 (Registration No. 333-44845) filed January 23, 1998. 4.8 Junior Subordinated Debt Trust Securities Indenture dated as of March 1, 1997 between the Company and The First National Bank of Chicago, to provide for the issuance of the $2.75 Term Convertible Securities, Series B, is incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form S-3 (Registration No. 333-46189) filed February 12, 1998. 4.9 Second Supplemental Indenture dated as of October 29, 1997 between the Company and The First National Bank of Chicago, to provide for the issuance of the $2.75 Term Convertible Securities, Series B, is incorporated herein by reference to Exhibit 4.1.1 to the Registration Statement on Form S-3 (Registration No. 333-46189) filed February 12, 1998. 4.10 Amended and Restated Declaration of Trust of AES Trust II, to provide for the issuance of the $2.75 Term Convertible Securities, Series B, is incorporated herein by reference to Exhibit 4.3 to the Registration Statement on Form S-3 (Registration No. 333-46189) filed February 12, 1998. 4.11 Restated Certificate of Trust of AES Trust II, to provide for the issuance of the $2.75 Term Convertible Securities, Series B, is incorporated herein by reference to Exhibit 4.4 to the Registration Statement on Form S-3 (Registration No. 333-46189) filed February 12, 1998. 4.12 Form of Preferred Security, to provide for the issuance of the $2.75 Term Convertible Securities, Series B, is incorporated herein by reference to Exhibit 4.5 to the Registration Statement on Form S-3 (Registration No. 333-46189) filed February 12, 1998. 4.13 Form of Junior Subordinated Debt Trust Security, to provide for the issuance of the $2.75 Term Convertible Securities, Series B, is incorporated herein by reference to Exhibit 4.6 to the Registration Statement on Form S-3 (Registration No. 333-46189) filed February 12, 1998. 4.14 Preferred Securities Guarantee with respect to Preferred Securities, to provide for the issuance of the $2.75 Term Convertible Securities, Series B, is incorporated herein by reference to Exhibit 4.7 to the Registration Statement on Form S-3 (Registration No. 333-46189) filed February 12, 1998. -18- 4.15 Junior Subordinated Indenture dated as of August 10, 1998, between The AES Corporation and The First National Bank of Chicago, as trustee, to provide for the issuance of the 4.5% Convertible Junior Subordinated Debentures due 2005 is incorporated here in by reference to Exhibit 4.15 to the Quarterly Report on Form 10-Q of the Registrant for the quarterly period ended June 30, 1998 filed August 14, 1998. 4.16 First Supplemental Indenture dated as of August 10. 1998, to the Junior Subordinated Indenture dated as of August 10, 1998, between The AES Corporation and The First National Bank of Chicago, as trustee, to provide for the issuance of the 4.5% Convertible Junior Subordinated Debentures due 2005 is incorporated here in by reference to Exhibit 4.16 to the Quarterly Report on Form 10-Q of the Registrant for the quarterly period ended June 30, 1998 filed August 14, 1998. 4.17 Senior Indenture dated December 8, 1998 between the Registrant and the First National Bank of Chicago to provide for the issuance of $200 million of 8% Senior Note due 2008 is incorporated herein by reference to Exhibit 4.01 to the Current Report on Form 8-K of the Registrant filed December 11, 1998. 4.18 First Supplemental Indenture dated December 8, 1998 to the Senior Indenture between the Registrant and the First National Bank of Chicago to provide for the issuance of $200 million of 8% Senior Note due 2008 is incorporated herein by reference to Exhibit 4.02 to the Current Report on Form 8-K of the Registrant filed December 11, 1998. 4.19 Other instruments defining the rights of holders of long-term indebtedness of the Registrant and its consolidated subsidiaries is incorporated here in by reference to Exhibit 4.17 to the Quarterly Report on Form 10-Q of the Registrant for the quarterly period ended June 30, 1998 filed August 14, 1998. 10.1 Amended Power Sales Agreement, dated as of December 10, 1985, between Oklahoma Gas and Electric Company and AES Shady Point, Inc. is incorporated herein by reference to Exhibit 10.5 to the Registration Statement on Form S-1 (Registration No. 33-40483). 10.2 First Amendment to the Amended Power Sales Agreement, dated as of December 19, 1985, between Oklahoma Gas and Electric Company and AES Shady Point, Inc. is incorporated herein by reference to Exhibit 10.45 to the Registration Statement on Form S-1 (Registration No. 33-46011). 10.3 Electricity Purchase Agreement, dated as of December 6, 1985, between The Connecticut Light and Power Company and AES Thames, Inc. is incorporated herein by reference to Exhibit 10.4 to the Registration Statement on Form S-1 (Registration No. 33-40483). 10.4 Power Purchase Agreement, dated March 25, 1988, between AES Barbers Point, Inc. and Hawaiian Electric Company, Inc., as amended, is incorporated herein by reference to Exhibit 10.6 to the Registration Statement on Form S-1 (Registration No. 33-40483). 10.5 The AES Corporation Profit Sharing and Stock Ownership Plan is incorporated herein by reference to Exhibit 4(c)(1) to the Registration Statement on Form S-8 (Registration No. 33-49262). 10.6 The AES Corporation Incentive Stock Option Plan of 1991, as amended, is incorporated herein by reference to Exhibit 10.30 to the Annual Report on Form 10-K of the Registrant for the fiscal year ended December 31, 1995. 10.7 Applied Energy Services, Inc. Incentive Stock Option Plan of 1982 is incorporated herein by reference to Exhibit 10.31 to the Registration Statement on Form S-1 (Registration No. 33-40483). -19- 10.8 Deferred Compensation Plan for Executive Officers, as amended, is incorporated herein by reference to Exhibit 10.32 to Amendment No. 1 to the Registration Statement on Form S-1 (Registration No. 33-40483). 10.9 Deferred Compensation Plan for Directors is incorporated herein by reference to Exhibit 10.9 to the Quarterly Report on Form 10-Q of the Registrant for the quarter ended March 31, 1998, filed May 15, 1998. 10.10 The AES Corporation Stock Option Plan for Outside Directors is incorporated herein by reference to Exhibit 10.43 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1991. 10.11 The AES Corporation Supplemental Retirement Plan is incorporated herein by reference to Exhibit 10.64 to the Annual Report on Form 10-K of the Registrant for the year ended December 31, 1994. 11 Statement of computation of earnings per share. 27 Financial Data Schedule (Article 5). (b) Reports on Form 8-K. Registrant filed a Current Report on Form 8-K dated April 12, 1999 containing the Registrant's press release about the partial contract repayment to AES Thames. Registrant filed a Current Report on Form 8-K dated June 8, 1999 containing a discussion of the failure of Registrant's subsidiary that is the parent of Empresa Distribuidora de Energia Norte S.A. (Eden) and Empresa Distribuidora de Energia Sur S.A. (Edes) to repay when due $330 million of short-term indebtedness, which was subsequently cured. Registrant filed a Current Report on Form 8-K dated June 11, 1999 containing the Registrant's exhibit 4.01 "Form of Supplemental Indenture" (the "Second Supplemental Indenture") between Registrant and First National Bank of Chicago. -20- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE AES CORPORATION (Registrant) Date: August 6, 1999 By: /s/ Barry J. Sharp ------------------ Name: Barry J. Sharp Title: Senior Vice President and Chief Financial Officer -21- EXHIBIT INDEX Sequentially Exhibit Description of Exhibit Numbered Page - ------- ---------------------- ------------- 11 Statement of Computation of Earnings Per Share. 27 Financial Data Schedule. EX-11 2 EXHIBIT 11 THE AES CORPORATION EXHIBIT 11 STATEMENTS REGARDING COMPUTATION OF EARNINGS PER SHARE FOR THE PERIODS ENDED JUNE 30, 1998 AND 1999
- ----------------------------------------------------------------------------------------------------------------- THREE THREE SIX SIX MONTHS MONTHS MONTHS MONTHS ENDED ENDED ENDED ENDED 6/30/98 6/30/99 6/30/98 6/30/99 - ----------------------------------------------------------------------------------------------------------------- ($ in millions, except per share amounts) BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 175.6 191.6 175.4 184.1 ========== ============ ========== =========== NET INCOME $ 71 $ 71 $ 136 $ 58 ========== ============ ========== =========== PER SHARE AMOUNT $ 0.41 $ 0.37 $ 0.77 $ 0.31 ========== ============ ========== =========== DILUTED Weighted Average Number of Shares of Common Stock Outstanding 175.6 191.6 175.4 184.1 Net effect of Dilutive Stock Options and Warrants Based on the Treasury Stock Method Using Ending Market Price 4.7 4.5 4.6 4.2 Stock Units Allocated to the Deferred Compensation Plans for Executives and Directors 0.3 0.3 0.3 0.3 Effect of Tecons - Based on the If-Converted Method 6.9 6.9 6.9 - ---------- ------------ ---------- ----------- WEIGHTED AVERAGE SHARES OUTSTANDING 187.5 203.3 187.2 188.6 ========== ============ ========== =========== NET INCOME $ 71 $ 71 $ 136 $ 58 Additional Contribution to Net Income if Tecons is fully converted 3 3 5 - ---------- ------------ ---------- ----------- ADJUSTED NET INCOME $ 74 $ 74 $ 141 $ 58 ========== ============ ========== =========== PER SHARE AMOUNT $ 0.39 $ 0.36 $ 0.75 $ 0.31 ========== ============ ========== ===========
-22- EX-27 3 ART. 5 FED FOR 3RD QUARTER 10-Q
5 0000874761 AES 1,000,000 US DOLLARS 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 1 391 31 480 (42) 123 1271 6661 (601) 11237 1290 6660 550 0 2 1512 11237 1262 1278 830 861 0 0 276 86 28 58 0 0 0 58 0.31 0.31
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