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, 2009

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-12291

THE AES CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	54 1163725
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4300 Wilson Boulevard Arlington, Virginia	22203
(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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x	Accelerated filer  ¨	Non-accelerated filer  ¨	Smaller reporting company  ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨    No  x

The number of shares outstanding of Registrant’s Common Stock, par value $0.01 per share, at August 3, 2009, and was 667,006,929.

THE AES CORPORATION

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED June 30, 2009

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION		3
ITEM 1.	FINANCIAL STATEMENTS	3
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Changes in Equity	6
	Notes to Condensed Consolidated Financial Statements	7
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	43
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	74
ITEM 4.	CONTROLS AND PROCEDURES	76
PART II: OTHER INFORMATION		77
ITEM 1.	LEGAL PROCEEDINGS	77
ITEM 1A.	RISK FACTORS	77
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	77
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	77
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	77
ITEM 5.	OTHER INFORMATION	77
ITEM 6.	EXHIBITS	77

2

PART I: FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

THE AES CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
	(in millions, except per share data)
Revenues:
Regulated	$	1,782		$	2,039		$	3,450		$	3,954
Non-regulated		1,713			2,087			3,423			4,253
Total revenues		3,495			4,126			6,873			8,207
Cost of Sales:
Regulated		(1,317	)		(1,452	)		(2,545	)		(2,807	)
Non-regulated		(1,331	)		(1,645	)		(2,598	)		(3,329	)
Total cost of sales		(2,648	)		(3,097	)		(5,143	)		(6,136	)
Gross margin		847			1,029			1,730			2,071
General and administrative expenses		(88	)		(99	)		(173	)		(197	)
Interest expense		(383	)		(469	)		(774	)		(904	)
Interest income		90			133			188			249
Other expense		(30	)		(85	)		(52	)		(110	)
Other income		22			150			244			195
Gain on sale of investments		102			908			115			912
Impairment expense		(1	)		(25	)		(1	)		(72	)
Foreign currency transaction gains (losses) on net monetary position		27			(85	)		(12	)		(63	)
Other non-operating expense		-			-			(10	)		-
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF AFFILIATES		586			1,457			1,255			2,081
Income tax expense		(105	)		(318	)		(280	)		(557	)
Net equity in earnings of affiliates		50			20			57			42
INCOME FROM CONTINUING OPERATIONS		531			1,159			1,032			1,566
Income from operations of discontinued businesses, net of income tax benefit of $—, $1, $— and $—, respectively		-			1			-			3
Loss from disposal of discontinued businesses, net of income tax expense of $—, $—, $— and $—, respectively		-			-			-			(1	)
NET INCOME		531			1,160			1,032			1,568
Less: Net income attributable to noncontrolling interests		(228	)		(257	)		(511	)		(432	)
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION	$	303		$	903		$	521		$	1,136
BASIC EARNINGS PER SHARE:
Income from continuing operations attributable to The AES Corporation common stockolders, net of tax	$	0.45		$	1.34		$	0.78		$	1.69
Discontinued operations attributable to The AES Corporation common stockholders, net of tax		-			-			-			-
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS	$	0.45		$	1.34		$	0.78		$	1.69
DILUTED EARNINGS PER SHARE:
Income from continuing operations attributable to The AES Corporation common stockholders, net of tax	$	0.45		$	1.31		$	0.78		$	1.65
Discontinued operations attributable to The AES Corporation common stockholders, net of tax		-			-			-			-
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS	$	0.45		$	1.31		$	0.78		$	1.65
AMOUNTS ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS:
Income from continuing operations, net of tax	$	303		$	902		$	521		$	1,134
Discontinued operations, net of tax		-			1			-			2
Net income	$	303		$	903		$	521		$	1,136

See Notes to Condensed Consolidated Financial Statements

3

THE AES CORPORATION

Condensed Consolidated Balance Sheets

	June 30, 2009			December 31, 2008
	(in millions except share and per share data)
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,735		$	903
Restricted cash		444			729
Short-term investments		1,152			1,382
Accounts receivable, net of allowance for doubtful accounts of $260 and $254, respectively		2,293			2,233
Inventory		577			564
Receivable from affiliates		21			31
Deferred income taxes—current		201			180
Prepaid expenses		350			177
Other current assets		1,249			1,117
Total current assets		8,022			7,316
NONCURRENT ASSETS
Property, plant and equipment:
Land		1,024			854
Electric generation and distribution assets, and other		26,427			24,654
Accumulated depreciation		(8,368	)		(7,515	)
Construction in progress		3,971			3,410
Property, plant and equipment, net		23,054			21,403
Other assets:
Deferred financing costs, net of accumulated amortization of $273 and $272, respectively		392			366
Investments in and advances to affiliates		1,043			901
Debt service reserves and other deposits		655			636
Goodwill		1,430			1,421
Other intangible assets, net of accumulated amortization of $191 and $185, respectively		486			500
Deferred income taxes—noncurrent		633			567
Other assets		1,703			1,696
Total other assets		6,342			6,087
TOTAL ASSETS	$	37,418		$	34,806
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$	1,038		$	1,042
Accrued interest		270			252
Accrued and other liabilities		2,705			2,660
Non-recourse debt—current		1,384			1,074
Recourse debt—current		-			154
Total current liabilities		5,397			5,182
LONG-TERM LIABILITIES
Non-recourse debt—noncurrent		12,321			11,869
Recourse debt—noncurrent		5,515			4,994
Deferred income taxes—noncurrent		1,237			1,132
Pension and other post-retirement liabilities		1,110			1,017
Other long-term liabilities		3,547			3,525
Total long-term liabilities		23,730			22,537
Commitments and contingent liabilities (see Note 8)
Cumulative preferred stock of subsidiary		60			60
EQUITY
THE AES CORPORATION STOCKHOLDERS’ EQUITY
Common stock ($.01 par value, 1,200,000,000 shares authorized; 676,362,823 issued and 666,828,233 outstanding at June 30, 2009; 673,478,012 issued and 662,786,745 outstanding at December 31, 2008)		7			7
Additional paid-in capital		6,845			6,832
Retained earnings (accumulated deficit)		513			(8	)
Accumulated other comprehensive loss		(2,847	)		(3,018	)
Treasury stock, at cost (9,534,590 and 10,691,267 shares at June 30, 2009 and December 31, 2008, respectively)		(126	)		(144	)
Total The AES Corporation stockholders’ equity		4,392			3,669
NONCONTROLLING INTERESTS		3,839			3,358
Total equity		8,231			7,027
TOTAL LIABILITIES AND EQUITY	$	37,418		$	34,806

See Notes to Condensed Consolidated Financial Statements

4

THE AES CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,
	2009			2008
	(in millions)
OPERATING ACTIVITIES:
Net income	$	1,032		$	1,568
Adjustments to net income:
Depreciation and amortization		498			500
Gain from sale of investments and impairment expense		(103	)		(850	)
Provision for deferred taxes		(111	)		208
Settlement of non-cash contingencies		(54	)		(35	)
(Gain) loss on the extinguishment of debt		(3	)		55
Other		4			(120	)
Changes in operating assets and liabilities:
Increase in accounts receivable		(3	)		(243	)
Increase in inventory		(11	)		(79	)
Decrease (increase) in prepaid expenses and other current assets		31			(217	)
Increase in other assets		(139	)		(121	)
Decrease in accounts payable and accrued liabilities		(292	)		(15	)
Increase in income tax receivables and payables, net		54			89
(Decrease) increase in other long-term liabilities		(32	)		44
Net cash provided by operating activities		871			784
INVESTING ACTIVITIES:
Capital expenditures		(1,193	)		(1,385	)
Acquisitions—net of cash acquired		-			(1,137	)
Proceeds from the sales of businesses		2			1,093
Proceeds from the sales of assets		4			80
Sale of short-term investments		2,269			2,888
Purchase of short-term investments		(1,740	)		(2,887	)
Decrease in restricted cash		305			2
Decrease (increase) in debt service reserves and other assets		40			(60	)
Affiliate advances and equity investments		(87	)		(148	)
Loan advances		-			(173	)
Other investing		16			92
Net cash used in investing activities		(384	)		(1,635	)
FINANCING ACTIVITIES:
(Repayments) borrowings under the revolving credit facilities, net		(31	)		199
Issuance of recourse debt		503			625
Issuance of non-recourse debt		816			1,566
Repayments of recourse debt		(154	)		(1,037	)
Repayments of non-recourse debt		(491	)		(674	)
Payments for deferred financing costs		(53	)		(36	)
Distributions to noncontrolling interests		(334	)		(244	)
Contributions from noncontrolling interests		74			161
Financed capital expenditures		(24	)		(51	)
Other financing		25			17
Net cash provided by financing activities		331			526
Effect of exchange rate changes on cash		14			3
Total increase (decrease) in cash and cash equivalents		832			(322	)
Cash and cash equivalents, beginning		903			2,043
Cash and cash equivalents, ending	$	1,735		$	1,721
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest, net of amounts capitalized	$	697		$	832
Cash payments for income taxes, net of refunds	$	306		$	233
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Assets acquired in noncash asset exchange	$	110		$	-
Assets acquired in acquisition of subsidiary	$	-		$	946
Non-recourse debt assumed in acquisition of subsidiary	$	-		$	12
Liabilities assumed in acquisition of subsidiary	$	-		$	7

See Notes to Condensed Consolidated Financial Statements

5

THE AES CORPORATION

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

	THE AES CORPORATION STOCKHOLDERS										Noncontrolling Interests		Consolidated Comprehensive Income
	Common Stock		Treasury Stock		Additional Paid-In Capital		(Accumulated Deficit) Retained Earnings		Accumulated Other Comprehensive Loss
Balance at January 1, 2009	$	7	$	(144)	$	6,832	$	(8)	$	(3,018)	$	3,358
Comprehensive income
Net income		-		-		-		521		-		511		1,032
Foreign currency translation adjustment, net of income tax		-		-		-		-		65		268		333
Change in derivative fair value (including a reclassification to earnings of $(43), net of income tax)		-		-		-		-		104		39		143
Change in unfunded pension obligation, net of income tax		-		-		-		-		2		-		2
Other comprehensive income														478
Total comprehensive income													$	1,510
Capital contributions from noncontrolling interests		-		-		-		-		-		75
Dividends paid to noncontrolling interests		-		-		-		-		-		(412)
Issuance of common stock under benefit plans and exercise of stock options		-		18		5		-		-		-
Stock compensation		-		-		8		-		-		-
Balance at June 30, 2009	$	7	$	(126)	$	6,845	$	513	$	(2,847)	$	3,839

	THE AES CORPORATION STOCKHOLDERS
	Common Stock		Additional Paid-In Capital		(Accumulated Deficit) Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Consolidated Comprehensive Income
Balance at January 1, 2008	$	7	$	6,776	$	(1,241)	$	(2,378)	$	3,241
Comprehensive income
Net income		-		-		1,136		-		432		1,568
Change in fair value of available-for-sale securities, net of income tax		-		-		-		(1)		-		(1)
Foreign currency translation adjustment, net of income tax		-		-		-		97		193		290
Change in derivative fair value (including a reclassification to earnings of $— million, net of income tax)		-		-		-		(145)		(1)		(146)
Change in unfunded pension obligation, net of income tax		-		-		-		(5)		(6)		(11)
Other comprehensive income												132
Total comprehensive income											$	1,700
Capital contributions from noncontrolling interests		-		-		-		-		165
Dividends declared to noncontrolling interests		-		-		-		-		(215)
Issuance of common stock under benefit plans and exercise of stock options		-		27		-		-		-
Stock compensation		-		16		-		-		-
Balance at June 30, 2008	$	7	$	6,819	$	(105)	$	(2,432)	$	3,809

See Notes to Condensed Consolidated Financial Statements

6

THE AES CORPORATION

Notes to Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2009 and 2008

1. FINANCIAL STATEMENT PRESENTATION

The prior period condensed consolidated financial statements in this Quarterly Report have been reclassified to reflect the financial statement presentation requirements of Statement of Financial Accounting Standard (“FAS”) No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“FAS No. 160”), the new reportable segment structure discussed in Note 11 — Segments and businesses held for sale and discontinued operations as discussed in Note 13 — Discontinued Operations. In addition, certain immaterial prior period amounts have been reclassified within the condensed consolidated financial statements to conform to current period presentation.

Consolidation

In this Quarterly Report the terms “AES”, “the Company”, “us” or “we” refer to the consolidated entity including its subsidiaries and affiliates. The terms “The AES Corporation”, “the Parent” or “the Parent Company” refer only to the publicly-held holding company, The AES Corporation, excluding its subsidiaries and affiliates. Furthermore, variable interest entities (“VIEs”) in which the Company has an interest have been consolidated where the Company is the primary beneficiary. Investments in which the Company has the ability to exercise significant influence but not control are accounted for using the equity method. All intercompany transactions and balances have been eliminated in consolidation.

Interim Financial Presentation

The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and Article 10 of Regulation S-X issued by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and footnotes required by U.S. GAAP for annual fiscal reporting periods. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position and cash flows. The results of operations for the three and six months ended June 30, 2009, are not necessarily indicative of results that may be expected for the year ending December 31, 2009. The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the 2008 audited consolidated financial statements and notes thereto, which are included in the 2008 Form 10-K, as filed with the SEC on February 26, 2009.

Significant New Accounting Policies

Noncontrolling Interests

Effective January 1, 2009, the Company adopted FAS No. 160, which changed the accounting for and the reporting of minority interest, now referred to as noncontrolling interests, in the Company’s condensed consolidated financial statements. The adoption of FAS No. 160 resulted in the reclassification of amounts previously attributable to minority interest to a separate component of stockholders’ equity titled “Noncontrolling Interests” in the accompanying condensed consolidated balance sheets and statements of changes in equity. Additionally, net income and comprehensive income attributable to noncontrolling interests are shown separately from consolidated net income and comprehensive income in the accompanying condensed consolidated statements of operations and statements of changes in equity. Prior period financial statements have been reclassified to conform to the current year presentation as required by FAS No. 160.

7

The following summarizes significant changes in the Company’s accounting policies related to the allocation of losses to noncontrolling interests, sale of stock of a subsidiary and the deconsolidation of a subsidiary:

FAS No. 160 significantly revises the provisions of Accounting Research Bulletin (“ARB”) No. 51, Consolidated Financial Statements. Under FAS No. 160, losses continue to be attributed to the noncontrolling interests, even when the noncontrolling interests’ basis has been reduced to zero. Prior to the implementation of FAS No. 160, losses that otherwise would have been attributed to the noncontrolling interests were allocated to the controlling interest after the associated noncontrolling interests’ basis was reduced to zero. The Company had no material losses that it did not allocate to noncontrolling interests prior to the adoption of FAS No. 160 and the adoption did not have a material impact.

FAS No. 160 requires a change in a parent’s ownership interest in a subsidiary when the parent retains its controlling financial interest to be accounted for as an equity transaction. Gains or losses from such transactions are no longer recognized in net income and the carrying values of the subsidiary’s assets (including goodwill) and liabilities are not adjusted. SEC Staff Accounting Bulletin (“SAB”) No. 51, Accounting for Sales of Stock by a Subsidiary (“SAB 51”), had previously provided an option in certain circumstances for a parent to recognize a gain or loss on the sale of stock by a subsidiary or account for the sale as an equity transaction. In certain transactions, AES had previously elected the option to recognize a gain or loss under SAB 51. This option is no longer available under FAS No. 160.

A parent company deconsolidates a subsidiary when that parent company no longer controls the subsidiary. When control is lost, the parent-subsidiary relationship no longer exists and the parent derecognizes the assets and liabilities of the subsidiary. In accordance with FAS No. 160, if the parent company retains a noncontrolling interest, the remaining noncontrolling investment in the subsidiary is remeasured at fair value and is included in the gain or loss recognized upon the deconsolidation of the subsidiary. Under SAB 51, the retained noncontrolling interest in the subsidiary was not adjusted to fair value.

New Accounting Pronouncements

The following accounting standards have been issued, but as of June 30, 2009 are not yet effective for and have not been adopted by AES.

FAS No. 166, Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140 (“FAS No. 166”)

In June 2009, the FASB issued FAS No. 166, which removes the concept of a qualifying special-purpose entity (“QSPE”) from FAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities-a replacement of FASB Statement No. 125. The QSPE concept had initially been established to facilitate off-balance sheet treatment for certain securitizations. FAS No. 166 also removes the exception from applying FASB Interpretation (“FIN”) No. 46(R), Consolidation of Variable Interest Entities (“FIN No. 46(R)”), to QSPEs. FAS No. 166 is effective for fiscal years beginning after November 15, 2009, or January 1, 2010 for AES. AES does not believe the adoption of FAS No. 166 will have a material impact on the Company’s financial statements.

FAS No. 167, Amendments to FASB Interpretation No. 46(R) (“FAS No. 167”)

In June 2009, the FASB issued FAS No. 167, which amends FIN 46(R) to among other things, require an entity to qualitatively rather than quantitatively assess the determination of the primary beneficiary of a variable interest entity (“VIE”). This determination should be based on whether the entity has 1) the power to direct matters that most significantly impact the activities of the VIE and 2) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Other key changes include: the

8

requirement for an ongoing reconsideration of the primary beneficiary, the criteria for determining whether service provider or decision maker contracts are variable interests, the consideration of kick-out and removal rights in determining whether an entity is a VIE, the types of events that trigger the reassessment of whether an entity is a VIE and the expansion of the disclosures previously required under FASB Staff Position (“FSP”) FAS 140-4 and FIN 46(R), Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities. These disclosures were provided in the Company’s 2008 Form 10-K. The impact of the adoption of FAS No. 167 may be applied retrospectively with a cumulative-effect adjustment to retained earnings as of the beginning of the first year restated, or through a cumulative-effect adjustment on the date of adoption. FAS No. 167 is effective for fiscal years beginning after November 15, 2009, or January 1, 2010 for AES. Early adoption is prohibited. AES is currently reviewing the potential impact of FAS No. 167, but at this time cannot determine the impact on the Company’s financial statements.

FAS No. 168, FASB Codification and the Hierarchy of GAAP (“FAS No. 168”)

In June 2009, the FASB issued FAS No. 168, which identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with U.S. GAAP. FAS No. 168 replaces FAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, and establishes the FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative guidance recognized by the FASB. Under the Codification, all guidance carries an equal level of authority. FAS No. 168 is effective for interim and annual periods ending after September 15, 2009, or the quarter ending September 30, 2009 for AES.

2. INVENTORY

The following table summarizes the Company’s inventory balances as of June 30, 2009 and December 31, 2008:

	June 30, 2009		December 31, 2008
	(in millions)
Coal, fuel oil and other raw materials	$	300	$	311
Spare parts and supplies		277		253
Total	$	577	$	564

3. FAIR VALUE DISCLOSURES

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP FAS 107-1 and APB 28-1”) which amended FAS No. 107, Disclosures about Fair Value of Financial Instruments and APB Opinion No. 28, Interim Financial Reporting, to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. AES has incorporated these additional disclosures into this Form 10-Q.

9

The following table summarizes the carrying value and fair value of the Company’s financial assets and liabilities as of June 30, 2009 and December 31, 2008:

	June 30, 2009				December 31, 2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in millions)
Assets
Marketable securities (1)	$	1,194	$	1,194	$	1,413	$	1,413
Derivatives (2)		215		215		350		350
Total assets	$	1,409	$	1,409	$	1,763	$	1,763
Liabilities
Debt (3)	$	19,220	$	19,228	$	18,091	$	15,588
Derivatives (2)		372		372		534		534
Total liabilities	$	19,592	$	19,600	$	18,625	$	16,122

⁽¹⁾ See Note 4 — Investments in Marketable Securities for additional information regarding the classification of marketable securities in the Fair Value Hierarchy in accordance with FAS No. 157, Fair Value Measurements (“FAS No. 157”).

⁽²⁾ See Note 5 — Derivative Instruments and Hedging Activities for additional information regarding the fair value of derivatives.

⁽³⁾ See Note 7 — Long-Term Debt for additional information regarding the fair value of debt.

The Company adopted the provisions of FAS No. 157 as of January 1, 2008 for financial assets and liabilities and January 1, 2009 for all nonrecurring fair value measurements of nonfinancial assets. In general the Company’s nonfinancial assets and liabilities that are measured at fair value on a nonrecurring basis include goodwill; intangible assets, such as sales concessions, land rights and emissions allowances; and long-lived tangible assets including property, plant and equipment. The Company did not adjust any nonfinancial assets or liabilities measured at fair value on a nonrecurring basis to fair value during the three or six months ended June 30, 2009. Although the adoption of FAS No. 157 did not materially impact our financial condition, results of operations or cash flows, additional disclosures about fair value measurements are discussed below.

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis fall into two broad categories: marketable securities and derivatives. Marketable securities are generally measured at fair value using the market approach. The Company’s investments generally consist of debt and equity securities. Equity securities are adjusted to fair value using quoted market prices. Debt securities primarily consist of certificates of deposit, government debt securities and money market funds held by our Brazilian subsidiaries. The Company’s derivatives are valued using the income approach. When deemed appropriate, the Company minimizes its risk from interest and foreign currency exchange rate and commodity price fluctuations through the use of derivative financial instruments. The Company’s derivatives are primarily interest rate swaps on non-recourse debt to establish a fixed rate on variable rate debt, foreign exchange instruments to hedge against currency fluctuations and derivatives or embedded derivatives associated with commodity contracts. The fair value of the Company’s derivative portfolio was determined using internal valuation models, most of which are based on observable market inputs including interest rate curves and forward and spot prices for currencies and commodities.

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were measured at fair value on a recurring basis as of June 30, 2009 in accordance with FAS No. 157. Financial assets and liabilities have been classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the determination of the fair value of the assets and liabilities and their placement within the fair value hierarchy levels.

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	June 30, 2009		Quoted Market Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Assets
Available-for-sale securities	$	1,131	$	1	$	1,128	$	2
Trading securities		7		7		-		-
Derivatives		215		-		123		92
Total assets	$	1,353	$	8	$	1,251	$	94
Liabilities
Derivatives	$	372	$	-	$	271	$	101
Total liabilities	$	372	$	-	$	271	$	101

The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2009:

	Derivatives (1)			Available-For- Sale Securities
	(in millions)
Balance at December 31, 2008	$	(69	)	$	42	(5)
Total gains (losses) (realized/unrealized)
Included in earnings (2)		(24	)		-
Included in other comprehensive income		140			-
Included in regulatory assets		2			-
Purchases, issuances and settlements		(1	)		(40	)
Asset transferred in (out) of Level 3		(187	) (3)		-
Liabilities transferred (in) out of Level 3		130	(4)		-
Balance at June 30, 2009	$	(9	)	$	2
Total gains/losses for the period included in earnings attributable to the change in unrealized gains/losses relating to assets and liabilities held at June 30, 2009 and December 31, 2008	$	(26	)	$	-

⁽¹⁾ Derivative assets and (liabilities) are presented on a net basis.

⁽²⁾ See Note 5 — Derivative Instruments and Hedging Activities for further information regarding the classification of gains and losses included in earnings in the Condensed Consolidated Statements of Operations.

⁽³⁾ Assets transferred out of Level 3 during the six months ended June 30, 2009 primarily resulted from the election of the normal purchase normal sale designation as of December 31, 2008 for a power purchase agreement (“PPA”). As such, the agreement was measured at fair value using significant unobservable inputs at December 31, 2008, but is subsequently being amortized and is not reported at fair value.

⁽⁴⁾ Liabilities transferred out of Level 3 primarily resulted from a decrease in the significance of the unobservable inputs to credit valuation adjustments in the valuation of these derivative instruments.

⁽⁵⁾ Available-for-sale securities in Level 3 are auction rate securities and variable rate demand notes which have failed remarketing, are not actively trading and for which there are no longer adequate observable inputs available to measure the fair value.

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4. INVESTMENTS IN MARKETABLE SECURITIES

FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (“FSP FAS 115-2”) became effective and was adopted by the Company for the quarter ended June 30, 2009. FSP FAS 115-2 amended existing other-than-temporary impairment guidance for debt securities to change the recognition threshold and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. For debt securities, FSP FAS 115-2 changed the accounting requirements related to the recognition of other-than-temporary impairment. If other-than-temporary impairment is recognized, it is separated into two pieces 1) the amount representing the credit loss is recognized in earnings and 2) the amount related to other factors is recognized in other comprehensive income. The amount recognized in other comprehensive income for held-to-maturity debt securities is then amortized over the remaining life of the security. FSP FAS 115-2 covers new and existing securities held by an entity as of the beginning of the period adopted and requires a cumulative adjustment to the opening balance of retained earnings in the period of adoption with a corresponding adjustment to accumulated other comprehensive income. The adoption did not have a material impact on the Company’s financial condition, results of operations, or cash flows. AES has incorporated the additional disclosure requirements below.

The following table sets forth the Company’s investments in marketable debt and equity securities reported at fair value as of June 30, 2009 and December 31, 2008 by security type and by level within the fair value hierarchy in accordance with SFAS No. 157. The security types are determined based on the nature and risk of the security and are consistent with how the Company manages, monitors and measures its securities. These securities have been classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the determination of the fair value of the securities and their placement within the fair value hierarchy levels.

	June 30, 2009								December 31, 2008
	Level 1		Level 2		Level 3		Total (2)		Total (2)
	(in millions)
AVAILABLE-FOR-SALE:
Unsecured debentures ( 1)	$	-	$	582	$	-	$	582	$	674
Certificates of deposit (1)		-		406		-		406		493
Government debt securities (3)		-		110		-		110		32
Common stock		1		-		-		1		1
Money market funds		-		30		-		30		21
Other		-		-		2		2		42
Subtotal	$	1	$	1,128	$	2	$	1,131	$	1,263
TRADING:
Mutual funds		7		-		-		7		-
Subtotal		7		-		-		7		-
TOTAL	$	8	$	1,128	$	2	$	1,138	$	1,263

⁽¹⁾ Unsecured debentures are instruments similar to certificates of deposit that are held primarily by our subsidiaries in Brazil. The unsecured debentures and certificates of deposit included here do not qualify as cash equivalents under SFAS No. 95, Statement of Cash Flows, and meet the definition of a security under SFAS No. 115 and are therefore classified as available-for-sale securities.

⁽²⁾ The amortized cost approximated fair value of the available-for-sale securities at June 30, 2009 and December 31, 2008.

⁽³⁾ During the three months ended June 30, 2009, three of the Company’s generation businesses in the Dominican Republic exchanged $110 million in accounts receivable due from the government-owned

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distribution companies of the Dominican Republic for sovereign bonds of the same amount. The bonds, which are classified as available-for-sale securities in the accompanying condensed consolidated balance sheet, were adjusted to fair value when acquired. During the second quarter, the Company used a portion of the bonds with a carrying value of $31 million to settle third party liabilities and sold bonds with a carrying value of $28 million. The remaining bonds were subsequently marked to market as of June 30, 2009 with any changes in fair value reflected in accumulated other comprehensive income. As of June 30, 2009, the fair value of such bonds approximated $39 million.

The following table sets forth the stated maturities of the Company’s debt securities classified as available-for-sale as of June 30, 2009:

	Available-for-sale debt securities
	(in millions)
Less than one year	$	377
One to five years		701
Five to ten years		20
Total	$	1,098

The following table summarizes the gains and losses related to available-for-sale and trading securities for the three and six months ended June 30, 2009 and 2008. There were no realized losses on the sale of available-for-sale securities. Gains and losses on sales of investments are determined using the specific identification method. There was no other-than-temporary impairment recognized in earnings or other comprehensive income for the three and six months ended June 30, 2009 and 2008.

	Three Months Ended June 30,					Six Months Ended June 30,
	2009		2008			2009		2008
	(in millions)
Gains (losses) included in earnings that relate to trading securities held at the reporting date	$	1	$	-		$	1	$	-
Gain (losses) included in other comprehensive income	$	-	$	(1	)	$	-	$	(2	)
Proceeds from sales	$	733	$	774		$	1,270	$	1,583
Gross realized gains on sales	$	1	$	-		$	1	$	-

The following table sets forth the Company’s investments in marketable securities classified as held-to-maturity as of June 30, 2009 and December 31, 2008:

	June 30, 2009		December 31, 2008
	(in millions)
Certificates of deposit	$	41	$	45
Government debt securities		8		93
Other		7		12
Total	$	56	$	150

The amortized cost approximated fair value of the held-to-maturity securities at June 30, 2009 and December 31, 2008. As of June 30, 2009, all held-to-maturity debt securities (including restricted securities) had stated maturities within one year.

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5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Risk Management Objectives

The Company is exposed to market risks associated with its enterprise-wide business activities, namely the purchase and sale of fuels and electricity as well as foreign currency risk and interest rate risk. In order to manage the market risks associated with these business activities, we enter into contracts that incorporate derivatives and financial instruments, including forwards, futures, options, swaps or combinations thereof as appropriate. Derivative transactions are not entered into for trading purposes.

Interest Rate Risk

AES and its subsidiaries utilize variable rate debt financing for construction projects and operations, resulting in an exposure to interest rate risk. Interest rate swap, cap and floor agreements are entered into to manage interest rate risk by effectively fixing or limiting the interest rate exposure on the underlying financing. These interest rate contracts range in maturity through 2026. The following table sets forth, by type of interest rate index, the Company’s current and maximum outstanding notional under its interest rate derivative instruments, the weighted average remaining term and the percentage of variable-rate debt hedged that is based on that index as of June 30, 2009 regardless of whether the derivative instruments are in qualifying cash flow hedging relationships:

	June 30, 2009
	Current Derivative Notional Translated to USD		Maximum Derivative Notional Translated to USD (1)		Weighted Average Remaining Term	% of Debt Currently Hedged by Index (2)
	(in millions)				(in years)
Libor (U.S. Dollar)	$	2,800	$	3,292	8	73	%
Euribor (Euro)		1,050		1,152	5	89	%
Libor (British Pound Sterling)		75		84	6	60	%
Treasury Bills (U.S. Dollar)(3)		65		70	1	116	%
City of Petersburg, Indiana Pollution Control Refunding Revenue Bonds Adjustable Rate (U.S. Dollar)		40		40	14	100	%
Bubor (Hungarian Forint)		19		19	1	71	%

⁽¹⁾ The Company’s interest rate derivative instruments primarily include accreting and amortizing notionals. The maximum derivative notional represents the largest notional at any point between June 30, 2009 and the maturity of the derivative instrument, which includes forward starting derivative instruments.

⁽²⁾ Excludes variable-rate debt tied to other indices where the Company has no interest rate derivatives.

⁽³⁾ Debt and swap are related to a construction project. This swap does not currently qualify for cash flow hedge accounting.

Cross currency swaps are utilized in certain instances to manage the risk related to fluctuations in both interest rates and certain foreign currencies. These cross currency contracts range in maturity through 2028. The following table sets forth, by type of foreign currency denomination, the Company’s current and maximum outstanding notional of its cross currency derivative instruments as of June 30, 2009 which are all in qualifying cash flow hedging relationships:

	June 30, 2009
	Notional Translated to USD		Weighted Average Remaining Term
	(in millions)		(in years)
Chilean Unidad de Fomento (CLF)	$	220	17
Euro (EUR)		9	1

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Foreign Currency Risk

We are exposed to foreign currency risk as a result of our investments in foreign subsidiaries and affiliates. AES operates businesses in many foreign environments and such operations in foreign countries may be impacted by significant fluctuations in foreign currency exchange rates. Foreign currency forwards, swaps and options are utilized, where possible, to manage the risk related to fluctuations in certain foreign currencies. These foreign currency contracts range in maturity through 2010. The following table sets forth, by type of foreign currency denomination, the Company’s outstanding notional over the remaining terms of its foreign currency derivative instruments as of June 30, 2009 regardless of whether the derivative instruments are in qualifying cash flow hedging relationships:

	June 30, 2009
	Notional Translated to USD		Weighted Average Remaining Term
	(in millions)		(in years)
Argentina Peso (ARS)	$	119	<1
Brazilian Real (BRL)		67	<1
Colombian Peso (COP)		34	<1
Chilean Peso (CLP)		27	<1
U.S. Dollar (USD)		5	<1

In addition, certain of our subsidiaries have entered into contracts denominated in currencies other than their own functional currencies. These contracts range in maturity through 2028. The following table sets forth, by type of foreign currency denomination, the Company’s outstanding notional over the remaining terms of its foreign currency embedded derivative instruments as of June 30, 2009:

	June 30, 2009
	Notional Translated to USD			Weighted Average Remaining Term
	(in millions)			(in years)
Kazakhstani Tenge (KZT)	$	289		9
Argentine Peso (ARS)		12		2
British Pound Sterling (GBP)		5		<1
Euro (EUR)		3		10
Brazilian Real (BRL)		2		1
Hungarian Forint (HUF)		-	(1)	1

⁽¹⁾ De minimis amount

Commodity Price Risk

We are exposed to the impact of market fluctuations in the price of electricity, fuels and environmental credits. Although we primarily consist of businesses with long-term contracts or retail sales concessions, a portion of our current and expected future revenues are derived from businesses without significant long-term revenue or supply contracts. These businesses subject our results of operations to the volatility of prices for electricity, fuels and environmental credits in competitive markets. We have used a hedging strategy, where appropriate, to hedge our financial performance against the effects of fluctuations in energy commodity prices. The implementation of this strategy can involve the use of commodity forward contracts, futures, swaps and options. Some businesses hedge certain aspects of their commodity risks using financial hedge instruments.

We also enter into short-term contracts for the supply of electricity and fuel in other competitive markets in which we operate. When hedging the output of our generation assets, we have power purchase agreements or other hedging instruments that lock in the spread in dollars per MWh between the cost of fuel to generate a unit of electricity and the price at which the electricity can be sold. The portion of our sales and fuel purchases that

15

are not subject to such agreements will be exposed to commodity price risk. Eastern Energy and Deepwater, two of our North America generation businesses, sell electricity into the power pools managed by the New York Independent System Operator and the Electric Reliability Council of Texas, respectively. Our commodity transactions at Eastern Energy hedge 78% of the forecasted sales of this electricity through the remainder of 2009 and 9% of the forecasted sales of this electricity through 2010. Our commodity transactions at Deepwater hedge 46% of the forecasted sales of this electricity through the remainder of 2009 and 18% of the forecasted sales of this electricity through 2010.

In addition, certain of our subsidiaries have entered into PPAs and fuel supply agreements that have been assessed as derivatives or contain embedded features that have been assessed as embedded derivatives. These contracts range in maturity through 2024. The following table sets forth by type of commodity, the Company’s outstanding notional for the remaining term of its commodity derivative (excluding Eastern Energy and Deepwater) and embedded derivative instruments as of June 30, 2009:

	June 30, 2009
	Volume	Weighted Average Remaining Term
	(in millions)	(in years)
Natural gas (MMBtu)	107	9
Petcoke (Metric tons)	15	15
Coal (Metric tons)	2	1
Log wood (Tons)	1	4
Electricity (MWhs)	1	1

Accounting and Reporting

Under FAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“FAS No. 133”), as amended, we recognize all derivatives, except those designated as “normal purchase normal sale” at inception as either assets or liabilities on the balance sheet at fair value. Changes in the fair value of derivatives are recognized in earnings unless specific hedge criteria are met. Gains or losses on derivatives that do not qualify for hedge accounting are recognized as interest expense for interest rate derivatives, foreign currency gains or losses on foreign currency derivatives, and non-regulated revenue or non-regulated cost of sales for commodity derivatives.

FAS No. 133 enables companies to designate qualifying derivatives as hedging instruments based on the exposure being hedged. Changes in the fair value of a derivative that is highly effective as, and is designated as and qualifies as, a cash flow hedge are deferred in accumulated other comprehensive income and are recognized into earnings as the hedged transactions affect earnings. Any ineffectiveness is immediately recognized in earnings as interest expense for interest rate hedges, foreign currency gains or losses on foreign currency hedges, and non-regulated revenue or non-regulated cost of sales for commodity hedges. For all hedge contracts, the Company maintains formal documentation of the hedge and effectiveness testing in accordance with FAS No. 133. If AES deems that a derivative is not highly effective as a hedge, hedge accounting will be discontinued prospectively. During the first six months of 2009 no cash flow hedges were discontinued because it was probable that the forecasted transaction would not occur by the end of the originally specified time period (as documented at the inception of the hedging relationship) or within an additional two-month time period thereafter.

Certain derivatives are not designated as hedging instruments. While these instruments economically hedge interest rate risk, foreign exchange risk or commodity price risk, they do not qualify for hedge accounting treatment as defined by FAS No. 133.

As of June 30, 2009, approximately $(108) million, $1 million and $105 million of the pre-tax accumulated other comprehensive (loss) income related to interest rate derivative instruments, cross currency derivative

16

instruments and commodity derivative instruments, respectively, is expected to be recognized as a (decrease) increase to income from continuing operations before income taxes over the next twelve months. The balance in accumulated other comprehensive loss related to derivative transactions will be reclassified into earnings as interest expense is recognized for interest rate hedges, as depreciation is recognized for hedges of capitalized interest, as foreign currency transaction and translation gains and losses are recognized for hedges of foreign currency exposure and as electricity sales are recognized for hedges of forecasted electricity transactions. These balances are included in the condensed consolidated statements of cash flows as operating and/or investing activities based on the nature of the underlying transaction.

The following table sets forth by type of derivative the financial statement location and fair value of the Company’s investments in derivative instruments as of June 30, 2009:

	June 30, 2009
	Designated as Hedging Instruments		Not Designated as Hedging Instruments
	(in millions)
Assets
Other current assets
Cross currency derivatives	$	1	$	-
Foreign exchange derivatives		-		2
Commodity derivatives:
Electricity		107		-
Fuel		-		23
Other		-		3
Total other current assets		108		28
Other assets
Interest rate derivatives		63		-
Commodity derivatives:
Electricity		10		-
Fuel		-		6
Total other assets—noncurrent		73		6
Total assets	$	181	$	34
Liabilities
Accrued and other liabilities
Interest rate derivatives	$	118	$	17
Foreign exchange derivatives		-		12
Commodity derivatives:
Electricity		2		-
Fuel		-		4
Total accrued and other liabilities—current		120		33
Other long-term liabilities
Interest rate derivatives		198		16
Foreign exchange derivatives		-		3
Commodity derivatives:
Fuel		-		2
Total other long-term liabilities		198		21
Total liabilities	$	318	$	54

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The following tables set forth by type of derivative, the financial statement location and amount of gains (losses) recognized in accumulated other comprehensive loss and earnings related to the effective portion of derivative instruments in qualifying cash flow hedging relationships, as defined under FAS No. 133, for the three and six months ended June 30, 2009:

	Three Months Ended June 30, 2009
	Gain (Loss) Recognized in OCI on Derivatives		Location of Gain/(Loss) Reclassified from Accumulated OCI into Earnings	Gain (Loss) Reclassified from Accumulated OCI
	(in millions)			(in millions)
Interest rate derivatives	$	49	Interest expense	$	(9	) (1)
Cross currency derivatives		28	Interest expense		-
Commodity derivatives - electricity		28	Non-regulated revenue		57
Total	$	105		$	48

	Six Months Ended June 30, 2009
	Gain (Loss) Recognized in OCI on Derivatives		Location of Gain/(Loss) Reclassified from Accumulated OCI into Earnings	Gain (Loss) Reclassified from Accumulated OCI
	(in millions)			(in millions)
Interest rate derivatives	$	99	Interest expense	$	(10	) (1)
Cross currency derivatives		34	Interest expense		-
Commodity derivatives - electricity		109	Non-regulated revenue		87
Total	$	242		$	77

⁽¹⁾ Excludes $0 and $14 million of losses for the three and six months ended June 30, 2009, respectively, reclassified from accumulated other comprehensive income related to derivative instruments that previously, but no longer, qualify for cash flow hedge accounting

The following tables set forth by type of derivative, the financial statement location and amount of gains (losses) recognized in earnings related to the ineffective portion of derivative instruments in qualifying cash flow hedging relationships, as defined under FAS No. 133, for the three and six months ended June 30, 2009:

	Amount of Gain (Loss) Recognized in Earnings
	Location of Gain (Loss) Recognized in Earnings	Three Months Ended June 30, 2009			Six Months Ended June 30, 2009
		(in millions)
Interest rate derivatives	Interest expense	$	10		$	10
Cross currency derivatives	Interest expense		-	(1)		2
Commodity derivatives - electricity	Non-regulated revenue		-	(1)		(2	)
Total		$	10		$	10

⁽¹⁾ De minimis amount of ineffectiveness recognized

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The following table sets forth by type of derivative, the financial statement location and amount of gains (losses) recognized in earnings related to derivative instruments not designated as hedging instruments under FAS No. 133 for the three and six months ended June 30, 2009:

	Amount of Gain (Loss) Recognized in Earnings
	Location of Gain (Loss) Recognized in Earnings	Three Months Ended June 30, 2009			Six Months Ended June 30, 2009
		(in millions)
Interest rate derivatives	Interest expense	$	5		$	-
Foreign exchange derivatives	Foreign currency transaction gains (losses) on net monetary position		(19)			(12)
Commodity derivatives - PPA embedded	Non-regulated revenue		-			(5)
Commodity derivatives - fuel	Non-regulated cost of sales		6			(7)
Total		$	(8	)	$	(24	)

In addition, Indianapolis Power & Light Company (“IPL”), the Company’s North American integrated utility, has two derivative instruments for which the gains and losses are accounted for in accordance with FAS No. 71, Accounting for the Effects of Certain Types of Regulation, as regulatory assets or liabilities. Gains and losses on these derivatives due to changes in fair value are recoverable through future rates and are recognized as an adjustment to the regulatory asset or liability instead of being recognized through earnings, so they are excluded from the above table. For the three and six months ended June 30, 2009, there was an increase (decrease) in the fair value of these derivatives of $2 million and $(1) million, respectively, included in regulatory assets and liabilities on the accompanying condensed consolidated balance sheet.

Credit Risk-Related Contingent Features

In December 2007, Gener, our generation business in Chile, entered into cross currency swap agreements with a counterparty to swap the Chilean inflation indexed bonds issued in December 2007 into U.S. Dollars. The cross currency swap agreements require Gener to provide collateral credit support when the fair value of the swaps exceeds the thresholds established in the agreements. These thresholds vary based on Gener’s credit rating. As Gener’s credit rating drops the threshold drops, requiring more collateral support. If Gener’s credit rating were to fall below the minimum threshold established in the swap agreements, the counterparty could demand immediate collateralization of the entire mark-to-market value of the swaps (excluding credit valuation adjustments) if they were in a liability position, which would have been $4 million at June 30, 2009. As of June 30, 2009, Gener had posted $50 million in the form of a letter of credit to support these swaps.

6. INVESTMENTS IN AND ADVANCES TO AFFILIATES

50%-or-less Owned Affiliates and Majority-owned Unconsolidated Subsidiaries

AES holds a 71% ownership interest in AES Energia Cartagena (“Cartagena”), a VIE, in which the Company is not the primary beneficiary. The Company’s investment in Cartagena is a combination of common stock and participative loans. As a result of unrealized losses on Cartagena’s interest rate hedges, in December 2008, the investment balance was reduced to zero and the equity method of accounting was suspended. AES will resume the equity method of accounting and recognize income once Cartagena generates income of which AES’s portion is greater than or equal to the cumulative losses AES has not recognized while the equity method of accounting has been suspended. In June 2009, Cartagena received a cash settlement of $53 million for liquidated damages including legal costs incurred related to the construction delay from December 2005 to November 2006 of the 1,200 MW generation plant in Cartagena, Spain. Cartagena used the settlement proceeds to repay a portion of the participative loans outstanding to its investors including AES. In June 2009, the Company received its

19

proportionate share of the settlement, $35 million, which was recognized as “net equity in earnings of affiliates” because the distribution was in excess of the Company’s current investment balance of zero and AES does not have an obligation or intent to fund future cash flow requirements of Cartagena.

The following table summarizes financial information of the affiliates accounted for using the equity method in which we own 50% or less and have the ability to exercise significant influence but do not control and our majority-owned unconsolidated subsidiaries:

	50%-or-less Owned Affiliates(1)								Majority-owned Unconsolidated Subsidiaries(2)
	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,					Six Months Ended June 30,
	2009		2008		2009		2008		2009		2008			2009		2008
	(in millions)								(in millions)
Revenue	$	289	$	299	$	537	$	587	$	77	$	42		$	79	$	87
Gross margin	$	52	$	37	$	70	$	85	$	20	$	14		$	20	$	32
Net income	$	23	$	42	$	34	$	84	$	24	$	(1	)	$	22	$	3

⁽¹⁾ The 50%-or-less Owned Affiliates portion of the table excludes information related to the Companhia Energetica de Minas Gerais (“CEMIG”) business because the Company discontinued the application of the equity method of accounting in accordance with its accounting policy regarding equity method investments. In addition, although the Company’s ownership interest in Trinidad Generation Unlimited, (“Trinidad”) is 10%, the Company accounts for its investment in Trinidad as an equity method investment because AES continues to exercise significant influence through the supermajority vote requirement for any significant future project development activities.

⁽²⁾ The Majority-owned Unconsolidated Subsidiaries portion of the table includes information related to Barry, Cartagena, Cili and IC Ictas Energy Group. Although we continue to maintain 100% ownership of Barry, as a result of an amended credit agreement, no material financial or operating decisions can be made without the banks’ consent, and the Company no longer controls Barry. Consequently, the Company discontinued consolidating the business’s results and began using the equity method to account for this unconsolidated majority-owned subsidiary.

7. LONG-TERM DEBT

The Company has two types of debt reported on its balance sheet: non-recourse and recourse debt. Non-recourse debt is used to fund investments and capital expenditures for the construction and acquisition of electric power plants, wind farms and distribution companies at our subsidiaries. Non-recourse debt is generally secured by the capital stock, physical assets, contracts and cash flows of the related subsidiary. The default risk is limited to the respective business and is without recourse to the Parent Company and other subsidiaries. Recourse debt is direct borrowings by the Parent Company and is used to fund development, construction or acquisition and serves as funding to equity investments or loans to the affiliates. This debt is with recourse to the Parent Company and is structurally subordinated to the affiliates’ non-recourse debt.

Recourse and non-recourse debt are carried at amortized cost. The following table summarizes the carrying amount and estimated fair values of the Company’s recourse and non-recourse debt as of June 30, 2009 and December 31, 2008:

	June 30, 2009				December 31, 2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in millions)
Non-recourse debt	$	13,705	$	13,992	$	12,943	$	11,200
Recourse debt		5,515		5,236		5,148		4,388
Total debt	$	19,220	$	19,228	$	18,091	$	15,588

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The fair value of non-recourse debt is estimated differently depending upon the type of loan. The fair value of fixed rate loans is estimated using quoted market prices or a discounted cash flow analysis. For variable rate loans, carrying value typically approximates fair value. At December 31, 2008, credit spreads were significantly above historic levels. For the U.S. Dollar, Euro and British Pound markets where the Company believed the expanded credit spread was material, fair value was estimated using a discounted cash flow analysis. The increase in credit spreads was calculated as the difference between composite fair value curves, published by pricing services for the relevant issuer credit rating, and London Inter-Bank Offered Rate (“LIBOR”). For all other currencies, the Company continued to assume the carrying value was equal to fair value. As of June 30, 2009, credit spreads had returned to a typical range for all currencies and the Company determined that carrying value approximated fair value for all of our variable rate debt.

The estimated fair value was determined using available market information as of June 30, 2009. The Company is not aware of any factors that would significantly affect the estimated fair value amounts subsequent to June 30, 2009.

Non-Recourse Debt

Subsidiary non-recourse debt in default or accelerated, including any temporarily waived default, is classified as current debt in the accompanying condensed consolidated balance sheets. The following table summarizes the Company’s subsidiary non-recourse debt in default or accelerated as of June 30, 2009:

Subsidiary	Primary Nature of Default	June 30, 2009
		Default		Net Assets
		(in millions)
Kelanitissa	Covenant	$	45	$	4
Kievoblenergo	Covenant		26		49
Rivneenergo	Covenant		13		24
Ebute(1)	Covenant		10		154
Aixi	Payment		3		8
Total		$	97

⁽¹⁾ Ebute, our subsidiary in Nigeria, received a waiver of default on September 18, 2008. The waiver gives Ebute until December 31, 2009 to cure the breached covenants; however, as this waiver does not extend beyond the Company’s current reporting cycle and the probability of curing the default cannot be determined, the debt was classified as current.

None of the subsidiaries that are currently in default is a material subsidiary under The AES Corporation’s corporate debt agreements whose defaults would trigger an event of default or permit acceleration under such indebtedness. However, as a result of additional dispositions of assets, other significant reductions in asset carrying values or other matters in the future that may impact the Company’s financial position and results of operations, it is possible that one or more of these subsidiaries could fall within the definition of a “material subsidiary”, and thereby upon an acceleration of its non-recourse debt, trigger an event of default and possible acceleration of the indebtedness under the Parent Company’s outstanding debt agreements.

On April 8, 2009, AES Gener S.A. (“Gener”) issued $196 million aggregate principal amount of 8% unsecured notes due in 2019. The unsecured notes were priced at a discount to par resulting in an 8.5% yield. The proceeds from this issuance will be used to provide Gener’s funding requirements for projects under construction.

Recourse Debt

On March 26, 2009, the Parent Company and certain subsidiary guarantors amended the Parent Company’s existing senior secured credit facility pursuant to the terms of Amendment No. 1 (“Amendment No. 1”) to the

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Fourth Amended and Restated Credit and Reimbursement Agreement, dated as of July 29, 2008 (the “senior secured credit facility”). The senior secured credit facility previously included a $200 million term loan facility maturing on August 10, 2011 and a $750 million revolving credit facility maturing on June 23, 2010 (the “revolving credit facility”).

The principal modification set forth in Amendment No. 1 was a one-year extension of $570 million of revolving credit facility commitments from an original maturity date of June 23, 2010 to July 5, 2011. In addition, certain lenders determined that they would increase their commitment under the revolving credit facility by $35 million from March 26, 2009 through July 5, 2011. Accordingly, Amendment No. 1 increased the size of the revolving credit facility from $750 million to $785 million for the period between the dates of Amendment No. 1 and June 23, 2010. Between June 23, 2010 and July 5, 2011, the revolving credit facility size will be $605 million. No modifications were made to the amount or maturity date of the $200 million term loan facility.

The extended commitments from this amendment were subject to new pricing that included an upfront fee of 1.25% for participating in the extensions and an increase in undrawn commitment fees from 50 to 100 basis points. The annual interest rate on the drawn loans was also increased by 200 basis points to LIBOR plus 3.50%. Pricing and all other material terms remain unchanged for the revolving credit facility commitments which have not been extended.

On April 2, 2009 the Parent Company issued $535 million aggregate principal amount of 9.75% senior unsecured notes due 2016 in a private placement. The notes were priced at a discount to yield 11%. Subsequently, the Parent Company allocated a substantial portion of the proceeds to voluntarily reduce the size of its $600 million senior unsecured credit facility among the Parent Company, Merrill Lynch Bank USA and the banks party thereto (the “senior unsecured credit facility”), by $465 million. The remaining $135 million under the senior unsecured credit facility consists of letters of credit, the majority of which support several projects currently under construction.

On June 1, 2009, the Parent Company repaid at maturity all outstanding 9.5% senior unsecured notes at par for an aggregate principal amount of $154 million.

8. CONTINGENCIES AND COMMITMENTS

Environmental

The Company periodically reviews its obligations as they relate to compliance with environmental laws, including site restoration and remediation. As of June 30, 2009, the Company had recorded liabilities of $29 million for projected environmental remediation costs. Due to the uncertainties associated with environmental assessment and remediation activities, future costs of compliance or remediation could be higher or lower than the amount currently accrued. Based on currently available information and analysis, the Company believes that it is reasonably possible that costs associated with such liabilities, or as yet unknown liabilities, may exceed current reserves in amounts that could be material but cannot be estimated as of June 30, 2009.

For a discussion of potential U.S. federal climate change legislation and potential international agreements on climate change, see Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview of Our Business — Key Trends and Uncertainties — Regulatory Environment.

If national climate change legislation or other legislation is not enacted that precludes the U.S. Environmental Protection Agency (“EPA”) from regulating greenhouse gas (“GHG”) under the Clean Air Act (“CAA”), the EPA is likely to regulate GHG emissions. As noted in the Company’s 2008 Form 10-K, on April 2, 2007, the U.S. Supreme Court issued a decision in a case involving the regulation of CO₂ emissions from motor vehicles under the CAA. The Court ruled that CO₂ is a pollutant which potentially could be subject to regulation under Section 202 of the CAA and that the EPA had a duty to determine whether CO₂ emissions contribute to

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climate change or to provide some reasonable explanation why it would not exercise its authority. In response to the Court’s decision, on July 11, 2008, the U.S. EPA issued an Advanced Notice of Public Rulemaking soliciting public input on whether CO₂ emissions should be regulated from both mobile and stationary sources under Section 202 the CAA. In order for the EPA to regulate CO₂ and other greenhouse emissions under Section 202 of the CAA, such emissions must be “endangering public health and welfare” under the CAA. On April 17, 2009, EPA released proposed findings for comment which included a proposed finding that atmospheric concentrations of six greenhouse gases, including CO₂, “endanger public health and welfare within the meaning of Section 202(a) of the CAA.” The EPA held two public meetings in May 2009, and the period for public comments closed on June 23, 2009. While the EPA has not proposed regulations at this time, a finding that CO₂ and other greenhouse emissions endanger the public health and welfare would allow the agency to regulate mobile sources of greenhouse gas emissions under the CAA. It is possible that the EPA could subsequently make a similar finding with respect to greenhouse gas emissions from stationary sources. Such a determination by the EPA could result in CO₂ emission limits on stationary sources that do not include market-based compliance mechanisms, which could increase our costs directly and indirectly and have a material adverse effect on our business and/or results of operations.

As noted in the Company’s 2008 Form 10-K, ten northeastern States have entered into the Regional Greenhouse Gas Initiative (“RGGI”) under which the States coordinate to establish rules that require reductions in CO₂ emissions from power plant operations within those states through a cap-and-trade program. States in which our subsidiaries have generating facilities include Connecticut, Maryland, New York and New Jersey. Under RGGI, power plants must acquire one carbon allowance through auction or in the emission trading markets for each ton of CO₂ emitted. For additional information regarding the risks associated with carbon emissions, see the following items in the Company’s 2008 Form 10-K: Item 1 — Business — Regulatory Matters — Environmental and Land Use Regulations and Item 1A: Risk Factors — Risks Associated with Governmental Regulations and Laws.

As noted in the Company’s 2008 Form 10-K, on February 6, 2009, the Acting Solicitor General of the United States filed a motion in the U.S. Supreme Court to dismiss the EPA’s request for review of the D.C. Circuit Court’s February 2008 decision vacating the Clean Air Mercury Rule (“CAMR”). On February 23, 2009, the U.S. Supreme Court declined to review the lower court’s CAMR decision. The EPA is now expected to propose a new rule to address hazardous air pollutants (“HAPs”) from electric generation power plants, including mercury. With respect to the HAPs, the EPA recently issued a notice of the agency’s intent to collect information so that it can develop a maximum achievable control technology standard for coal-fired power plants which, unlike CAMR, will not provide a market-based compliance option (e.g., cap-and-trade) for power plants subject to the rule. The EPA has indicated that such standards would impose controls on existing sources within three years of a final rule. While the exact impact and cost of any such new federal rules cannot be established until they are promulgated and any related litigation resolved, there can be no assurance that the Company’s business, financial conditions or results of operations would not be materially and adversely affected by such rules.

Guarantees, Letters of Credit and Commitments

As of June 30, 2009, The AES Corporation had provided outstanding financial and performance related guarantees or other credit support commitments for the benefit of its subsidiaries, which were limited by the terms of the agreements to an aggregate of approximately $404 million (excluding investment commitments and those collateralized by letters of credit discussed below). The term of these credit support arrangements generally parallels the length of the related financing arrangements or transactions.

As of June 30, 2009, the Parent Company had $207 million in letters of credit outstanding under the revolving credit facility and under the senior unsecured credit facility that operate to guarantee performance of certain project development activities and subsidiary operations. During the second quarter the Company paid letter of credit fees ranging from 3.17% to 8.84% per annum on the outstanding amounts.

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As of June 30, 2009, The AES Corporation had $185 million of commitments to invest in subsidiaries under construction and to purchase related equipment excluding approximately $144 million of such obligations already included in the letters of credit discussed above. The Company expects to fund these net investment commitments over time according to the following schedule: $89 million in 2009, $39 million in 2010 and $57 million in 2011. The exact payment schedule will be dictated by construction milestones.

Litigation

The Company is involved in certain claims, suits and legal proceedings in the normal course of business, some of which are described below. The Company has accrued for litigation and claims where it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company believes, based upon information currently available and taking into account established reserves for estimated liabilities and its insurance coverage, that the ultimate outcome of these proceedings and actions is unlikely to have a material adverse effect on the Company’s financial statements. It is reasonably possible, however, that some matters could be decided unfavorably to the Company and could require the Company to pay damages or make expenditures in amounts that could be material but cannot be reasonably estimated as of June 30, 2009.

In 1989, Centrais Elétricas Brasileiras S.A. (“Eletrobrás”) filed suit in the Fifth District Court in the State of Rio de Janeiro against Eletropaulo Eletricidade de São Paulo S.A. (“EEDSP”) relating to the methodology for calculating monetary adjustments under the parties’ financing agreement. In April 1999, the Fifth District Court found for Eletrobrás and in September 2001, Eletrobrás initiated an execution suit in the Fifth District Court to collect approximately R$970 million ($500 million) from Eletropaulo (as estimated by Eletropaulo) and a lesser amount from an unrelated company, Companhia de Transmissão de Energia Elétrica Paulista (“CTEEP”) (Eletropaulo and CTEEP were spun off from EEDSP pursuant to its privatization in 1998). In November 2002, the Fifth District Court rejected Eletropaulo’s defenses in the execution suit. Eletropaulo appealed and in September 2003, the Appellate Court of the State of Rio de Janeiro ruled that Eletropaulo was not a proper party to the litigation because any alleged liability was transferred to CTEEP pursuant to the privatization. In June 2006, the Superior Court of Justice (“SCJ”) reversed the Appellate Court’s decision and remanded the case to the Fifth District Court for further proceedings, holding that Eletropaulo’s liability, if any, should be determined by the Fifth District Court. Eletropaulo’s subsequent appeals to the Special Court (the highest court within the SCJ) and the Supreme Court of Brazil have been dismissed. Eletrobrás has requested that the amount of Eletropaulo’s alleged debt be determined by an accounting expert appointed by the Fifth District Court. Eletropaulo has consented to the appointment of such an expert, subject to a reservation of rights. After the amount of the alleged debt is determined, Eletrobrás may resume the execution suit in the Fifth District Court at any time. If Eletrobrás does so, Eletropaulo will be required to provide security in the amount of its alleged liability. In that case, if Eletrobrás requests the seizure of such security and the Fifth District Court grants such request, Eletropaulo’s results of operations may be materially adversely affected. In addition, in February 2008, CTEEP filed a lawsuit in the Fifth District Court against Eletrobrás and Eletropaulo seeking a declaration that CTEEP is not liable for any debt under the financing agreement. Eletropaulo believes it has meritorious defenses to the claims asserted against it and will defend itself vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.

In September 1999, a state appellate court in Minas Gerais, Brazil, granted a temporary injunction suspending the effectiveness of a shareholders’ agreement between Southern Electric Brasil Participacoes, Ltda. (“SEB”) and the state of Minas Gerais concerning CEMIG, an integrated utility in Minas Gerais. The Company’s investment in CEMIG is through SEB. This shareholders’ agreement granted SEB certain rights and powers in respect of CEMIG (“Special Rights”). In March 2000, a lower state court in Minas Gerais held the shareholders’ agreement invalid where it purported to grant SEB the Special Rights and enjoined the exercise of the Special Rights. In August 2001, the state appellate court denied an appeal of the decision and extended the injunction. In October 2001, SEB filed appeals against the state appellate court’s decision with the Superior Court of Justice (“SCJ”) and the Supreme Court. The state appellate court denied access of these appeals to the higher courts, and in August 2002 SEB filed interlocutory appeals against such denial with the SCJ and the Supreme Court. In

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December 2004, the SCJ declined to hear SEB’s appeal. However, the Supreme Court is considering whether to hear SEB’s appeal. SEB intends to vigorously pursue a restoration of the value of its investment in CEMIG by all legal means; however, there can be no assurances that it will be successful in its efforts. Failure to prevail in this matter may limit SEB’s influence on the daily operation of CEMIG.

In August 2000, the Federal Energy Regulation Commission (“FERC”) announced an investigation into the organized California wholesale power markets in order to determine whether rates were just and reasonable. Further investigations involved alleged market manipulation. FERC requested documents from each of the AES Southland, LLC plants and AES Placerita, Inc. AES Southland and AES Placerita have cooperated fully with the FERC investigations. AES Southland was not subject to refund liability because it did not sell into the organized spot markets due to the nature of its tolling agreement. After hearings at FERC, AES Placerita was found subject to refund liability of $588,000 plus interest for spot sales to the California Power Exchange from October 2, 2000 to June 20, 2001. As FERC investigations and hearings progressed, numerous appeals on related issues were filed with the U.S. Court of Appeals for the Ninth Circuit. Over the past five years, the Ninth Circuit issued several opinions that had the potential to expand the scope of the FERC proceedings and increase refund exposure for AES Placerita and other sellers of electricity. Following remand of one of the Ninth Circuit appeals in March 2009, FERC started a new hearing process involving AES Placerita. In May 2009, AES Placerita entered into a settlement, subject to FERC approval, concerning the claims before FERC against AES Placerita relating to the California energy crisis of 2000-2001, including the California refund proceeding. Pursuant to the settlement, AES Placerita paid $6 million and assigned a receivable of $168,119 due it from the California Power Exchange in return for a release of all claims against it at FERC by the settling parties and other consideration. In July 2009, FERC approved the settlement as submitted. To date, in excess of 97% of the buyers in the market have elected to join the settlement. A small amount of AES Placerita’s settlement payment was placed in escrow for buyers that do not join the settlement (“non-settling parties”). It is unclear whether the escrowed funds will be enough to satisfy any additional sums that might be determined to be owed to non-settling parties at the conclusion of the FERC proceedings concerning the California energy crisis. However, any such additional sums are expected to be immaterial to the Company’s consolidated financial statements. On July 30, 2009, one-settling party, the Sacramento Municipal Utility District, requested that the FERC rehear its order approving the settlement. We cannot predict the FERC’s determination on the request for rehearing.

In August 2001, the Grid Corporation of Orissa, India, now Gridco Ltd (“Gridco”), filed a petition against the Central Electricity Supply Company of Orissa Ltd. (“CESCO”), an affiliate of the Company, with the Orissa Electricity Regulatory Commission (“OERC”), alleging that CESCO had defaulted on its obligations as an OERC-licensed distribution company, that CESCO management abandoned the management of CESCO, and asking for interim measures of protection, including the appointment of an administrator to manage CESCO. Gridco, a state-owned entity, is the sole wholesale energy provider to CESCO. Pursuant to the OERC’s August 2001 order, the management of CESCO was replaced with a government administrator who was appointed by the OERC. The OERC later held that the Company and other CESCO shareholders were not necessary or proper parties to the OERC proceeding. In August 2004, the OERC issued a notice to CESCO, the Company and others giving the recipients of the notice until November 2004 to show cause why CESCO’s distribution license should not be revoked. In response, CESCO submitted a business plan to the OERC. In February 2005, the OERC issued an order rejecting the proposed business plan. The order also stated that the CESCO distribution license would be revoked if an acceptable business plan for CESCO was not submitted to and approved by the OERC prior to March 31, 2005. In its April 2, 2005 order, the OERC revoked the CESCO distribution license. CESCO has filed an appeal against the April 2, 2005 OERC order and that appeal remains pending in the Indian courts. In addition, Gridco asserted that a comfort letter issued by the Company in connection with the Company’s indirect investment in CESCO obligates the Company to provide additional financial support to cover all of CESCO’s financial obligations to Gridco. In December 2001, Gridco served a notice to arbitrate pursuant to the Indian Arbitration and Conciliation Act of 1996 on the Company, AES Orissa Distribution Private Limited (“AES ODPL”), and Jyoti Structures (“Jyoti”) pursuant to the terms of the CESCO Shareholders Agreement between Gridco, the Company, AES ODPL, Jyoti and CESCO (the “CESCO arbitration”). In the arbitration, Gridco appeared to be seeking approximately $189 million in damages, plus

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undisclosed penalties and interest, but a detailed alleged damage analysis was not filed by Gridco. The Company counterclaimed against Gridco for damages. In June 2007, a 2-to-1 majority of the arbitral tribunal rendered its award rejecting Gridco’s claims and holding that none of the respondents, the Company, AES ODPL, or Jyoti, had any liability to Gridco. The respondents’ counterclaims were also rejected. The Company subsequently filed an application to recover its costs of the arbitration, which is under consideration by the tribunal. In addition, in September 2007, Gridco filed a challenge of the arbitration award with the local Indian court. In June 2008, Gridco filed a separate application with the local Indian court for an order enjoining the Company from selling or otherwise transferring its shares in Orissa Power Generation Corporation Ltd’s (“OPGC”), and requiring the Company to provide security in the amount of the contested damages in the CESCO arbitration until Gridco’s challenge to the arbitration award is resolved. The Company believes that it has meritorious defenses to the claims asserted against it and will defend itself vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.

In early 2002, Gridco made an application to the OERC requesting that the OERC initiate proceedings regarding the terms of OPGC’s existing Power Purchase Agreement (“PPA”) with Gridco. In response, OPGC filed a petition in the Indian courts to block any such OERC proceedings. In early 2005, the Orissa High Court upheld the OERC’s jurisdiction to initiate such proceedings as requested by Gridco. OPGC appealed that High Court’s decision to the Supreme Court and sought stays of both the High Court’s decision and the underlying OERC proceedings regarding the PPAs terms. In April 2005, the Supreme Court granted OPGC’s requests and ordered stays of the High Court’s decision and the OERC proceedings with respect to the PPA’s terms. The matter is awaiting further hearing. Unless the Supreme Court finds in favor of OPGC’s appeal or otherwise prevents the OERC’s proceedings regarding the PPA’s terms, the OERC will likely lower the tariff payable to OPGC under the PPA, which would have an adverse impact on OPGC’s financials. OPGC believes that it has meritorious claims and defenses and will assert them vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.

In March 2003, the office of the Federal Public Prosecutor for the State of São Paulo, Brazil (“MPF”) notified AES Eletropaulo that it had commenced an inquiry related to the Brazilian National Development Bank (“BNDES”) financings provided to AES Elpa and AES Transgás and the rationing loan provided to Eletropaulo, changes in the control of Eletropaulo, sales of assets by Eletropaulo and the quality of service provided by Eletropaulo to its customers, and requested various documents from Eletropaulo relating to these matters. In July 2004, the MPF filed a public civil lawsuit in the Federal Court of Sao Paulo (“FSCP”) alleging that BNDES violated Law 8429/92 (the Administrative Misconduct Act) and BNDES’s internal rules by: (1) approving the AES Elpa and AES Transgás loans; (2) extending the payment terms on the AES Elpa and AES Transgás loans; (3) authorizing the sale of Eletropaulo’s preferred shares at a stock-market auction; (4) accepting Eletropaulo’s preferred shares to secure the loan provided to Eletropaulo; and (5) allowing the restructurings of Light Serviços de Eletricidade S.A. (“Light”) and Eletropaulo. The MPF also named AES Elpa and AES Transgás as defendants in the lawsuit because they allegedly benefited from BNDES’s alleged violations. In May 2006, the FCSP ruled that the MPF could pursue its claims based on the first, second, and fourth alleged violations noted above. The MPF subsequently filed an interlocutory appeal with the Federal Court of Appeals (“FCA”) seeking to require the FCSP to consider all five alleged violations. Also, in July 2006, AES Elpa and AES Transgás filed an interlocutory appeal with the FCA, which was subsequently consolidated with the MPF’s interlocutory appeal, seeking a transfer of venue and to enjoin the FCSP from considering any of the alleged violations. In June 2009, the FCA granted the injunction sought by AES Elpa and AES Transgás and transferred the case to the Federal Court of Rio de Janeiro. MPF likely will appeal. The MPF’s lawsuit before the FCSP has been stayed pending a final decision on the interlocutory appeals. AES Elpa and AES Transgás believe they have meritorious defenses to the allegations asserted against them and will defend themselves vigorously in these proceedings; however, there can be no assurances that they will be successful in their efforts.

AES Florestal, Ltd. (“Florestal”), had been operating a pole factory and had other assets, including a wooded area known as “Horto Renner,” in the State of Rio Grande do Sul, Brazil (collectively, “Property”). Florestal had been under the control of AES Sul (“Sul”) since October 1997, when Sul was created pursuant to a

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privatization by the Government of the State of Rio Grande do Sul. After it came under the control of Sul, Florestal performed an environmental audit of the entire operational cycle at the pole factory. The audit discovered 200 barrels of solid creosote waste and other contaminants at the pole factory. The audit concluded that the prior operator of the pole factory, Companhia Estadual de Energia Elétrica (“CEEE”), had been using those contaminants to treat the poles that were manufactured at the factory. Sul and Florestal subsequently took the initiative of communicating with Brazilian authorities, as well as CEEE, about the adoption of containment and remediation measures. The Public Attorney’s Office has initiated a civil inquiry (Civil Inquiry n. 24/05) to investigate potential civil liability and has requested that the police station of Triunfo institute a police investigation (IP number 1041/05) to investigate potential criminal liability regarding the contamination at the pole factory. The parties filed defenses in response to the civil inquiry. The Public Attorney’s Office then requested an injunction which the judge rejected on September 26, 2008. The Public Attorney’s office has a right to appeal the decision. The environmental agency (“FEPAM”) has also started a procedure (Procedure n. 088200567/059) to analyze the measures that shall be taken to contain and remediate the contamination. Also, in March 2000, Sul filed suit against CEEE in the 2nd Court of Public Treasure of Porto Alegre seeking to register in Sul’s name the Property that it acquired through the privatization but that remained registered in CEEE’s name. During those proceedings, AES subsequently waived its claim to re-register the Property and asserted a claim to recover the amounts paid for the Property. That claim is pending. In November 2005, the 7th Court of Public Treasure of Porto Alegre ruled that the Property must be returned to CEEE. CEEE has had sole possession of Horto Renner since September 2006 and of the rest of the Property since April 2006. In February 2008, Sul and CEEE signed a “Technical Cooperation Protocol” pursuant to which they requested a new deadline from FEPAM in order to present a proposal. In March 2008, the State Prosecution office filed a Public Class Action against AES Florestal, AES Sul and CEEE, requiring an injunction for the removal of the alleged sources of contamination and the payment of an indemnity in the amount of R$6 million ($3.1 million). The injunction was rejected and the case is in the evidentiary stage awaiting the judge’s determination concerning the production of expert evidence. The above referenced proposal was delivered on April 8, 2008. FEPAM responding by indicating that the parties should undertake the first step of the proposal which would be to retain a contractor. In its response Sul indicated that such step should be undertaken by CEEE as the relevant environmental events resulted from CEEE’s operations. It is estimated that remediation could cost approximately R$14.7 million ($7.6 million). Discussions between Sul and CEEE are ongoing.

In January 2004, the Company received notice of a “Formulation of Charges” filed against the Company by the Superintendence of Electricity of the Dominican Republic. In the “Formulation of Charges,” the Superintendence asserts that the existence of three generation companies (Empresa Generadora de Electricidad Itabo, S.A. (“Itabo”), Dominican Power Partners, and AES Andres BV) and one distribution company (Empresa Distribuidora de Electricidad del Este, S.A. (“Este”)) in the Dominican Republic, violates certain cross-ownership restrictions contained in the General Electricity Law of the Dominican Republic. In February 2004, the Company filed in the First Instance Court of the National District of the Dominican Republic an action seeking injunctive relief based on several constitutional due process violations contained in the “Formulation of Charges” (“Constitutional Injunction”). In February 2004, the Court granted the Constitutional Injunction and ordered the immediate cessation of any effects of the “Formulation of Charges,” and the enactment by the Superintendence of Electricity of a special procedure to prosecute alleged antitrust complaints under the General Electricity Law. In March 2004, the Superintendence of Electricity appealed the Court’s decision. In July 2004, the Company divested any interest in Este. The Superintendence of Electricity’s appeal is pending. The Company believes it has meritorious defenses to the claims asserted against it and will defend itself vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.

In April 2004, BNDES filed a collection suit against SEB, a subsidiary of the Company, to obtain the payment of R$3.8 billion ($2.0 billion), which includes principal, interest and penalties under the loan agreement between BNDES and SEB, the proceeds of which were used by SEB to acquire shares of CEMIG. In May 2004, the 15th Federal Circuit Court (“Circuit Court”) ordered the attachment of SEB’s CEMIG shares, which were given as collateral for the loan, as well as dividends paid by CEMIG to SEB. At the time of the attachment, the shares were worth approximately R$762 million ($393 million). In December 2006, SEB’s defense was ruled

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groundless by the Circuit Court. The Federal Court of Appeals affirmed that decision in February 2009. SEB intends to file further appeals. BNDES has seized a total of approximately R$630 million ($325 million) in attached dividends to date, with the approval of the Circuit Court, and is seeking to recover additional attached dividends. Also, BNDES has filed a plea to seize the attached CEMIG shares. The Circuit Court will consider BNDES’s request to seize the attached CEMIG shares after the net value of the alleged debt is recalculated in light of BNDES’s seizure of dividends. SEB believes it has meritorious defenses to the claims asserted against it and will defend itself vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.

In July 2004, the Corporación Dominicana de Empresas Eléctricas Estatales (“CDEEE”) filed lawsuits against Itabo, an affiliate of the Company, in the First and Fifth Chambers of the Civil and Commercial Court of First Instance for the National District. CDEEE alleges in both lawsuits that Itabo spent more than was necessary to rehabilitate two generation units of an Itabo power plant and, in the Fifth Chamber lawsuit, that those funds were paid to affiliates and subsidiaries of AES Gener and Coastal Itabo, Ltd. (“Coastal”), a former shareholder of Itabo, without the required approval of Itabo’s board of administration. In the First Chamber lawsuit, CDEEE seeks an accounting of Itabo’s transactions relating to the rehabilitation. In November 2004, the First Chamber dismissed the case for lack of legal basis. On appeal, in October 2005 the Court of Appeals of Santo Domingo ruled in Itabo’s favor, reasoning that it lacked jurisdiction over the dispute because the parties’ contracts mandated arbitration. The Supreme Court of Justice is considering CDEEE’s appeal of the Court of Appeals’ decision. In the Fifth Chamber lawsuit, which also names Itabo’s former president as a defendant, CDEEE seeks $15 million in damages and the seizure of Itabo’s assets. In October 2005, the Fifth Chamber held that it lacked jurisdiction to adjudicate the dispute given the arbitration provisions in the parties’ contracts. The First Chamber of the Court of Appeal ratified that decision in September 2006. In a related proceeding, in May 2005, Itabo filed a lawsuit in the U.S. District Court for the Southern District of New York seeking to compel CDEEE to arbitrate its claims. The petition was denied in July 2005. Itabo’s appeal of that decision to the U.S. Court of Appeals for the Second Circuit has been stayed since September 2006. Further, in September 2006, in an International Chamber of Commerce arbitration, an arbitral tribunal determined that it lacked jurisdiction to decide arbitration claims concerning these disputes. Itabo believes it has meritorious claims and defenses and will assert them vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.

In April 2006, a putative class action complaint was filed in the U.S. District Court for the Southern District of Mississippi (“District Court”) on behalf of certain individual plaintiffs and all residents and/or property owners in the State of Mississippi who allegedly suffered harm as a result of Hurricane Katrina, and against the Company and numerous unrelated companies, whose alleged greenhouse gas emissions allegedly increased the destructive capacity of Hurricane Katrina. The plaintiffs assert unjust enrichment, civil conspiracy/aiding and abetting, public and private nuisance, trespass, negligence, and fraudulent misrepresentation and concealment claims against the defendants. The plaintiffs seek damages relating to loss of property, loss of business, clean-up costs, personal injuries and death, but do not quantify their alleged damages. In August 2007, the District Court dismissed the case. The plaintiffs have appealed to the U.S. Court of Appeals for the Fifth Circuit, which heard oral arguments in November 2008 and is considering the appeal. The Company believes it has meritorious defenses to the claims asserted against it and will defend itself vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.

In July 2007, the Competition Committee of the Ministry of Industry and Trade of the Republic of Kazakhstan (the “Competition Committee”) ordered Nurenergoservice, an AES subsidiary, to pay approximately 18 billion KZT ($121 million) for alleged antimonopoly violations in 2005 through the first quarter of 2007. The Competition Committee’s order was affirmed by the economic court in April 2008. Nurenergoservice’s subsequent appeals have been unsuccessful to date, including at the court of appeals (first panel), which dismissed Nurenergoservice’s appeal in July 2008. Also, the economic court has issued an injunction to secure Nurenergoservice’s alleged liability, freezing Nurenergoservice’s bank accounts and prohibiting Nurenergoservice from transferring or disposing of its property. In separate but related proceedings, in August 2007, the Competition Committee ordered Nurenergoservice to pay approximately 1.8 billion KZT (approximately

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$12 million) in administrative fines for its alleged antimonopoly violations. Nurenergoservice’s appeal to the administrative court of first instance was rejected in February 2009. The Competition Committee’s successor, the Antimonopoly Agency, has not indicated whether it intends to assert claims against Nurenergoservice for alleged antimonopoly violations post first quarter 2007. Nurenergoservice believes it has meritorious claims and defenses; however, there can be no assurances that it will prevail in these proceedings. As Nurenergoservice did not prevail in the economic court or the court of appeals (first panel) with respect to the alleged damages, it will have to pay the alleged damages or risk seizure of its assets. In February 2009, the Antimonopoly Agency seized approximately 783 million KZT ($5 million) from a frozen Nurenergoservice bank account in partial satisfaction of Nurenergoservice’s alleged damages liability. Furthermore, as Nurenergoservice did not prevail in the administrative court with respect to the fines, it will have to pay the fines or risk seizure of its assets.

In December 2008, the Antimonopoly Agency ordered Ust-Kamenogorsk HPP (“UK HPP”), a hydroelectric plant under AES concession, to pay approximately 1.1 billion KZT ($7 million) for alleged antimonopoly violations in February through November 2007. The economic court of first instance has issued an injunction to secure UK HPP’s alleged liability, among other things freezing UK HPP’s bank accounts. Also, in March 2009, the economic court affirmed the Antimonopoly Agency’s order. UK HPP’s subsequent appeal to the court of appeals (first panel) was dismissed in April 2009. In June 2009, UK HPP paid the alleged damages and thus the economic court thereafter canceled the injunction on UK HPP’s assets. Furthermore, the Antimonopoly Agency has initiated administrative proceedings against UK HPP for its alleged antimonopoly violations. In May 2009, the administrative court of first instance ordered UK HPP to pay approximately 99 million KZT ($668,000) in administrative fines, which UK HPP did in June 2009. UK HPP believes it has meritorious defenses and will assert them vigorously; however, there can be no assurances that it will be successful in its efforts.

In April 2009, the Antimonopoly Agency initiated an investigation of the power sales of UK HPP and Shulbinsk HPP, another hydroelectric plant under AES concession (collectively, the “Hydros”), in 2008 through February 2009. The investigation is ongoing and no order has been issued relating to it. The Hydros believe they have meritorious defenses and will assert them vigorously in any formal proceeding concerning the investigation; however, there can be no assurances that they will be successful in their efforts.

In April 2009, the Antimonopoly Agency initiated an investigation of AES Ust-Kamenogorsk TETS LLP’s (“UKT”) power sales in 2008 through February 2009. With respect to UKT’s 2008 sales, the Antimonopoly Agency has issued an order allegedly quantifying UKT’s revenues from those sales, but the amount of damages and/or fines that UKT will have to pay, if any, for its alleged antimonopoly violations relating to the 2008 sales has not been determined and is the subject of ongoing court proceedings. As for UKT’s sales in January and February 2009, the Antimonopoly Agency’s investigation of those sales is temporarily suspended pending court proceedings concerning UKT’s market share. If UKT fails to prove in those proceedings that it is not a dominant market entity, the Antimonopoly Agency’s investigation will resume. UKT believes it has meritorious defenses and will assert them vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.

In July 2007, AES Energia Cartagena SRL, (“AESEC”) initiated arbitration against Initec Energia SA, Mitsubishi Corporation, and MC Power Project Management, SL (“Contractor”) to recover damages from the Contractor for its delay in completing the construction of AESEC’s majority-owned power facility in Murcia, Spain. In October 2007, the Contractor denied AESEC’s claims and asserted counterclaims to recover approximately €12 million ($17 million) for alleged unpaid milestone and scope change order payments, among other things, and an unspecified amount for an alleged early completion bonus. The final hearing was scheduled to begin in June 2009, however, prior to the hearing the parties settled.

In November 2007, the International Brotherhood of Electrical Workers, Local Union No. 1395, and sixteen individual retirees, (the “Complainants”), filed a complaint at the Indiana Utility Regulatory Commission (“IURC”) seeking enforcement of their interpretation of the 1995 final order and associated settlement agreement resolving IPL’s basic rate case. The Complainants requested that the IURC conduct an investigation of IPL’s

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failure to fund the Voluntary Employee Beneficiary Association Trust (“VEBA Trust”), at a level of approximately $19 million per year. The VEBA Trust was spun off to an independent trustee in 2001. The complaint sought an IURC order requiring IPL to make contributions to place the VEBA Trust in the financial position in which it allegedly would have been had IPL not ceased making annual contributions to the VEBA Trust after its spin off. The complaint also sought an IURC order requiring IPL to resume making annual contributions to the VEBA Trust. IPL filed a motion to dismiss and both parties sought summary judgment in the IURC proceeding. In May 2009, the IURC issued an order granting summary judgment in favor of IPL. In June 2009, the Complainants filed a notice of appeal with the IURC to provide notice that an appeal of the IURC’s May 2009 order will be taken to the Indiana Court of Appeals; IPL believes it has meritorious defenses to the Complainants’ claims and it will assert them vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.

In September 2007, the New York Attorney General issued a subpoena to the Company seeking documents and information concerning the Company’s analysis and public disclosure of the potential impacts that GHG legislation and climate change from GHG emissions might have on the Company’s operations and results. The Company has produced documents and information in response to the subpoena.

In January 2008, the Tioga Preservation Group and two individuals (collectively, “TPG”) filed a land use appeal with the Tioga County Court of Common Pleas of Pennsylvania (“Common Pleas Court”) with respect to the Tioga County Planning Commission’s grant to AES Armenia Mountain Wind, LLC (“Armenia Mountain”) of preliminary approval for development of a wind project. Although the appeal is against the Tioga County Planning Commission, Armenia Mountain joined as an interested party. In August 2008, the Common Pleas Court entered an Opinion and Order denying TPG’s land use appeal with prejudice and affirming Armenia Mountain’s preliminary approval. In September 2008, TPG filed a Notice of Appeal with the Commonwealth Court of Pennsylvania. In October 2008, the Planning Commission notified Armenia Mountain that all of the conditions to the preliminary approval had been satisfied and that Armenia Mountain was authorized to start construction of the wind project. In March 2009, the Commonwealth Court denied TPG’s appeal, also affirming Armenia Mountain’s preliminary approval. In April 2009, TPG filed a Petition for Allowance of Appeal with the Pennsylvania Supreme Court asking it to review the Commonwealth Court’s order. We cannot predict whether the Pennsylvania Supreme Court will agree to hear this petition.

In February 2008, the Native Village of Kivalina and the City of Kivalina, Alaska, filed a complaint in the U.S. District Court for the Northern District of California against the Company and numerous unrelated companies, claiming that the defendants’ alleged GHG emissions are destroying the plaintiffs’ alleged land. The plaintiffs assert nuisance and concert of action claims against the Company and the other defendants, and a conspiracy claim against a subset of the other defendants. The plaintiffs seek to recover relocation costs, indicated in the complaint to be from $95 million to $400 million, and other alleged damages from the defendants, which are not quantified. The Company has filed a motion to dismiss the case, which the plaintiffs have opposed. The Company believes it has meritorious defenses to the claims asserted against it and will defend itself vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.

In June 2008, an individual plaintiff, on his own behalf and on behalf of two environmental groups, filed a constitutional protection action (recurso de protección) with the Valparaiso Court of Appeals (“VCA”) against the Comisión Regional del Medio Ambiente, V Region (Chile) (“COREMA”) and other authorities that participated in the environmental assessment of the Campiche Thermal Power Plant (“Plant”), seeking to revoke the environmental permit for the Plant. Empresa Eléctrica Campiche (“EEC”), an affiliate of the Company, joined the action as an interested party. In January 2009, the VCA held that the permit was not properly granted and was thus illegal. According to the VCA the Plant was located in a zone that did not allow for its construction (an allegedly unsafe area) and thus affected the rights of the plaintiffs to live in an unpolluted environment. Later in January 2009, EEC and COREMA filed separate appeals with the Supreme Court of Chile against the VCA’s decision. The Supreme Court heard arguments on the appeals in April 2009 and later requested information about the location of the Plant and related issues from the Ministry of Housing and Urbanism and the Municipality of

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Puchuncaví. In June 2009, the Supreme Court issued a decision affirming the VCA’s decision reasoning that the relevant land regulation did not allow for the Plant’s construction. Construction of the Plant has stopped as a consequence of the Supreme Court’s decision. EEC is working with Chilean authorities to attempt to find a solution that might allow the Plant’s construction to resume. Campiche has issued to the EPC contractor a notification of Force Majeure under the relevant construction contract. The EPC contractor has disputed such declaration of Force Majeure by Campiche. Management believes it is probable that the Campiche project will be completed. However, if Gener is unable to complete the project, AES may be required to record an impairment of Campiche proportional to its indirect ownership, which could have a material impact on earnings in the period in which it is recorded. Based on cash investments through June 30, 2009 and potential termination costs, Gener could incur an impairment of approximately $186 million. In the event an impairment is taken with regard to the project, the amount of such impairment will depend on a number of factors, including our ability to recover project costs. In addition, Empresa Electrica Ventanas S.A., a 270 MW gross coal plant under development in Ventanas, is reviewing the potential effects, if any, that the decision of the Supreme Court could have on the Nueva Ventanas project.

A public civil action has been asserted against Eletropaulo and Associação Desportiva Cultural Eletropaulo (the “Associação”) relating to alleged environmental damage caused by construction of the Associação near Guarapiranga Reservoir. The initial decision that was upheld by the Appellate Court of the State of Sao Paulo in 2006 found that Eletropaulo should either repair the alleged environmental damage by demolishing certain construction and reforesting the area, pursuant to a project which would cost approximately $628,000, or pay an indemnification amount of approximately $5 million. Eletropaulo has appealed this decision to the Supreme Court and is awaiting a decision.

In 2007, a lower court issued a decision related to a 1993 claim that was filed by the Public Attorney’s office against Eletropaulo, the São Paulo State Government, SABESP (a state owned company), CETESB (a state owned company) and DAEE (the municipal Water and Electric Energy Department), alleging that they were liable for pollution of the Billings Reservoir as a result of pumping water from Pinheiros River into Billings Reservoir. The events in question occurred while Eletropaulo was a state owned company. An initial lower court decision in 2007 found the parties liable for the payment of approximately $230 million for remediation. Eletropaulo subsequently appealed the decision to the Appellate Court of the State of Sao Paulo which reversed the lower court decision. It is not yet known whether this appellate decision will be appealed by the Public Attorney’s office. If so, Eletropaulo believes it has meritorious defenses to the claims asserted against it and will defend itself vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.

In September 2008, IPL received a CAA Section 114 information request. The request seeks various information regarding production levels and projects implemented at IPL’s generating stations, generally for the time period from January 1, 2001 to the date of the information request. A subsequent related request extended the time period to cover certain operational data for the year 2000. This type of information request has been used in the past to assist the EPA in determining whether a plant is in compliance with applicable standards under the CAA. At this time it is not possible to predict what impact, if any, this request may have on IPL, its results of operation or its financial position.

In November 2007, the U.S. Department of Justice (“DOJ”) notified AES Thames, LLC (“AES Thames”) that the EPA had requested that the DOJ file a federal court action against AES Thames for alleged violations of the CAA, the CWA, the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and the Emergency Planning and Community Right-to-Know Act (“EPCRA”), in particular alleging that AES Thames had violated (i) the terms of its Prevention of Significant Deterioration (“PSD”) air permits in the calculation of its steam load permit limit; and (ii) the CWA, CERCLA and EPCRA in connection with two spills of chlorinating agents that occurred in 2006. The DOJ subsequently indicated that it would like to settle this matter prior to filing a suit and negotiations are ongoing. During such discussions, the DOJ and EPA have accepted AES Thames method of operation and have asked AES Thames to seek a minor permit modification to clarify the air permit condition in a manner that is consistent with AES Thames’ historical

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method of operation. On October 21, 2008, the DOJ proposed a civil penalty of $245,000 for the alleged violations. The Company believes that it has meritorious defenses to the claims asserted against it and if a settlement cannot be achieved, the Company will defend itself vigorously in any lawsuit.

In December 2008, the National Electricity Regulatory Entity of Argentina (“ENRE”) filed a criminal action in the National Criminal and Correctional Court of Argentina against the board of directors and administrators of EDELAP. ENRE’s action concerns certain bank cancellations of EDELAP debt in 2006 and 2007, which were accomplished through transactions between the banks and related AES companies. ENRE claims that EDELAP should have reflected in its accounts the alleged benefits of the transactions that were allegedly obtained by the related companies. EDELAP believes that the allegations lack merit; however, there can be no assurances that its board and administrators will prevail in the action.

In January 2009, an alleged shareholder of the Company filed a putative derivative and class action in Delaware state court against the Company and certain members of its board of directors at the time. The plaintiff claimed that aspects of Section 2.17(B) of the Company’s bylaws, concerning certain informational requirements in connection with shareholder action by written consent, violated Delaware law. The plaintiff did not seek damages but declarations that Section 2.17(B) was unlawful and void and that the board member defendants breached their respective fiduciary duties of loyalty by adopting that bylaw in October 2008. The plaintiff further sought to recover his litigation costs. In April 2009, the parties executed a stipulation of settlement requiring an amendment of Section 2.17(B), and filed the stipulation with the court for approval. In July 2009, the court approved the stipulation of settlement dismissing the action.

A CAA Section 114 information request regarding Cayuga and Somerset was received in February 2009. The request seeks various operating and testing data and other information regarding certain types of projects at the Cayuga and Somerset facilities, generally for the time period from January 1, 2000 through the date of the information request. This type of information request has been used in the past to assist the EPA in determining whether a plant is in compliance with applicable standards under the CAA. The Company responded to the EPA’s information request in June 2009. At this time it is not possible to predict what impact, if any, this request may have on Cayuga and/or Somerset, their results of operation or their financial position.

On February 2, 2009, the Cayuga facility received a Notice of Violation from the New York State Department of Environmental Conservation that the facility had exceeded the permitted volume limit of coal ash that can be disposed of in the on-site landfill. Cayuga has met with and submitted a demonstration plan to the agency and discussions between the parties are ongoing. While at this time it is not possible to predict what impact, if any, this matter may have on Cayuga, its results of operation or its financial position, based upon the discussions to date, the Company does not believe the impact will be material.

In March 2009, Glencore International AG initiated arbitration against Itabo in the International Chamber of Commerce concerning the parties’ coal supply agreement. Glencore claimed that Itabo repudiated and breached the agreement by allegedly failing to purchase coal pursuant to the terms of the agreement. Glencore sought approximately $75 million in damages, plus interest, among other relief. In June 2009, the parties settled the arbitration.

In June 2009, the Inter-American Commission on Human Rights of the Organization of American States (“IACHR”) requested that the Republic of Panama suspend the construction of AES Changuinola S.A.’s hydroelectric project (“Project”) until the bodies of the Inter-American human rights system can issue a final decision on a petition (286/08) claiming that the construction violates the human rights of alleged indigenous communities. In July 2009, Panama responded by informing the IACHR that it would not suspend construction of the Project and requesting that the IACHR revoke its request. The Company cannot predict Panama’s response to any determination on the merits of the petition by the bodies of the Inter-American human rights system.

On July 30, 2009, AES Energía Cartagena S.R.L. (“AES Cartagena”) received a notice from the Spanish national energy regulator, Comisión Nacional de Energía (“CNE”), stating that it intends to invoice AES Cartagena for CO₂ allowances previously granted to AES Cartagena for 2007, 2008 and the first half of 2009. CNE alleges that generators selling into the electricity pool offered prices that included the costs of purchasing CO₂ allowances to offset their emissions, despite the fact that the generators were allegedly allocated free CO₂

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allowances to cover some or all of those emissions. CNE’s notice asserts that AES Cartagena’s revenues should be reduced by roughly the amount of free CO₂ allowances allocated to AES Cartagena for 2007, 2008 and the first half of 2009, which CNE calculates as approximately $29 million for 2007-2008 and an amount to be determined for the first half of 2009. AES Cartagena is currently considering its options with respect to CNE’s notice, including whether to contest the allegations in CNE’s notice. There can be no assurance that any attempt to contest CNE’s allegations will be successful. Regardless of whether AES Cartagena contests such allegations, it will likely seek remedies for any CNE invoice from GDF-Suez under its long-term energy agreement (the “Energy Agreement”) with GDF-Suez, as further described below. AES Cartagena understands that CNE has sent notices to other generators, also alleging that they sold into the electricity pool at prices which reflected the cost of purchasing CO₂ allowances when they allegedly received free allowances. AES Cartagena does not sell electricity into the electricity pool, but instead, it provides electricity directly to GDF-Suez when requested by GFD-Suez to do so, subject to the terms of the Energy Agreement. AES Cartagena receives a fixed capacity payment from GDF-Suez under the Energy Agreement in return for keeping the plant available to run when requested. GDF-Suez then sells the electricity provided by AES Cartagena directly into the electricity pool and GDF-Suez receives all of the revenue associated with such sales into the electricity pool. Accordingly, AES Cartagena believes that GDF-Suez should bear the costs associated with any invoices from CNE. However, GDF-Suez has previously disputed that it is liable under the Energy Agreement for CO₂ emissions related costs. Therefore, if CNE invoices AES Cartagena, AES Cartagena would likely have to pay the amount of the invoices and then seek reimbursement of the payment from GDF-Suez by initiating formal dispute resolution proceedings against them. While the Company believes that AES Cartagena has meritorious arguments in any such proceedings, dispute resolution involves a number of inherent uncertainties. Therefore, we cannot predict the outcome of any dispute resolution proceedings that might be necessary to attempt to pass the costs of the invoices to GDF-Suez.

9. PENSION PLANS

Total pension cost for the three and six months ended June 30, 2009 and 2008 included the following components:

	Three Months Ended June 30,												Six Months Ended June 30,
	2009						2008						2009						2008
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
	(in millions)												(in millions)
Service cost	$	2		$	3		$	2		$	4		$	4		$	6		$	3		$	7
Interest cost		9			111			8			123			17			211			16			244
Expected return on plan assets		(6	)		(90	)		(9	)		(111	)		(13	)		(171	)		(17	)		(220	)
Amortization of initial net asset		-			-			-			-			-			(1	)		-			(2	)
Amortization of prior service cost		1			-			-			-			2			-			1			-
Amortization of net loss		4			2			1			1			8			3			1			2
Total pension cost	$	10		$	26		$	2		$	17		$	18		$	48		$	4		$	31

Total employer contributions for the six months ended June 30, 2009 for the Company’s U.S. and foreign subsidiaries were $10 million and $85 million, respectively. The expected remaining scheduled annual employer contributions for 2009 are $12 million for U.S. subsidiaries and $66 million for foreign subsidiaries. As of June 30, 2009, the depreciation of the U.S. Dollar compared to the Brazilian Real (“BRL”) resulted in an increase of $18 million in the estimate of total remaining expected 2009 employer contributions for foreign subsidiaries when translated into U.S. Dollar. This increase is entirely due to the change in the exchange rate used to translate the BRL, the local currency, to a U.S. Dollar estimate of expected future contributions. The expected contributions, which will be made in BRL, remain unchanged.

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10. COMPREHENSIVE INCOME

The components of comprehensive income for the three and six months ended June 30, 2009 and 2008 were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
	(in millions)
Net income	$	531		$	1,160		$	1,032		$	1,568
Change in fair value of available-for-sale securities, net of income tax benefit of $—, $—, $— and $1, respectively		-			-			-			(1	)
Foreign currency translation adjustments, net of income tax expense of $30, $13, $31 and $16, respectively		402			210			333			290
Derivative activity:
Reclassification to earnings, net of income tax benefit of $15, $6, $26 and $10, respectively		(37	)		1			(43	)		-
Change in derivative fair value, net of income tax (expense) benefit of $(29), $8, $(69) and $94, respectively		86			11			186			(146	)
Total change in fair value of derivatives		49			12			143			(146	)
Change in unfunded pension obligation, net of income tax (expense) benefit of $(1), $12, $(1) and $12, respectively		1			(11	)		2			(11	)
Other comprehensive income		452			211			478			132
Comprehensive income		983			1,371			1,510			1,700
Less: Comprehensive income attributable to noncontrolling interests(1)		(518	)		(426	)		(818	)		(618	)
Comprehensive income attributable to The AES Corporation	$	465		$	945		$	692		$	1,082

⁽¹⁾ Reflects the income (loss) attributed to noncontrolling interests in the form of common securities and dividends on preferred stock of subsidiaries.

The components of accumulated other comprehensive loss as of June 30, 2009 were as follows:

	(in millions)
Foreign currency translation adjustment	$	2,518
Unrealized derivative losses		159
Unfunded pension obligation		170
Accumulated other comprehensive loss as of June 30, 2009	$	2,847

11. SEGMENTS

As further described below, beginning with the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2009 filed with the SEC on May 8, 2009, the Company modified its segment reporting in accordance with FAS No. 131, Disclosures about Segments of an Enterprise and Related Information (“FAS No. 131”).

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Background

Through the end of 2008, the Company organized its operations for management reporting purposes along two primary lines of business – the generation of electricity (“Generation”) and the distribution of electricity (“Utilities”) within four geographic regions: Latin America; North America; Europe & Africa; and Asia & the Middle East (“Asia”). Three regions, North America, Latin America and Europe & Africa, are engaged in both Generation and Utility businesses. Our Asia region only has Generation businesses. This regional management structure resulted in the Company reporting seven segments, as defined in FAS No. 131 in the 2008 Form 10-K. These reportable segments included Latin America – Generation, Latin America – Utilities, North America – Generation, North America – Utilities, Europe & Africa – Generation, Europe & Africa – Utilities and Asia – Generation. In addition, the Company reported certain activities in “Corporate and Other” including corporate overhead costs which are not directly associated with the operations of our primary operating segments; and other intercompany charges such as self-insurance premiums which are fully eliminated in consolidation. The Company’s alternative energy business which included AES Wind Generation, climate solutions, and certain other initiatives, was managed by our alternative energy group. The associated revenue, development and operational costs were reported under “Corporate and Other” since its results were not material to the presentation of the Company’s operating segments.

2009 Segment Reporting

Management Reporting Structure – In early 2009, we implemented certain internal organizational changes in an effort to streamline the organization. These changes affected how results are reported internally for management review, but did not change any of the chief operating decision makers. The new management reporting structure continues to be organized along our two lines of businesses, but there are now three regions: (1) Latin America & Africa; (2) North America and AES Wind; and (3) Europe, Middle East & Asia (collectively “EMEA”), each managed by a regional president. The Company no longer has an alternative energy group. Instead, AES Wind Generation is managed with our North America region while climate solutions projects are now managed in the region in which they are located. In addition to the change in regional management structure, with the exception of AES Wind Development, the Company now manages all development efforts centrally through a development group.

Segment Reporting Structure – The new segment reporting structure uses the management reporting structure as its foundation. The Company’s segment reporting structure continues to be organized along our two lines of business and three regions to reflect how the Company manages the business internally. The Company applied the guidance in FAS No. 131, which provides certain quantitative thresholds and aggregation criteria, and the Company concluded that it now has six reportable segments. The operating segments comprising the former Europe & Africa Generation and Utilities reportable segments are no longer managed together. Under the new management structure Africa is managed with the Latin America region and Europe is managed with the Asia region. Only Europe – Generation was determined to be a reportable segment based on the Company’s application of FAS No. 131. As described below, our Europe Utilities, Africa Utilities and Africa Generation operating segments are now reported within “Corporate and Other” because they do not meet the quantitative thresholds for separate disclosure under FAS No. 131.

Therefore, as a result of this analysis, the Company now reports six segments, which include:

• Latin America – Generation;

• Latin America – Utilities;

• North America – Generation;

• North America – Utilities;

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• Europe – Generation;

• Asia – Generation.

Corporate and Other – Corporate and Other now includes corporate overhead costs which are not directly associated with the operations of our six primary reportable segments, other intercompany charges such as self-insurance premiums which are fully eliminated in consolidation, the operations for the Company’s Europe and Africa Utilities and Africa Generation businesses, the operations of AES Wind and the development and operational costs related to the development group. None of these operations is currently material to our presentation of reportable segments, individually or in the aggregate.

The Company uses multiple measures to evaluate the performance of its segments. The GAAP measure that most closely aligns with the Company’s performance measures is gross margin. Gross margin is defined as total revenue less operating expenses including depreciation and amortization, local fixed operating and other overhead costs. Segment revenue includes inter-segment sales related to the transfer of electricity from generation plants to utilities within the Latin America region. No inter-segment revenue relationships exist between other segments. Corporate allocations include certain management fees and self insurance activity which are reflected within segment gross margin. All intra-segment activity has been eliminated with respect to revenue and gross margin within the segment; inter-segment activity has been eliminated within the total consolidated results.

As required by FAS No. 131, all prior period information has been recast to reflect the realignment of reportable segments.

Information about the Company’s operations by segment for the three and six months ended June 30, 2009 and 2008, respectively, was as follows:

	Total Revenue					Inter-segment						External Revenue
Three Months Ended June 30,	2009		2008			2009			2008			2009		2008
						(in millions)
Latin America–Generation	$	895	$	1,177		$	(203	)	$	(252	)	$	692	$	925
Latin America–Utilities		1,367		1,577			-			-			1,367		1,577
North America–Generation		475		538			-			-			475		538
North America–Utilities		261		267			-			-			261		267
Europe–Generation		152		268			-			-			152		268
Asia–Generation		337		301			-			-			337		301
Corporate and Other		8		(2	)		203			252			211		250
Total Revenue	$	3,495	$	4,126		$	-		$	-		$	3,495	$	4,126
	Total Revenue					Inter-segment						External Revenue
Six Months Ended June 30,	2009		2008			2009			2008			2009		2008
						(in millions)
Latin America–Generation	$	1,786	$	2,383		$	(386	)	$	(510	)	$	1,400	$	1,873
Latin America–Utilities		2,581		3,040			-			-			2,581		3,040
North America–Generation		977		1,089			-			-			977		1,089
North America–Utilities		551		516			-			-			551		516
Europe–Generation		356		572			-			-			356		572
Asia–Generation		584		613			-			-			584		613
Corporate and Other		38		(6	)		386			510			424		504
Total Revenue	$	6,873	$	8,207		$	-		$	-		$	6,873	$	8,207

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	Total Gross Margin				Inter-segment						External Gross Margin
Three Months Ended June 30,	2009		2008		2009			2008			2009		2008
					(in millions)
Latin America–Generation	$	335	$	319	$	(193	)	$	(247	)	$	142	$	72
Latin America–Utilities		175		254		203			252			378		506
North America–Generation		122		242		13			6			135		248
North America–Utilities		51		61		1			-			52		61
Europe–Generation		27		64		-			-			27		64
Asia–Generation		77		40		3			1			80		41
Corporate and Other		60		49		(27	)		(12	)		33		37
Total Gross Margin	$	847	$	1,029	$	-		$	-		$	847	$	1,029
	Total Gross Margin				Inter-segment						External Gross Margin
Six Months Ended June 30,	2009		2008		2009			2008			2009		2008
					(in millions)
Latin America–Generation	$	707	$	718	$	(373	)	$	(500	)	$	334	$	218
Latin America–Utilities		346		479		387			510			733		989
North America–Generation		242		402		17			11			259		413
North America–Utilities		121		113		2			1			123		114
Europe–Generation		95		179		1			-			96		179
Asia–Generation		124		88		4			2			128		90
Corporate and Other		95		92		(38	)		(24	)		57		68
Total Gross Margin	$	1,730	$	2,071	$	-		$	-		$	1,730	$	2,071

Assets by segment as of June 30, 2009 and December 31, 2008, respectively, were as follows:

	Total Assets
	June 30, 2009		December 31, 2008
	(in millions)
Latin America–Generation	$	9,155	$	8,228
Latin America–Utilities		8,262		7,267
North America–Generation		6,343		6,426
North America–Utilities		3,034		3,093
Europe–Generation		2,798		2,656
Asia–Generation		3,172		3,239
Corporate and Other		4,654		3,897
Total Assets	$	37,418	$	34,806

12. OTHER INCOME (EXPENSE)

The components of other income were summarized as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
	(in millions)
Tax credit settlement	$	-	$	-	$	129	$	-
Management performance incentive		-		-		80		-
Gain on extinguishment of liabilities		3		117		3		124
Gain on sale of assets		2		1		8		4
Other		17		32		24		67
Total other income	$	22	$	150	$	244	$	195

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Other income generally includes gains on asset sales and extinguishments of liabilities, favorable judgments on legal settlements and other income from miscellaneous transactions.

Other income of $22 million for the three months ended June 30, 2009 included a gain on early extinguishment of debt at Itabo in the Dominican Republic, a reversal of a legal reserve at Sonel in Cameroon, and insurance recoveries related to turbine damage at one of our Brazilian subsidiaries. Other income of $150 million for the three months ended June 30, 2008 included a $117 million gain related to the extinguishment of a tax liability at Eletropaulo, whose net impact to the Company after noncontrolling interests was $19 million, and insurance recoveries of $14 million for damaged turbines at Uruguaiana.

Other income of $244 million for the six months ended June 30, 2009 included a favorable court decision on a legal dispute in which Eletropaulo, the Company’s utility business in Brazil, had requested reimbursement for excess non-income taxes paid from 1989 to 1992. Eletropaulo received reimbursement in the form of tax credits to be applied against future tax liabilities resulting in a $129 million gain. The net impact to the Company after noncontrolling interests was $21 million. In addition, the Company recognized income of $80 million from a performance incentive bonus for management services provided to Ekibastuz and Maikuben in 2008. The management agreement was related to the sale of these businesses in Kazakhstan in May 2008; see further discussion of this transaction in Note 14 — Acquisitions and Dispositions. Other income of $195 million for the six months ended June 30, 2008 included the previously mentioned gain on extinguishment of a tax liability and insurance recoveries in the second quarter of 2008, as well as $14 million of compensation received from the local government for the impairment of plant assets and cessation of the power purchase agreement associated with a settlement agreement to shut down the Hefei generation facility in China recorded during the first quarter of 2008.

The components of other expense were summarized as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
	(in millions)
Loss on extinguishment of debt	$	-	$	69	$	-	$	69
Loss on sale and disposal of assets		9		8		14		15
Legal/dispute settlement		1		1		10		15
Other		20		7		28		11
Total other expense	$	30	$	85	$	52	$	110

Other expense generally includes losses on asset sales, losses on the extinguishment of debt, charges from legal disputes and losses from other miscellaneous transactions.

Other expense of $30 million for the three months ended June 30, 2009 included a $13 million loss recognized when three of our businesses in the Dominican Republic received $110 million par value bonds issued by the Dominican Republic government to settle existing accounts receivable for the same amount from the government-owned distribution companies. The loss represented an adjustment to reflect the fair value of the bonds on the date received. Other expense also included losses on disposal of assets at Eletropaulo. Other expense of $85 million for the three months ended June 30, 2008 included $69 million of losses related to the retirement of debt at the Parent Company in connection with a refinancing in June 2008 and the refinancing of $375 million of debt by IPALCO in April 2008.

Other expense of $52 million for the six months ended June 30, 2009 primarily consisted of the previously mentioned $13 million fair value adjustment to government issued bonds in the Dominican Republic on the date received and losses on the disposal of assets at Eletropaulo and Andres. Other expense of $110 million for the six months ended June 30, 2008 included the previously mentioned loss on debt retirements in the second quarter of 2008, as well as losses on disposal of assets at one of our Brazilian subsidiaries and legal reserves.

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13. DISCONTINUED OPERATIONS

The Company had no discontinued operations for the three and six months ended June 30, 2009.

In December 2008, the Company completed the sale of its 70% equity interest in Jiaozuo AES Wanfang Power Co., Ltd. (“Jiaozuo”), which was reported in the Asia Generation segment, for approximately $73 million, net of any withholding taxes. For the three and six months ended June 30, 2008, income from operations of discontinued businesses was $1 million and $3 million, respectively, and reflected the operations of Jiaozuo.

The following table summarizes the revenue, income tax expense and income from operations of the discontinued businesses for the three and six months ended June 30, 2008:

	Three Months Ended June 30, 2008		Six Months Ended June 30, 2008
	(in millions)
Revenue	$	20	$	43
Income from operations of discontinued businesses	$	-	$	3
Income tax benefit		1		-
Income from operations of discontinued businesses, net of tax	$	1	$	3
Loss on disposal of discontinued operations	$	-	$	(1	)

14. ACQUISITIONS AND DISPOSITIONS

Dispositions

On May 30, 2008 the Company completed the sale of two of its wholly-owned subsidiaries in Kazakhstan, AES Ekibastuz LLP (“Ekibastuz”), a coal-fired generation plant, and Maikuben West LLP (“Maikuben”), a coal mine. Total consideration received in the transaction was approximately $1.1 billion plus additional potential earn-out provisions, a three-year management and operation agreement and a capital expenditures program bonus. Due to the fact that AES was to have significant continuing involvement in the management and operations of the businesses through its three-year management and operation agreement, the results of operations from Ekibastuz and Maikuben were included in income from continuing operations through the date of the disposition. Income earned as a result of the three-year management and operation agreement has been recognized as management fee income for all periods subsequent to the disposition.

On March 23, 2009, the Company and Kazakhmys PLC (“Kazakhmys”), which purchased the subsidiaries, mutually agreed to terminate the original sale agreement and the three-year management and operation agreement. In connection with the termination of these agreements, the Company and Kazakhmys entered into a new agreement (the “2009 Agreement”). Under the 2009 Agreement, Kazakhmys agreed to pay the Company an $80 million performance incentive bonus in April 2009 for management services provided in 2008. This was recognized as “Other Income” in the Company’s condensed consolidated statement of operations during the first quarter of 2009. The cash was received by the Company in April 2009. A $13 million gain was recognized related to a reversal of a tax contingency for a contractual obligation, under which the Company provided indemnification to Kazakhmys, which expired in January 2009. This was recorded as an adjustment to the gain on the sale of Ekibastuz and Maikuben during the first quarter of 2009.

The 2009 agreement also provided for an additional $102 million payment, primarily related to the termination of the management agreement, payable to AES in January 2010. In May 2009, Kazakhmys provided an irrevocable standby letter of credit from a credit worthy institution to AES of $102 million to secure the final payment. The payment of the final component of the management termination agreement is not contingent upon

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any future events. As a result, the Company recognized an additional gain on the sale of Ekibastuz and Maikuben of approximately $98.5 million in the second quarter of 2009.

The parties agreed to terminate both the Stock Purchase Agreement and the Management Agreement, and have further agreed to a mutual release of prior claims. As part of the management termination agreement, AES agreed to transition the management of the businesses to Kazakhmys over a period of 100 days from March 13, 2009. The transition period ended June 21, 2009 and at that time the management of Ekibastuz and Maikuben became the responsibility of Kazakhmys. Despite the termination of the management agreement, the Company’s involvement with the businesses remained in place for more than one year from the date of the sale; therefore, the Company has continued to include the businesses as part of continuing operations in the condensed consolidated financial statements for all periods presented.

Excluding income earned under the three-year management and operation agreement (terminated in March 2009), Ekibastuz and Maikuben generated no revenue for the three and six months ended June 30, 2009 and generated revenue of $45 million and $108 million for the three and six months ended June 30, 2008.

15. EARNINGS PER SHARE

Basic and diluted earnings per share are based on the weighted average number of shares of common stock and potential common stock outstanding during the period, after giving effect to stock splits. Potential common stock, for purposes of determining diluted earnings per share, includes the effects of dilutive restricted stock units and stock options. The effect of such potential common stock is computed using the treasury stock method or the if-converted method, as applicable.

The following table presents a reconciliation of the numerator and denominator of the basic and diluted earnings per share computation for income from continuing operations for the three and six months ended June 30, 2009 and 2008. In the table below, income represents the numerator and weighted-average shares represent the denominator:

	Three Months Ended June 30,
	2009					2008
	Income		Shares	$ per Share		Income		Shares	$ per Share
	(in millions except per share data)
BASIC EARNINGS PER SHARE
Income from continuing operations attributable to The AES Corporation common stockholders	$	303	667	$	0.45	$	902	672	$	1.34
EFFECT OF DILUTIVE SECURITIES
Convertible securities		6	15		-		6	15		(0.03	)
Stock options		-	1		-		-	6		-
Restricted stock units		-	1		-		-	1		-
DILUTED EARNINGS PER SHARE	$	309	684	$	0.45	$	908	694	$	1.31

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	Six Months Ended June 30,
	2009					2008
	Income		Shares	$ per Share		Income		Shares	$ per Share
	(in millions except per share data)
BASIC EARNINGS PER SHARE
Income from continuing operations attributable to The AES Corporation common stockholders	$	521	666	$	0.78	$	1,134	671	$	1.69
EFFECT OF DILUTIVE SECURITIES
Convertible securities		-	-		-		11	15		(0.04	)
Stock options		-	1		-		-	6		-
Restricted stock units		-	1		-		-	2		-
DILUTED EARNINGS PER SHARE	$	521	668	$	0.78	$	1,145	694	$	1.65

There were approximately 20,169,060 and 7,616,664 additional options outstanding at June 30, 2009 and 2008, respectively, that could potentially dilute basic earnings per share in the future. Those options were not included in the computation of diluted earnings per share because the exercise price exceeded the average market price during the related periods. For the three months ended June 30, 2009 and 2008, no convertible debentures were omitted from the earnings per share calculation because they were all dilutive. For the six months ended June 30, 2009, all convertible debentures were omitted from the earnings per share calculation because they were anti-dilutive. For the six months ended June 30, 2008, there were no convertible debentures omitted from the earnings per share calculation because they were all dilutive. During the six months ended June 30, 2009, 2,096,389 shares of common stock were issued under the Company’s profit sharing plan and 113,484 shares of common stock were issued upon the exercise of stock options.

16. ACCOUNTS RECEIVABLE SECURITIZATION

IPL, a consolidated subsidiary of the Company, formed IPL Funding Corporation (“IPL Funding”) in 1996 as a special purpose entity to purchase, on a revolving basis, up to $50 million of the accounts receivable and related collections of IPL. IPL Funding is consolidated by IPL and IPALCO, the holding company of IPL, as a qualified special-purpose entity under FAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. IPL Funding has entered into a sale facility with unrelated parties (“the Purchasers”) pursuant to which the Purchasers agree to purchase from IPL Funding, on a revolving basis, interests in the pool of receivables purchased from IPL up to the lesser of (1) an amount determined pursuant to the sale facility that takes into account certain eligibility requirements and reserves relating to the receivables, or (2) $50 million. During the second quarter of 2009, this agreement was extended through May 25, 2010. Accounts receivable on the Company’s condensed consolidated balance sheets are stated net of the $50 million sold and include $78 million and $87 million as of June 30, 2009 and December 31, 2008, respectively, related to IPL Funding’s accounts receivable.

IPL retains servicing responsibilities for its role as a collection agent on the amounts due on the sold receivables. However, the Purchasers assume the risk of collection on the purchased receivables without recourse to IPL in the event of a loss. While no direct recourse to IPL exists, it risks loss in the event collections are not sufficient to allow for full recovery of its retained interests. No servicing asset or liability is recognized since the servicing fee paid to IPL approximates a market rate.

The carrying values of the retained interests are determined by allocating the carrying value of the receivables between the assets sold and the interests retained based on relative fair value. The key assumptions in estimating fair value are credit losses, the selection of discount rates, and expected receivables turnover rate. The hypothetical effect on the fair value of the retained interests assuming both a 10% and a 20% unfavorable variation in credit losses or discount rates is not material due to the short turnover of receivables and historically low credit loss history.

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The losses recognized on the sales of receivables were $0.3 million and $0.4 million for the three months ended June 30, 2009 and 2008, respectively, and $0.6 million and $1 million for the six months ended June 30, 2009 and 2008, respectively. These losses are included in other expense on the condensed consolidated statements of operations. The amount of the losses recognized depends on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold and the interests that continue to be held by the transferor based on their relative fair value at the date of transfer, and the proceeds received.

There were no proceeds from new securitizations for each of the three and six months ended June 30, 2009 and 2008. IPL Funding pays IPL annual service fees totaling $0.6 million, which is financed by capital contributions from IPL to IPL Funding.

The following table shows the receivables sold and retained interests as well as the cash flows for the periods ended June 30, 2009 and 2008:

	Six Months Ended June 30,
	2009		2008
	(in millions)
Retail receivables at IPL	$	128	$	119
Less: Retained interests		78		69
Net receivables sold	$	50	$	50

	Six Months Ended June 30,
	2009		2008
	(in millions)
Cash proceeds from interest retained	$	325	$	275
Cash proceeds from sold receivables	$	202	$	198

IPL and IPL Funding provide certain indemnities to the Purchasers, including indemnification in the event that there is a breach of representations and warranties made with respect to the purchased receivables. IPL Funding and IPL each have agreed to indemnify the Purchasers on an after-tax basis for any and all damages, losses, claims, liabilities, penalties, taxes, costs and expenses at any time imposed on or incurred by the indemnified parties arising out of, or otherwise relating to, the sale facility, subject to certain limitations as defined in the sale facility.

Under the sale facility, if IPL fails to maintain certain financial covenants regarding interest coverage and debt to capital, it would constitute a “termination event.” As of June 30, 2009, IPL was in compliance with such covenants. In the event that IPL’s credit rating falls below a threshold identified in the sale facility, the facility agent has the ability to replace IPL as the collection agent and declare a “lock-box” event. Under a lock-box event or a termination event, the facility agent has the ability to require all proceeds of purchased receivables of IPL to be directed to lock-box accounts within 45 days of notifying IPL. In addition, a termination event would also give the facility agent the option to take control of the lock-box account, give the Purchasers the option to discontinue the purchase of new receivables, and require all proceeds to be used to reduce the Purchaser’s investment and pay other amounts owed to the Purchasers and the facility agent. This could reduce the operating capital available to IPL by the aggregate amount of any purchased receivables up to $50 million.

17. SUBSEQUENT EVENTS

On July 30, 2009, Cartagena received a notice from the Spanish national energy regulator, CNE, stating its intention to invoice Cartagena for CO₂ allowances previously granted to Cartagena from 2007 through the first half of 2009. The impact to the Parent Company, if any, cannot be determined at this time. See further discussion in Note 8 — Contingencies and Commitments — Litigation.

On July 31, 2009, the Company secured $221 million in project financing and credit facilities for its 101 MW Armenia Mountain wind project located in Pennsylvania. Commercial operation is scheduled for the fourth quarter of 2009.

Subsequent events have been evaluated through August 6, 2009, the date of issuance of this Form 10-Q.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this Quarterly Report on Form 10-Q, the terms “AES,” “the Company,” “us,” or “we” refer to The AES Corporation and all of its subsidiaries and affiliates, collectively. The term “The AES Corporation” or “the Parent Company” refers only to the parent, publicly-held holding company, The AES Corporation, excluding its subsidiaries and affiliates.

Forward-Looking Information

The following discussion may contain forward-looking statements regarding us, our business, prospects and our results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those described in the “Risk Factors” section of our 2008 Form 10-K filed on February 26, 2009. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC that advise interested parties of the risks and factors that may affect our business.

The interim financial statements filed on this Form 10-Q and the discussions contained herein should be read in conjunction with our 2008 Form 10-K.

Overview of Our Business

We are a global power company. We operate two primary lines of business. The first is our Generation business, where we own and/or operate power plants to generate and sell power to wholesale customers such as utilities and other intermediaries. The second is our Utilities business, where we own and/or operate utilities to distribute, transmit and sell electricity to end-user customers in the residential, commercial, industrial and governmental sectors within a defined service area. The Utilities line of business also includes our integrated utilities that both distribute and generate electricity. Each of our primary lines of business generates approximately half of our revenues.

We are also continuing to expand our wind generation business and are pursuing additional renewable projects in solar and climate solutions. These initiatives are not material contributors to our operating results, but we believe that they may become material in the future. For additional information regarding our Business, see Item 1: Business in our 2008 Form 10-K.

Our Company is organized along our two lines of businesses in three regions: (1) Latin America & Africa; (2) North America and AES Wind Generation; and (3) Europe, Middle East & Asia (collectively “EMEA”), each managed by a regional president. AES Wind Generation is managed as part of our North America region while climate solutions projects are managed in the region in which they are located. With certain exceptions, the Company manages development efforts centrally through a development group. The Company recently realigned its accounting segments to reflect the structure described above. See Footnote 15 in the 2008 Form 10-K for a discussion of these segments.

Key Drivers of Our Results of Operations.    Our Generation and Utilities businesses are distinguished by the nature of their customers, operational differences, cost structure, regulatory environment, and risk exposure. As a result, each line of business has slightly different drivers which affect operating results. Performance drivers for our Generation businesses include, among other things, plant availability, reliability and efficiency, management of fixed and operational costs, management of working capital including collection of receivables,

43

and the extent to which our plants have hedged their exposure to currency and commodities such as fuel. For our Generation businesses which sell power under short-term contracts or in the spot market, the most crucial factors are the market price of electricity and the marginal cost of production. Growth in our Generation business is largely tied to securing new PPAs expanding capacity in our existing facilities, and building new power plants. Performance drivers for our Utilities businesses include, but are not limited to, reliability of service, negotiation of tariff adjustments, compliance with extensive regulatory requirements, management of working capital including collection of receivables, and in developing countries, reduction of commercial and technical losses. The results of operations of our Utilities businesses are sensitive to changes in economic growth and weather conditions in the areas in which they operate.

One of the key factors which affects our Generation business is our ability to enter into long-term contracts for the sale of electricity and the purchase of fuel used to produce that electricity. These contracts are intended to reduce the volatility associated with fuel prices and the price of electricity by fixing the revenues and costs for these businesses. The majority of the electricity produced by our Generation businesses is sold under long-term contracts, or PPAs, to wholesale customers. Approximately 73% of the revenues from our Generation businesses during the first half of 2009 were derived from plants that operate under PPAs of three years or longer for 75% or more of their output capacity. In turn, most of these businesses enter into long-term fuel supply contracts or fuel tolling contracts where the customer assumes full responsibility for purchasing and supplying the fuel to the power plant. While these long-term contractual agreements reduce exposure to volatility in the market price for electricity and fuel, the amount of earnings and cash flow predictability varies by business based on the extent to which facility’s generation capacity and fuel requirements are contracted and the negotiated terms of these agreements.

When fuel costs increase, many of our Generation businesses with long-term contracts and our Utilities businesses are able to pass these costs on to the customer through fuel pass-through or fuel indexing arrangements in their contracts or through increases in tariff rates. Therefore, in a rising fuel cost environment increases in fuel costs for these businesses often result in increases in revenue (though not necessarily on a one-for-one basis). Conversely, in a declining fuel cost environment, decreases in fuel costs can result in decreases in revenue. While these circumstances may not have a large impact on gross margin, they can significantly affect gross margin as a percentage of revenue.

Diversification also helps us to mitigate some operational risks. Our portfolio employs a broad range of fuels, including coal, gas, fuel oil and renewable sources such as hydroelectric power, wind and solar, which reduces the risks associated with dependence on any one fuel source. Our presence in mature markets helps reduce the volatility associated with our businesses in faster-growing emerging markets. In addition, as noted above, our Generation portfolio is largely contracted, which reduces the risk related to the market prices of electricity and fuel. We also attempt to limit risk by hedging certain currency and commodity risk, and by matching the currency of most of our subsidiary debt to the revenue of the business that issued that debt. However, we only hedge a portion of our currency and commodity risks, and our businesses are still subject to these risks, as further described in the 2008 Form 10-K, Item 1A – Risk Factors, “We may not be adequately hedged against our exposure to changes in commodity prices or interest rates” and “Our financial position and results of operations may fluctuate significantly due to fluctuations in currency exchange rates experienced at our foreign operations.”

Another key driver of our results is our ability to bring new businesses into commercial operations successfully. We currently have an aggregate of 3,156 MW of projects under construction in 10 countries. Our prospects for increases in operating results and cash flows are dependant upon successful completion of these projects on time and within budget. However, as disclosed in the 2008 Form 10-K, Item 1A – Risk Factors, “Our business is subject to substantial development uncertainties,” construction is subject to a number of risks, including risks associated with siting, financing and permitting, and our ability to meet construction milestones. Delays or inability to complete projects can result in increased costs, impairment of assets and other challenges involving partners and counterparties to our construction agreements, PPAs, and other agreements.

Our gross margin is also impacted by the fact that in each country where we conduct business, we are subject to extensive and complex governmental regulations which affect most aspects of our business, such as

44

regulations governing the generation and distribution of electricity, and environmental regulations. Regulations differ on a country by country basis (and even at the state and local levels) and are based upon the type of business we operate in a particular country, and affect many aspects of our operations and development projects. Our ability to negotiate tariffs, enter into long-term contracts, pass through capital expenditures and otherwise navigate these regulations can have an impact on our revenues, costs, and gross margin. While not currently material to our operations, environmental and land use regulations, including proposed regulation of carbon emissions, could substantially increase our capital expenditures or other compliance costs, which could in turn have a material adverse affect on our business and results of operations. For a further discussion of the Regulatory Environment, see Note 8 – Contingencies and Commitments – Environmental, included in Item 1 of this Form 10-Q and our 2008 Form 10-K: Item 1: Business – Regulatory Matters – Environmental and Land Use Regulations; Item 1A: Risk Factors – Risks Associated with Government Regulation and Laws.

Other factors that can affect our financial results include gains/losses from the sale of businesses, incurrence and release of legal/regulatory/tax reserves, and impairments.

Key Drivers of Results in the Second Quarter

As described further below, during the quarter ended June 30, 2009, our results of operations, including the key metrics set forth below, were impacted by factors including:

• Foreign currency losses on our international business operations;

• Spot market prices

• Fluctuations in fuel and other commodity prices, including the impact of derivative transactions; and

• Decreases in demand (as measured by volume) at certain of our businesses.

During the first six months of 2009, we have been able to address these challenges through its fuel and geographic diversification, operational improvements at certain businesses, improvements in the management of working capital, and cost reductions including development expense. During the second quarter, we also incurred a lower effective tax rate primarily from a tax benefit recorded upon the release of a valuation allowance at a U.S. and Brazilian subsidiary, we recognized a significant gain from the termination of a management agreement and we settled a legal claim of a European affiliate.

However, as a result of the macroeconomic challenges described above (and other factors described below), our gross margin has declined by 18% for the three months ended June 30, 2009 and 16% for the six months ended June 30, 2009. Management believes that the challenges described above may continue for some period of time, and will continue to seek ways to mitigate the effects of the global recession. However, there can be no assurance regarding our ability to do so in future periods. For example, during the second quarter of 2009, low natural gas prices caused a reduction in electricity prices which have placed pressure on certain North American coal-fired plants. At the same time, our gas-fired plants in countries such as Chile have benefited from low gas prices, which have helped that business expand margins and volume. The ability of these gas-fired plants to continue this performance (and mitigate the challenges described above) depends on access to fuel, continued plant availability, weather and other factors which may not recur in future periods. For further discussion of the impact of the global recession on our business, please see “Management’s Discussion and Analysis — Key Trends and Uncertainties — Global Recession” in this Form 10-Q.

	Three Months Ended June 30,								Six Months Ended June 30,
	2009			2008			% Change		2009			2008			% Change
	($’s in millions, except per share amounts)								($’s in millions, except per share amounts)
Revenue	$	3,495		$	4,126		-15	%	$	6,873		$	8,207		-16	%
Gross margin	$	847		$	1,029		-18	%	$	1,730		$	2,071		-16	%
Gross margin as a % of revenue		24	%		25	%				25	%		25	%
Net income attributable to The AES Corporation	$	303		$	903		-66	%	$	521		$	1,136		-54	%
Net cash provided by operating activities	$	495		$	314		58	%	$	871		$	784		11	%

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Our second quarter financial results include the following highlights:

Revenue

Revenue decreased $631 million, or 15%, to $3.5 billion for the three months ended June 30, 2009 compared with the same period in 2008. The unfavorable impact of foreign currency of $520 million, largely driven by the Brazilian Real, the impact of lower energy prices at our generation business in Chile and a decrease in wholesale prices in North America contributed to an overall decrease in revenue for the quarter.

Revenue decreased $1.3 billion, or 16%, to $6.9 billion for the six months ended June 30, 2008 compared with the same period in 2008 primarily due to the unfavorable impact of foreign currency of $1.1 billion, largely driven by the Brazilian Real, and generation rates and volume in Latin America partially offset by the contribution of our new business in Asia.

Gross Margin

Gross margin decreased $182 million, or 18%, to $847 million for the three months ended June 30, 2009 compared with the same period in 2008 primarily due to the unfavorable impact of foreign currency of $101 million and mark-to-market derivative adjustments of certain commodity contracts partially offset by improved operations at our Latin America generation businesses and the impact of new businesses in Asia.

Gross margin decreased $341 million, or 16%, to $1.7 billion for the six months ended June 30, 2009 compared with the same period in 2008 primarily due to the unfavorable impact of foreign currency of $238 million and mark-to-market derivative adjustments of certain commodity contracts and the lack of contribution from the Kazakhstan businesses sold in May 2008 partially offset by improved operations in Latin America and Asia.

The Company’s gross margin may continue to be significantly impacted by global macroeconomic conditions such as the volatility in currency exchange rates and commodity prices for fuel and other resources that we use in our business and reduced demand.

Gross margin as a percentage of revenue for the three and six months ended June 30, 2009 compared with the same period in 2008 remained relatively flat at 24% and 25%, respectively. Please refer to Segment Analysis for further discussion of gross margin as a percentage of revenue for each of our reportable segments.

Net Income Attributable to The AES Corporation

Net income attributable to The AES Corporation decreased $600 million or 66% to $303 million for the three months ended June 30, 2009 compared with the same period in 2008. The decrease was primarily attributable to the following events that occurred in 2008. In 2008, the Company recognized a net gain of $908 million from the sale of two wholly-owned subsidiaries in Kazakhstan, AES Ekibastuz (“Ekibastuz”) and Maikuben West LLP (“Maikuben”) which occurred in May 2008, which was partially offset by $144 million additional tax expense on the repatriation of a portion of the sale proceeds. Additionally in 2008, the Company recognized net pre-tax gains on mark-to-market derivative adjustments of $89 million, but also incurred expenses of $55 million related to a corporate debt refinancing. These items were partially offset in 2009 by the recognition of an additional gain on the Kazakhstan sale upon the termination of the management agreement of $98.5 million and the favorable impact of foreign currency largely from transaction gains in Chile and the Philippines.

Net income attributable to The AES Corporation decreased $615 million or 54% to $521 million for the six months ended June 30, 2009 compared with the same period in 2008. This decrease was primarily attributable to the 2008 events described above. In addition, in 2008 impairment charges were recognized in Africa, Asia and Latin America as further described in Impairment expenses. These items were partially offset by a performance incentive bonus recognized in 2009 of $80 million for management services provided to the Kazakhstan

46

businesses following their sale in May 2008; and the $98.5 million gain from the termination of the management agreement described above.

In 2008, the $908 million gain recognized on the sale of our two Northern Kazakhstan businesses had a significant impact on net income attributable to The AES Corporation. However, while the Company engages in the sale of assets and businesses from time to time, the gain or loss recognized in any such sale will depend on a number of factors related to the asset or business that may be sold. Therefore the Company does not expect that the increase in net income attributable to The AES Corporation which occurred between 2007 and 2008, will continue in future periods nor does it expect that the decline in net income between 2008 and 2009 will continue in future periods.

Net Cash Provided By Operating Activities

Net cash provided by operating activities increased $181 million, or 58% to $495 million for the three months ended June 30, 2009 compared to the same period in 2008 despite the decrease in net income of $629 million to $531 million for the three months ended June 30, 2009. As previously described, the Company recognized a gain of $908 million associated with the sale of Ekibastuz and Maikuben in 2008. This resulted in significant income recognized without a corresponding increase in operating cash flows. These proceeds are reflected as net cash provided by investing activities. The increase in net cash provided by operating activities was primarily due to improved working capital management, which resulted in an improvement in cash provided by operating activities of $156 million at our Latin America Generation businesses, $89 million at Corporate and other, $47 million at our Europe Generation businesses, of which $80 million was the receipt of the 2008 performance incentive bonus for the management of Ekibastuz and Maikuben recognized in the first quarter of 2009, and $27 million at our Africa Generation businesses. These increases were offset by decreases of $86 million at our Latin America Utilities businesses, primarily due to lower cash earnings and increased employer pension contributions, and $62 million at our Asia Generation businesses due to higher working capital requirements.

While net income decreased $536 million to $1,032 million for the six months ended June 30, 2009, net cash provided by operating activities increased $87 million, or 11%, to $871 million compared with $784 million for the same period in 2008. This increase was primarily due to improved working capital at our subsidiaries. For further discussion, see Consolidated Cash Flows – Operating Activities.

Management’s Priorities

Management continues to focus on the following priorities:

– Maintaining sufficient liquidity as further described in “Liquidity and Capital Resources” described below.

– Improvement of operations in the existing portfolio.

– Completion of more than 3,000 MW construction program on time and within budget. During the quarter, the Company stopped construction on its Campiche Plant, as further described in “Operational Challenges” below.

– Integration of new projects. During the quarter the following projects commenced commercial operations:

Project	Location	Fuel	Gross MW	AES Equity Interest (Percent, Rounded)
Santa Lidia	Chile	Diesel	130	71	%
Kilroot OCGT	United Kingdom	Gas	80	99	%
InnoVent (1)	France	Wind	12	40	%

⁽¹⁾ InnoVent is an equity method investment of AES.

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– The Company currently expects eight generation projects totaling 835 MW to come on-line over the remainder of 2009 including Amman East in Jordan (380 MW); Guacolda 3 in Chile (152 MW), which commenced commercial operations on July 31, 2009; Dibamba in Cameroon (86 MW); Armenia Mountain, a wind project in Pennsylvania (101 MW) and other wind generation projects in China, France and Scotland (116 MW).

– Investing excess cash to its highest and best use, including establishment of low-cost development options, reduction of debt, stock repurchases and expanding cash balances.

Key Trends and Uncertainties

Global Recession

The current global economic slowdown has caused unprecedented market illiquidity, widening credit spreads, volatile currencies, illiquidity, and increased counterparty credit risk. Despite these challenges, management currently believes that it can meet its liquidity requirements through a combination of existing cash balances, cash provided by operating activities, financings, and, if needed, borrowings under its secured and unsecured facilities. Although there can be no assurance due to the challenging times currently faced by financial institutions, management believes that the participating banks under its facilities will be able to meet their funding commitments.

The Company is subject to credit risk, which includes risk related to the ability of counterparties (such as parties to our power purchase agreements, fuel supply agreements, our hedging agreements, and other contractual arrangements) to deliver contracted commodities or services at the contracted price or to satisfy their financial or other contractual obligations. While counterparty credit risk has increased in the current crisis and there can be no assurances regarding the future, the Company has not suffered any material effects related to its counterparties for the quarter ended June 30, 2009.

The global economic slowdown could also result in a decline in the value of our assets including the businesses we operate, equity investments and projects under development, which could result in impairments that could be material to our operations. For example, during the fourth quarter of 2008, and in response to the financial market crisis, the Company reviewed and prioritized the projects in its development pipeline and consequently recognized an impairment charge of approximately $75 million ($34 million, net of noncontrolling interests and income taxes). The Company did not realize material impairment charges during the first or second quarters of 2009. However in the future, we may be required to adjust to fair value and record an impairment of certain of our assets if any of the following events occur: a significant adverse change in business climate or legal factors, an adverse action or assessment by a regulator, sale of assets at below book value, unanticipated competition, a loss of key personnel or our acquisitions do not perform as expected. The likelihood of the occurrence of these events may increase as a result of the credit crisis and deteriorating global macroeconomic conditions.

A decline in asset value could also result in a material increase in our obligations. For instance, certain subsidiaries have defined benefit pension plans. The Company periodically evaluates the value of the pension plan assets to ensure that they will be sufficient to fund their respective pension obligations. Given the declines in worldwide asset values, we are expecting an increase in pension expense and funding requirements in future periods, which may be material.

In addition, volatility in foreign currency exchange rates has had an impact on the Company’s financial results. For example, in the second quarter of 2009, our gross margin declined by $182 million compared to the same period last year, of which $238 million was due to foreign currency translation losses. If the current volatility in foreign currencies continues, our gross margin and other financial metrics could be adversely affected. It is also possible that commodity or power price volatility could impact our financial metrics. For

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example, as further discussed in Item 3. Quantitative and Qualitative Disclosures About Market Risk – Commodity Price Risk, we estimate that a 10% decline in power prices related to our U.S. operations alone would result in an estimated reduction in gross margin of $5 million. Foreign operations may also be impacted by volatility in currency and commodity prices.

To date, other than the impacts described above, the global economic slowdown has not significantly impacted the Company. However, in the event that the credit crisis and macroeconomic conditions deteriorate further, or continue for a prolonged period, there could be a material adverse impact on the Company. The Company could be materially affected if such events or other events occur such that participating lenders under its secured and unsecured facilities fail to meet their commitments, or the Company is unable to access the capital markets on favorable terms or at all, is unable to raise funds through the sale of assets, or is otherwise unable to finance or refinance its activities, or if capital market disruptions result in increased borrowing costs (including with respect to interest payments on the Company’s variable rate debt). The Company could also be adversely affected if the foregoing effects are exacerbated or general economic or political conditions in the markets where the Company operates deteriorate, resulting in a reduction in cash flow from operations, a reduction in the availability and/or an increase in the cost of capital, a reduction in the value of currencies in these markets relative to the U.S. dollar (which could cause currency losses), an increase in the price of commodities used in our operations and construction, or if the value of its assets remain depressed or decline further. Any of the foregoing events or a combination thereof could have a material impact on the Company, its results of operations, liquidity, financial covenants, and/or its credit rating.

Regulatory Environment

As disclosed in the Company’s 2008 Form 10-K and its Form 10-Q for the three months ended March 31, 2009, the Company faces certain risks related to potential GHG legislation or regulations, including risks related to increased capital expenditures or other compliance costs which could have a material adverse effect on certain of our U.S. or international subsidiaries and our consolidated results of operations.

During the quarter ended June 30, 2009, a key development in the area of GHG legislation was the passage of H.R. 2454, “The American Clean Energy and Security Act of 2009 (“ACESA”)” by the U.S. House of Representatives on June 26, 2009. The Senate is expected to consider its own version of climate change legislation later this year and several key Senate committees have begun hearings on energy and GHG legislation. Any legislation passed by the Senate will need to be reconciled with H.R. 2454, and both the House and Senate would then need to approve such reconciled legislation before it can become law.

As currently proposed, ACESA contemplates a nationwide cap and trade program to reduce U.S. emissions of CO₂ and other greenhouse gases starting in 2012. Key features of ACESA include, among other things:

• A planned target to reduce by 2020 GHG emissions by 17% from 2005 levels and to reduce GHG emissions by 83% from 2005 levels by 2050.

• A requirement that certain GHG emitting companies, including most power generators, surrender on an annual basis one ton of CO₂ equivalent allowances or GHG offset credits for each ton of annual CO₂ equivalent emissions. Such companies will be required to meet allowance surrender requirements via the allocations of free allowances if available from the U.S. Environmental Protection Agency (“EPA”) or purchases in the open market at auctions if free allowances are not allocated, or otherwise.

• A mechanism under which the EPA would initially issue a capped and steadily declining number of tradable free emissions allowances to certain sections of affected industries, including certain generators and utilities in the electricity sector, with such free distribution of allowances to the electricity sector phasing out over a five year period from 2026 through 2030.

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• A provision permitting up to two billion tons of GHG offset credits in the aggregate, if available, to be purchased annually by all emitters to satisfy the requirements above.

• A provision precluding the EPA from regulating GHG emissions under the existing provisions of the Clean Air Act.

• A temporary prohibition on the implementation of similar State or regional GHG cap and trade programs, with a six year moratorium (2012 to 2017) on the implementation or enforcement of similar GHG emission caps.

• The establishment of a combined energy efficiency and renewable electricity standard (“RES”) that would require retail electric utilities to receive 6% of their power from renewable sources by 2012, with such requirement increasing to 20% by 2020. In certain circumstances, a portion of this requirement for renewable energy could be satisfied through measures intended to increase energy efficiency.

At this time, if ACESA were to be enacted into law its impact on the Company’s consolidated results of operations could not be accurately predicted because of a number uncertainties with respect to the specific implementation of such legislation, including, among other provisions, the provisions set forth in ACESA related to:

• The number of free allowances that will be allocated to subsidiaries of the Company.

• The cost to purchase allowances in an auction or on the open market, and the cost of purchasing GHG offset credits.

• The extent to which our utility business (IPL) will be able to recover compliance costs from its customers.

• The benefits to our renewables businesses from the RES provision, if any.

• The benefits to our climate solutions projects from the potentially increased demand for GHG offset credits arising from climate change legislation, if any.

• The benefits from the temporary moratorium on state or regional GHG cap and trade programs, if any.

In light of the substantial uncertainties noted above, the Company is currently unable to make a reasonable estimate of the potential costs associated with ACESA. At this time there is also substantial uncertainty as to whether the Senate will pass climate change legislation and whether any such legislation will be reconciled with ACESA and ultimately enacted into law. However, the Company believes that it is reasonably possible that the final provisions of any federal GHG legislation that is enacted into law or further State or regional GHG legislation that is enacted into law will impose costs on the Company which could be material to our consolidated results of operations. U.S. based operations account for 21% of the Company’s revenue for the six months ended June 30, 2009.

As disclosed in the Company’s 2008 Form 10-K, our subsidiaries conduct business in a number of countries which have ratified the Kyoto Protocol, which is currently expected to expire at the end of 2012. A United Nations climate conference called COP 15 has been planned for December of 2009 in Copenhagen, Denmark. The conference is expected to include environmental ministers and other government officials from over 100 countries to discuss a new international agreement that would succeed Kyoto. However, there are a number of uncertainties and challenges regarding these discussions, including, among other factors, the difficulties of negotiating burden-sharing between developing and wealthier nations. In light of these uncertainties, it is difficult to predict whether a successor agreement to the Kyoto Protocol will be adopted and the impact to the Company of any such agreement.

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Operational Challenges

Our operations continue to face many risks as previously discussed in the Company’s 2008 Form 10-K with Item 1A: Risk Factors. We continue to monitor our operations and address challenges as they arise:

As previously discussed under the 2008 Form 10-K Risk Factor – Risks Associated with our Operations – Our acquisitions may not perform as expected, the Company continued to evaluate its Masinloc operations, which were acquired in April 2008. The Company completed a goodwill impairment test of the Masinloc reporting unit as of March 31, 2009 and concluded that no impairment existed. In the second quarter of 2009 we continued to monitor Masinloc’s operations noting no impairment indicators. The Company will continue to monitor Masinloc’s operating results and business outlook to identify any changes that could indicate a potential impairment. As of June 30, 2009 the book value of Masinloc’s goodwill was approximately $57 million.

As discussed under the Risk Factor - Risk Associated with our Operations – Our business is subject to substantial development uncertainties, our development projects are subject to uncertainties. On June 22, 2009, the Supreme Court of Chile invalidated an environmental permit granted on May 9, 2008 by the Chilean regulatory authorities for the Campiche Project, a 270 MW gross coal plant located in Ventanas, Chile which started construction upon approval of the environmental permit. We indirectly own a 71% interest in Empresa Electrica Campiche S.A. (“Campiche”) through our subsidiary AES Gener (“Gener”), the second largest generator of electricity in Chile. As a result of the Supreme Court’s ruling against the local permitting authority, Gener has suspended work on Campiche, which was previously expected to commence commercial operations in the second quarter of 2011. Construction on the project would resume when a solution has been implemented which complies with all applicable laws. Campiche has issued to the EPC contractor a notification of Force Majeure under the relevant construction contract. The EPC contractor has disputed such declaration of Force Majeure by Campiche. Management believes it is probable that the Campiche project will be completed. However, if Gener is unable to complete the project, AES may be required to record an impairment of Campiche proportional to its indirect ownership, which could have a material impact on earnings in the period in which it is recorded. Based on cash investment through June 30, 2009 and potential termination costs, Gener could incur an impairment of approximately $186 million. In the event an impairment is taken with regard to the project, the amount of such impairment will depend on a number of factors, including our ability to recover project costs. In addition, Empresa Electrica Ventanas S.A., a 270 MW gross coal plant under development in Ventanas, is reviewing the potential effects, if any, that the decision of the Supreme Court could have on the Nueva Ventanas project.

Second Quarter Events

On April 2, 2009, the Parent Company issued $535 million aggregate principal amount of 9.75% senior unsecured notes (“the Senior Notes”) due 2016. The notes were priced at a discount to yield 11%. The Parent Company intends to use the net proceeds from the sale of the notes for general corporate purposes, including, but not limited to, refinancing debt or providing working capital. Subsequently, the Parent Company allocated a substantial portion of the proceeds to voluntarily reduce the size of its $600 million senior unsecured credit facility by $465 million. The remaining $135 million under the senior unsecured credit facility consists of letters of credit, the majority of which supports several projects currently under construction.

On April 8, 2009, Gener issued $196 million aggregate principal amount of 8% unsecured notes in the Chilean market. The unsecured notes were issued in the Chilean market at a discount resulting in a yield of 8.5%. The proceeds from this issuance will be used to provide Gener’s funding requirements for projects currently under construction.

In March 2009, the Company reached an agreement with Kazakhmys PLC (“Kazakhmys”) to terminate the management agreement signed at the time Ekibastuz and Maikuben were sold to Kazakhmys in May 2008 for $1.1 billion. Under the original terms of the management agreement, the Company would have continued to manage and operate Ekibastuz and Maikuben through 2010. As part of the management termination agreement,

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AES agreed to transition the management of the businesses to Kazakhmys over a period of 100 days from March 13, 2009. The transition period ended June 21, 2009 and at that time the management of Ekibastuz and Maikuben became the responsibility of Kazakhmys. Additionally, the termination agreement provided for an $80 million management performance incentive bonus as compensation for the management services provided by AES in 2008. This was recognized as other income in the first quarter of 2009 for which cash payment was received in April 2009. The termination agreement also provided for an additional $102 million payment, primarily related to the termination of the management agreement, payable to AES in January 2010.

In May 2009, Kazakhmys provided an irrevocable standby letter of credit to AES of $102 million to secure the final payment. The payment of the final component of the management termination agreement is not contingent upon any future events. As a result, the Company recognized an additional gain on sale of investments of approximately $98.5 million in the second quarter of 2009. For further description, please refer to Note 14 — Acquisitions and Dispositions in the condensed consolidated financial statements included in Item 1 of this Form 10-Q.

AES holds a 71% ownership interest in AES Energia Cartagena (“Cartagena”), a VIE, in which the Company is not the primary beneficiary. The Company’s investment in Cartagena is a combination of common stock and participative loans. In June 2009, Cartagena received a cash settlement of $53 million for liquidated damages including legal costs incurred related to the construction delay from December 2005 to November 2006 of the 1,200 MW generation plant in Cartagena, Spain. Cartagena used the settlement proceeds to repay a portion of the participative loans outstanding to its investors including AES. In June 2009, the Company received its proportionate share of the settlement, $35 million, which was recognized as “net equity in earnings of affiliates” as the distribution was in excess of the Company’s current investment balance of zero and AES does not have an obligation or intent to fund future cash flow requirements of Cartagena.

In June 2009, the Company secured $39.5 million in project financing to fund its 34.5 MW St. Patrick wind project in France. St. Patrick will bring AES Wind Generation’s global capacity to more than 1,300 MW when it reaches full commercial operation expected during the third quarter of 2009. St. Patrick will sell electricity generated by the wind project to Électricité de France, the French national utility, under a 15-year PPA.

Recent Developments

On July 31, 2009, the Company secured $221 million in project financing and credit facilities for its 101 MW Armenia Mountain wind project located in Pennsylvania. Commercial operation is scheduled for the fourth quarter of 2009.

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Consolidated Results of Operations

	Three Months Ended June 30,											Six Months Ended June 30,
RESULTS OF OPERATIONS	2009			2008			$ change			% change		2009			2008			$ change			% change
	($’s in millions, except per share amounts)											($’s in millions, except per share amounts)
Revenue:
Latin America Generation	$	895		$	1,177			$    (282)		-24	%	$	1,786		$	2,383			$    (597)		-25	%
Latin America Utilities		1,367			1,577			(210	)	-13	%		2,581			3,040			(459	)	-15	%
North America Generation		475			538			(63	)	-12	%		977			1,089			(112	)	-10	%
North America Utilities		261			267			(6	)	-2	%		551			516			35		7	%
Europe Generation		152			268			(116	)	-43	%		356			572			(216	)	-38	%
Asia Generation		337			301			36		12	%		584			613			(29	)	-5	%
Corporate and Other (1)		8			(2	)		10		500	%		38			(6	)		44		733	%
Total Revenue		3,495			4,126			(631	)	-15	%		6,873			8,207			(1,334	)	-16	%
Gross Margin:
Latin America Generation		335			319			16		5	%		707			718			(11	)	-2	%
Latin America Utilities		175			254			(79	)	-31	%		346			479			(133	)	-28	%
North America Generation		122			242			(120	)	-50	%		242			402			(160	)	-40	%
North America Utilities		51			61			(10	)	-16	%		121			113			8		7	%
Europe Generation		27			64			(37	)	-58	%		95			179			(84	)	-47	%
Asia Generation		77			40			37		93	%		124			88			36		41	%
Total Corporate and Other (2)		(28	)		(50	)		22		44	%		(78	)		(105	)		27		26	%
Interest expense		(383	)		(469	)		86		18	%		(774	)		(904	)		130		14	%
Interest income		90			133			(43	)	-32	%		188			249			(61	)	-24	%
Other expense		(30	)		(85	)		55		65	%		(52	)		(110	)		58		53	%
Other income		22			150			(128	)	-85	%		244			195			49		25	%
Gain on sale of investments		102			908			(806	)	-89	%		115			912			(797	)	-87	%
Impairment expense		(1	)		(25	)		24		96	%		(1	)		(72	)		71		99	%
Foreign currency transaction (losses) gains on net monetary position		27			(85	)		112		132	%		(12	)		(63	)		51		81	%
Other non-operating expense		-			-			-		0	%		(10	)		-			(10	)	-100	%
Income tax expense		(105	)		(318	)		213		67	%		(280	)		(557	)		277		50	%
Net equity in earnings of affiliates		50			20			30		150	%		57			42			15		36	%
Income from continuing operations		531			1,159			(628	)	-54	%		1,032			1,566			(534	)	-34	%
Income from operations of discontinued businesses		-			1			(1	)	-100	%		-			3			(3	)	-100	%
Loss from disposal of discontinued businesses		-			-			-		0	%		-			(1	)		1		100	%
Net income		531			1,160			(629	)	-54	%		1,032			1,568			(536	)	-34	%
Noncontrolling interest		(228	)		(257	)		29		11	%		(511	)		(432	)		(79	)	-18	%
Net income attributable to The AES Corporation	$	303		$	903		$	(600	)	-66	%	$	521		$	1,136		$	(615	)	-54	%
PER SHARE DATA:
Basic income per share from continuing operations	$	0.45		$	1.34		$	(0.89	)	-66	%	$	0.78		$	1.69		$	(0.91	)	-54	%
Diluted income per share from continuing operations	$	0.45		$	1.31		$	(0.86	)	-66	%	$	0.78		$	1.65		$	(0.87	)	-53	%

⁽¹⁾ Corporate and Other includes revenue from our generation and utilities businesses in Africa, utilities businesses in Europe, AES Wind and other renewables projects and inter-segment eliminations of revenue related to transfers of electricity from Tietê (generation) to Eletropaulo (utility).

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⁽²⁾ Total Corporate and Other includes the gross margin from our generation and utilities businesses in Africa, utilities businesses in Europe and AES Wind and other renewables projects, development costs, corporate general and administrative expenses as well as certain inter-segment eliminations, primarily corporate charges for self insurance premiums.

Revenue

Revenue decreased $631 million, or 15%, to $3.5 billion for the three months ended June 30, 2009 compared with the same period in 2008. Excluding the unfavorable impact of foreign currency translation of $520 million, largely driven by the Brazilian Real, which accounted for $344 million of the impact, revenue decreased $111 million. This was a result of the decrease at our generation businesses in Latin America of $203 million primarily due to the impact of lower energy prices offset by increases in net volume at Gener. In addition, wholesale prices decreased at our North America generation plants during the quarter. These decreases were partially offset by higher tariffs of $39 million at our Brazilian utilities and improved operations at Masinloc in the Philippines of $56 million.

Revenue decreased $1.3 billion, or 16%, to $6.9 billion for the six months ended June 30, 2009 compared with the same period in 2008. Excluding the unfavorable impact of foreign currency of $1.1 billion, largely driven by the Brazilian Real, which accounted for $751 million of the impact, revenue decreased $225 million primarily due to the impact of lower energy prices at Gener and a reduction in volume at Uruguaiana. The decrease was partially offset by higher tariffs of $117 million at our Brazilian utilities and the impact of our new businesses in Asia of $158 million.

Gross Margin

Gross margin decreased $182 million, or 18%, to $847 million for the three months ended June 30, 2009 compared with the same period in 2008. Excluding the unfavorable impact of foreign currency translation of $101 million, gross margin decreased $81 million. This decrease was primarily the result of increased fixed costs, primarily in Latin America and a reduction in net mark-to-market derivative gains on certain commodity contracts of $84 million at our North America generation subsidiaries. These decreases were partially offset by improved operating margins at our Latin America generation businesses of $57 million, mainly at Gener. Additionally our results in Asia increased $43 million reflecting operational improvements at Masinloc.

Gross margin decreased $341 million, or 16%, to $1.7 billion for the six months ended June 30, 2009 compared with the same period in 2008. Excluding the unfavorable impact of foreign currency translation of $238 million, gross margin decreased $103 million. The decrease was largely a result of a reduction in the mark-to-market derivative gains of $91 million, increased fixed costs, primarily in Latin America and the lack of contribution from the Kazakhstan businesses sold in May 2008 of $41 million. These were partially offset by the improved operations at our generation businesses in Latin America, primarily at Gener, and an increase of $48 million in Asia largely due to the impact of our new businesses, Masinloc and Amman East in Jordan.

Gross margin as a percentage of revenue for the three and six months ended June 30, 2009 compared with the same period in 2008 remained essentially flat at 24% and 25%, respectively. Please refer to Segment Analysis for further discussion of gross margin as a percentage of revenue for each of our reportable segments.

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Segment Analysis

Latin America

The following table summarizes revenue and gross margin for our Generation segment in Latin America for the periods indicated:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2009		2008		% Change	2009		2008		% Change
	(in millions)					(in millions)
Latin America Generation
Revenue	$	895	$	1,177	-24%	$	1,786	$	2,383	-25%
Gross Margin	$	335	$	319	5%	$	707	$	718	-2%
Gross Margin as a % of Segment Revenue		37%		27%			40%		30%

Generation revenue for the three months ended June 30, 2009 decreased $282 million, or 24%, compared to the three months ended June 30, 2008 primarily due to lower spot and contract prices at Gener in Chile and our businesses in the Dominican Republic of $129 million and $18 million, respectively, and lower spot prices at our businesses in Argentina of $25 million. The decrease was also due to the unfavorable impact of foreign currency translation of $79 million in Brazil and Argentina, lower volume at Uruguaiana in Brazil of $43 million due to the renegotiation of its power sales agreements in 2009 and lower volume at our businesses in the Dominican Republic of $30 million. These decreases were partially offset by a net increase in volume at Gener of $60 million driven by the unfavorable impact in 2008 of gas curtailments in Argentina.

Generation gross margin for the three months ended June 30, 2009 increased $16 million, or 5%, compared to the three months ended June 30, 2008 primarily due to an increase at Gener of $94 million from an increase in the volume of spot sales driven by the unfavorable impact in 2008 of gas curtailments in Argentina, a decrease in fuel prices and savings from the use of more efficient fuel. These increases were partially offset by the unfavorable impact of foreign currency translation of $41 million in Brazil and Argentina, lower spot prices at our businesses in Argentina of $26 million and lower spot and contract prices at Gener of $25 million. The favorable impacts to gross margin, primarily driven by the decrease in fuel prices and use of more efficient fuel, combined with the decrease in generation revenue, in particular at Gener, resulted in an increase in gross margin as a percentage of segment revenue from 27% for the three months ended June 30, 2008 to 37% for the three months ended June 30, 2009.

Generation revenue for the six months ended June 30, 2009 decreased $597 million, or 25%, compared to the six months ended June 30, 2008 primarily due to lower spot and contract prices at Gener of $258 million. Also contributing to the decrease was the unfavorable impact of foreign currency translation of $155 million at our businesses in Brazil and Argentina, lower volume at Uruguaiana of $92 million as a result of the renegotiation of its power sales agreements in 2009 and lower prices and volume at our businesses in the Dominican Republic and Argentina of $71 million and $34 million, respectively. These decreases were partially offset by higher volume at Gener of $27 million.

Generation gross margin for the six months ended June 30, 2009 decreased $11 million, or 2%, compared to the six months ended June 30, 2008 primarily due to a decrease of $125 million due to lower spot and contract prices at Gener partially offset by a decrease in fuel prices, the unfavorable impact of foreign currency translation of $93 million in Brazil and Argentina, higher purchased energy prices at Uruguaiana of $50 million and higher fuel prices at our businesses in Argentina of $46 million. These decreases were partially offset by lower purchases of energy and fuel at Gener of $157 million, a reduction in purchased energy at Uruguaiana of $77 million, and the favorable impact at Uruguaiana of a decrease in bad debt expense of $54 million, largely a result

55

of the renegotiation of its power sales agreements in 2009. These favorable impacts to gross margin, primarily driven by the decrease in fuel prices and the decrease in bad debt expense, combined with the decrease in generation revenue, in particular at Gener and Uruguaiana, resulted in an increase in gross margin as a percentage of segment revenue, despite the overall decrease in gross margin, from 30% for the six months ended June 30, 2008 to 40% for the six months ended June 30, 2009.

The following table summarizes revenue and gross margin for our Utilities segment in Latin America for the periods indicated:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2009		2008		% Change	2009		2008		% Change
	(in millions)					(in millions)
Latin America Utilities
Revenue	$	1,367	$	1,577	-13%	$	2,581	$	3,040	-15%
Gross Margin	$	175	$	254	-31%	$	346	$	479	-28%
Gross Margin as a % of Segment Revenue		13%		16%			13%		16%

Utilities revenue for the three months ended June 30, 2009 decreased $210 million, or 13%, compared to the three months ended June 30, 2008 primarily due to the unfavorable impact of foreign currency translation of $297 million, primarily at our businesses in Brazil. This decrease was partially offset by higher tariffs in Brazil of $39 million and higher purchased energy costs which are passed through to the customer of $48 million in El Salvador.

Utilities gross margin for the three months ended June 30, 2009 decreased $79 million, or 31%, compared to the three months ended June 30, 2008 primarily due to an increase in fixed costs at Eletropaulo in Brazil of $67 million primarily related to higher bad debt expense, contingencies and pension costs, unfavorable impact of foreign currency translation in Brazil of $38 million and lower volume at Sul in Brazil of $18 million. These decreases were partially offset by higher tariffs in Brazil of $28 million and an increase of $24 million from lower purchased energy prices, primarily driven by a reduction in volume as a result of the renegotiation of the PPA between Uruguaiana and Sul in Brazil. The unfavorable impacts to gross margin resulted in a decrease in gross margin as a percentage of segment revenue from 16% for the three months ended June 30, 2008 to 13% for the three months ended June 30, 2009 primarily due to higher fixed costs in Brazil.

Utilities revenue for the six months ended June 30, 2009 decreased $459 million, or 15%, compared to the six months ended June 30, 2008 primarily due to the unfavorable impact of foreign currency translation of $643 million, primarily in Brazil. This decrease was partially offset by higher tariffs in Brazil of $117 million and higher purchased energy costs which are passed through to the customer of $54 million in El Salvador.

Utilities gross margin for the six months ended June 30, 2009 decreased $133 million, or 28%, compared to the six months ended June 30, 2008 primarily due to the unfavorable impact of foreign currency translation of $90 million, primarily in Brazil, an $84 million increase in fixed costs at Eletropaulo driven primarily by higher pension costs, labor contingencies and bad debt expense in addition to a decrease in volume across the region of $73 million. These decreases were partially offset by higher tariffs of $75 million and an increase of $54 million from lower purchased energy prices, primarily driven by a reduction in volume as a result of the renegotiation of the PPA between Uruguaiana and Sul. The unfavorable impacts to gross margin resulted in a decrease in gross margin as a percentage of segment revenue from 16% for the six months ended June 30, 2008 to 13% for the six months ended June 30, 2009 primarily due to higher fixed costs in Brazil.

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North America

The following table summarizes revenue and gross margin for our Generation segment in North America for the periods indicated:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2009		2008		% Change	2009		2008		% Change
	(in millions)					(in millions)
North America Generation
Revenue	$	475	$	538	-12%	$	977	$	1,089	-10%
Gross Margin	$	122	$	242	-50%	$	242	$	402	-40%
Gross Margin as a % of Segment Revenue		26%		45%			25%		37%

Generation revenue for the three months ended June 30, 2009 decreased $63 million, or 12%, compared to the three months ended June 30, 2008 primarily due to a decrease of $42 million at Merida in Mexico as a result of reduced natural gas prices in the second quarter of 2009 and a net decrease of $17 million in New York due to a combination of a reduction in the volume of electricity sold in the spot market as a result of lower spot rates, partially offset by a rate increase on electricity sold under favorable contracts and fewer outages. Additionally, revenue decreased due to an increase in outages at Warrior Run in Maryland of $16 million, the unfavorable impact of foreign currency translation in Mexico of $12 million and lower rates at Deepwater in Texas of $9 million. These decreases were partially offset by the favorable impact in 2009 of a $23 million mark-to-market derivative loss at Deepwater recognized in 2008.

Generation gross margin for the three months ended June 30, 2009 decreased $120 million, or 50%, compared to the three months ended June 30, 2008 primarily due to a $110 million mark-to-market derivative gain on a coal supply contract in Hawaii in 2008 compared to a $5 million gain recognized in the second quarter of 2009 and an increase in outages at Warrior Run of $16 million. These decreases were partially offset by the favorable impact in 2009 of a $23 million mark-to-market derivative loss at Deepwater recognized in 2008 and an increase in gross margin of $4 million in New York due to a combination of favorable contracted rates and fewer outages that were partially offset by a reduction in the volume of electricity sold in the spot market as a result of lower spot rates. Gross margin as a percentage of revenue for the three months ended June 30, 2009 decreased to 26% compared to 45% in the same period in 2008 primarily due to the unfavorable impact in 2009 of a significant reduction in the mark-to-market derivative gain in Hawaii.

Generation revenue for the six months ended June 30, 2009 decreased $112 million, or 10%, compared to the six months ended June 30, 2008 primarily due to a decrease of $42 million in New York due to a combination of a reduction in the volume of electricity sold in the spot market as a result of lower spot rates partially offset by a rate increase on electricity sold under favorable contracts and fewer outages. Additionally, revenue decreased $29 million due to a reduction in natural gas prices at Merida, partially offset by a revenue adjustment in 2008, the unfavorable impact of foreign currency translation in Mexico of $28 million, an increase in outages at Warrior Run of $16 million, a reduction in revenue from back-up power recoveries due to fewer outages at TEG/TEP in Mexico of $15 million and lower rates at Deepwater of $13 million. These decreases were partially offset by a $23 million mark-to-market derivative loss at Deepwater recognized in 2008.

Generation gross margin for the six months ended June 30, 2009 decreased $160 million, or 40%, compared to the six months ended June 30, 2008 primarily due to a $110 million mark-to-market derivative gain on a coal supply contract at Hawaii in 2008 compared to a $4 million loss recognized in the first six months of 2009, a decrease of $20 million in New York due to a combination of a reduction in the volume of electricity sold in the spot market as a result of lower spot rates partially offset by favorable contracted rates and fewer outages and an increase in outages at Warrior Run of $16 million. These decreases were partially offset by the favorable impact in 2009 of a $23 million mark-to-market derivative loss at Deepwater recognized in 2008 and a $17 million

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revenue adjustment at Merida in 2008. Gross margin as a percentage of revenue for the six months ended June 30, 2009 decreased to 25% compared to 37% in the same period in 2008 primarily due to the unfavorable impact in 2009 of the mark-to-market derivative gain recognized in Hawaii in 2008.

The Utilities segment in North America consists solely of our integrated utility business in Indiana, IPL. The following table summarizes revenue and gross margin for our Utilities segment in North America for the periods indicated:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2009		2008		% Change	2009		2008		% Change
	(in millions)					(in millions)
North America Utilities
Revenue	$	261	$	267	-2%	$	551	$	516	7%
Gross Margin	$	51	$	61	-16%	$	121	$	113	7%
Gross Margin as a % of Segment Revenue		20%		23%			22%		22%

Utilities revenue for the three months ended June 30, 2009 decreased $6 million, or 2%, compared to the three months ended June 30, 2008 primarily due to lower wholesale revenue of $9 million and a decrease in revenue related to clean coal projects of $4 million. This decrease was partially offset by higher pass-through fuel costs of $7 million.

Utilities gross margin for the three months ended June 30, 2009 decreased $10 million, or 16%, compared to the three months ended June 30, 2008 primarily due to lower wholesale margin of $9 million and increased pension expense of $6 million largely due to the decline in market value of IPL’s pension assets during 2008. Gross margin as a percentage of segment revenue for the three months ended June 30, 2009 decreased compared to the same period in 2008 primarily due to the decline in wholesale energy prices in 2009.

Utilities revenue for the six months ended June 30, 2009 increased $35 million, or 7%, compared to the six months ended June 30, 2008 primarily due to $32 million of credits to retail customers established during the first six months of 2008 and higher pass-through fuel costs of $26 million. These increases were partially offset by a decrease in wholesale revenue of $13 million, primarily driven by prices, and a decrease in retail volume of $9 million.

Utilities gross margin for the six months ended June 30, 2009 increased $8 million, or 7%, compared to the six months ended June 30, 2008 primarily due to $32 million of credits to retail customers established during the first six months of 2008. This increase was partially offset by a decrease in wholesale margin of $14 million due to unfavorable prices and increased pension expense of $12 million largely due to the decline in market value of IPL’s pension assets during 2008. Gross margin as a percentage of segment revenue for the six months ended June 30, 2009 was consistent compared to the same period in 2008.

Europe

The following table summarizes revenue and gross margin for the Generation segment in Europe for the periods indicated:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2009		2008		% Change	2009		2008		% Change
	(in millions)					(in millions)
Europe Generation
Revenue	$	152	$	268	-43%	$	356	$	572	-38%
Gross Margin	$	27	$	64	-58%	$	95	$	179	-47%
Gross Margin as a % of Segment Revenue		18%		24%			27%		31%

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Generation revenue for the three months ended June 30, 2009 decreased $116 million, or 43%, compared to the three months ended June 30, 2008 primarily due to the unfavorable impact of foreign currency translation of $44 million across the region, mainly driven by our businesses in the U.K and Hungary, a decrease of $41 million in Kazakhstan reflecting the impact of the sale of Ekibastuz and Maikuben in May 2008 and lower volume at Kilroot and our businesses in Hungary of $41 million, primarily due to a decrease in demand. These decreases were partially offset by increased rates of $8 million in Hungary.

Generation gross margin for the three months ended June 30, 2009 decreased $37 million, or 58%, compared to the three months ended June 30, 2008 primarily due to lower volume at our businesses in Hungary of $14 million, a decrease of $17 million in Kazakhstan as a result of the sale of Ekibastuz and Maikuben in May 2008 and the unfavorable impact of foreign currency translation and increased fixed costs of $6 million and $12 million, respectively, across the region. These decreases were partially offset by higher rates at our businesses in Hungary of $8 million and increased rates and volume of $6 million at Altai, our remaining business in Kazakhstan. Gross margin as a percentage of revenue for the three months ended June 30, 2009 decreased compared to the same period in 2008 primarily due to lower volume at our businesses in Hungary and the sale of two subsidiaries in Kazakhstan in May 2008.

Generation revenue for the six months ended June 30, 2009 decreased $216 million, or 38%, compared to the six months ended June 30, 2008 primarily due to the unfavorable impact of foreign currency translation of $107 million across the region, mainly driven by our businesses in the U.K and Hungary, a decrease of $101 million in Kazakhstan reflecting the impact of the sale of Ekibastuz and Maikuben in May 2008 and a decrease in volume and rate of $16 million at Borsod in Hungary primarily driven by decreased demand.

Generation gross margin for the six months ended June 30, 2009 decreased $84 million, or 47%, compared to the six months ended June 30, 2008 primarily due to a decrease of $43 million in Kazakhstan as a result of the sale of Ekibastuz and Maikuben in May 2008, the unfavorable impact of foreign currency translation of $27 million across the region, lower volume at our businesses in Hungary of $27 million and higher fixed costs of $13 million across the region. These unfavorable impacts were partially offset by higher rates at Kilroot and Tisza II in Hungary of $31 million. Gross margin as a percentage of revenue for the six months ended June 30, 2009 decreased compared to the same period in 2008 primarily due to the impact of lower volume at our businesses in Hungary and the sale of two subsidiaries in Kazakhstan in May 2008.

Asia

The following table summarizes revenue and gross margin for the Generation segment in Asia for the periods indicated:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2009		2008		% Change	2009		2008		% Change
	(in millions)					(in millions)
Asia Generation
Revenue	$	337	$	301	12%	$	584	$	613	-5%
Gross Margin	$	77	$	40	93%	$	124	$	88	41%
Gross Margin as a % of Segment Revenue		23%		13%			21%		14%

Generation revenue for the three months ended June 30, 2009 increased $36 million, or 12%, compared to the three months ended June 30, 2008 primarily due to an increase in generation volume of $56 million at Lal Pir and Pak Gen in Pakistan, as a result of fuel supply constraints in 2008 that did not continue in the second quarter of 2009; improved operations and availability of $56 million at Masinloc in the Philippines; and the favorable impact of $21 million from our new business at Amman East in Jordon, which started production in July 2008. These increases were partially offset by a decrease in rates of $53 million in Pakistan, as a result of a drop in pass-through fuel prices, and the unfavorable impact of foreign currency translation of $41 million across the region.

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Generation gross margin for the three months ended June 30, 2009 increased $37 million, or 93%, compared to the three months ended June 30, 2008 primarily due to improved operations at Masinloc of $29 million, excluding the impact of foreign currency, which was largely driven by an increase in availability and reduced coal prices, and the impact of Amman East of $8 million. Gross margin as a percentage of revenue for the three months ended June 30, 2009 increased to 23% compared to 13% in the same period in 2008 primarily due to improved operations at Masinloc.

Generation revenue for the six months ended June 30, 2009 decreased $29 million, or 5%, compared to the six months ended June 30, 2008 primarily due to a decrease in rates of $76 million in Pakistan, due mainly to a decline in pass-through fuel prices; the unfavorable impact of foreign currency translation of $75 million across the region and a decrease in rates of $21 million at Kelanitissa in Sri Lanka, primarily due to lower pass-through energy costs. These decreases were partially offset by improved operations and availability of $56 million at Masinloc in the second quarter. We also benefited from the impact of our new businesses Masinloc, which was acquired in April 2008, and Amman East, which started operation in July 2008, of $46 million and $47 million, respectively.

Generation gross margin for the six months ended June 30, 2009 increased $36 million, or 41%, compared to the six months ended June 30, 2008 primarily due to the favorable impact of Masinloc of $38 million, excluding the impact of foreign currency, and the impact of our new business in Jordon of $16 million partially offset by the unfavorable impact of foreign currency translation of $12 million across the region. Gross margin as a percentage of revenue for the six months ended June 30, 2009 increased to 21% compared to 14% during the same period in 2008 primarily due to improved operations at Masinloc.

Corporate and Other

Corporate and other includes general and administrative expenses related to corporate staff functions and/or initiatives, executive management, finance, legal, human resources, information systems, and certain development costs which are not allocable to our business segments. In addition, this category includes the net operating results from our generation and utilities businesses in Africa, utilities businesses in Europe and AES Wind and other renewables projects and costs associated with our development group which are immaterial for the purposes of separate segment disclosure and the effects of eliminating transactions such as self-insurance charges, between the operating segments and corporate. For the three and six months ended June 30, 2009 and 2008, Corporate and other was approximately 1% of consolidated revenue.

Corporate and other decreased $22 million, or 44%, to $28 million for the three months ended June 30, 2009 compared to the three months ended June 30, 2008. The decrease was primarily due to favorable operating results at Sonel, our utility business in Cameroon, of $18 million largely driven by a decrease in fixed costs, and an $11 million decrease in corporate expenses driven by remediation costs incurred in 2008 and a current year decrease in development efforts.

Corporate and other decreased $27 million, or 26%, to $78 million for the six months ended June 30, 2009 compared to the six months ended June 30, 2008. The decrease was primarily due to a $24 million decrease in corporate expenses driven by remediation costs incurred in 2008 and a current year decrease in development efforts and travel costs. Additionally, corporate and other decreased due to favorable operating results at Sonel of $12 million, largely driven by a decrease in fixed costs.

Interest expense

Interest expense decreased $86 million, or 18%, to $383 million for the three months ended June 30, 2009. The decrease for the three months ended June 30, 2009 was primarily due to favorable foreign currency translation and lower interest rates in Brazil.

Interest expense decreased $130 million, or 14%, to $774 million for the six months ended June 30, 2009. The decrease for the six months ended June 30, 2009 was primarily due to favorable foreign currency translation

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and lower interest rates in Brazil, in addition to payment of debt at the Parent Company in June 2008. These decreases were partially offset by interest expense at our Masinloc plant in the Philippines which was acquired in April 2008.

Interest income

Interest income decreased $43 million, or 32%, to $90 million for the three months ended June 30, 2009 and decreased $61 million, or 24%, to $188 million for the six months ended June 30, 2009. The decreases for the three and six months ended June 30, 2009 were primarily due to unfavorable foreign currency translation on the Brazilian Real, lower interest rates in Brazil and lower cash balances at the Parent Company.

Other expense

Other expense of $30 million for the three months ended June 30, 2009 included $13 million loss recognized when three of our businesses in the Dominican Republic received $110 million par value bonds issued by the Dominican Republic government to settle existing accounts receivable for the same amount from the government-owned distribution companies. The loss represented an adjustment to reflect the fair value of the bonds on the date received. Other expense also included losses on disposal of assets at Eletropaulo. Other expense of $85 million for the three months ended June 30, 2008 included $69 million of losses related to the retirement of debt at the Parent Company in connection with a refinancing in June 2008 and the refinancing of $375 million of debt by IPALCO in April 2008.

Other expense of $52 million for the six months ended June 30, 2009 primarily consisted of the previously mentioned $13 million fair value adjustment to government issued bonds in the Dominican Republic on the date received and losses on the disposal of assets at Eletropaulo and Andres. Other expense of $110 million for the six months ended June 30, 2008 included the previously mentioned loss on debt retirements in the second quarter of 2008, as well as losses on disposal of assets at one of our Brazilian subsidiaries and legal reserves.

Other income

Other income of $22 million for the three months ended June 30, 2009 included a gain on early extinguishment of debt at Itabo in the Dominican Republic, a reversal of a legal reserve at Sonel in Cameroon, and insurance recoveries related to turbine damage at one of our Brazilian subsidiaries. Other income of $150 million for the three months ended June 30, 2008 included a $117 million gain related to the extinguishment of a tax liability at Eletropaulo, whose net impact to the Company after noncontrolling interests was $19 million, and insurance recoveries of $14 million for damaged turbines at Uruguaiana.

Other income of $244 million for the six months ended June 30, 2009 included a favorable court decision on a legal dispute in which Eletropaulo, the Company’s utility business in Brazil, had requested reimbursement for excess non-income taxes paid from 1989 to 1992. Eletropaulo received reimbursement in the form of tax credits to be applied against future tax liabilities resulting in a $129 million gain. The net impact to the Company after noncontrolling interests was $21 million. In addition, the Company recognized income of $80 million from a performance incentive bonus for management services provided to Ekibastuz and Maikuben in 2008. See further discussion of this transaction in Note 14 — Acquisitions and Dispositions to the condensed consolidated financial statements included in this Quarterly Report. Other income of $195 million for the six months ended June 30, 2008 included the previously mentioned gain on extinguishment of a tax liability and insurance recoveries in the second quarter of 2008, as well as $14 million of compensation received from the local government for the impairment of plant assets and cessation of the power purchase agreement associated with a settlement agreement to shut down the Hefei generation facility in China recorded during the first quarter of 2008.

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Gain on sale of investments

Gain on sale of investments for the three and six months ended June 30, 2009 was $102 million and $115 million, respectively. The gain for the three months ended June 30, 2009 primarily consisted of $98 million recognized in May 2009 related to the termination of the management agreement between the Company and Kazakhmys PLC for Ekibastuz and Maikuben; see further discussion of this transaction in Note 14 – Acquisitions and Dispositions to the condensed consolidated financial statements included in this Quarterly Report. In addition, the gain for the six months ended June 30, 2009 included $13 million from the reversal of a contingent liability in March 2009 related to the Kazakhstan sale.

Gain on sale of investments for the three and six months ended June 30, 2008 was $908 million and $912 million, respectively. The gain for the three and six months ended June 30, 2008 primarily consisted of a $908 million net gain on the sale of two wholly-owned subsidiaries in Kazakhstan, AES Ekibastuz LLP and Maikuben West LLP in May 2008.

Impairment expense

Impairment expense for the three and six months ended June 30, 2009 was $1 million. Impairment expense for the three and six months ended June 30, 2008 was $25 million and $72 million, respectively. Impairment expenses in 2008 consisted primarily of impairment charges in the first and second quarter of $14 million and $20 million, respectively, resulting from the analysis of Uruguaiana’s long-lived assets, which was triggered by the combination of gas curtailments and increases in the spot market price of energy in 2007. In addition, there were impairment charges of $20 million related to South African peakers project development costs that were written off due to withdrawal from the project and $14 million associated with a settlement agreement to shut down the Hefei plant in China.

Foreign currency transaction (losses) gains on net monetary position

Foreign currency transaction (losses) gains were as follows:

	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	(in millions)						(in millions)
The AES Corporation	$	14		$	(11	)	$	(12	)	$	15
Chile		29			(46	)		55			(33	)
Kazakhstan		(12	)		(3	)		(27	)		(3	)
Colombia		(11	)		4			(5	)		(2	)
Brazil		4			(10	)		(3	)		(21	)
Argentina		(3	)		9			(12	)		7
Philippines		2			(28	)		(5	)		(27	)
Other		4			-			(3	)		1
Total (1)	$	27		$	(85	)	$	(12	)	$	(63	)

⁽¹⁾ Includes $23 million losses on foreign currency derivative contracts for the three months ended June 30, 2009 and 2008, respectively, and includes $34 million and $18 million losses on foreign currency derivative contracts for the six months ended June 30, 2009 and 2008, respectively.

The Company recognized foreign currency transaction gains of $27 million for the three months ended June 30, 2009. These consisted primarily of gains in Chile, The AES Corporation and Brazil, partially offset by losses in Kazakhstan, Colombia and Argentina.

¡ Gains of $29 million in Chile were primarily due to the appreciation of the Chilean Peso by 9%, resulting in gains at Gener (a U.S. Dollar functional currency subsidiary) associated with net

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working capital denominated in Chilean Peso, mainly cash and accounts receivables. This gain was partially offset by $3 million loss on foreign currency derivatives.

¡ Gains of $14 million at The AES Corporation were primarily due to the strengthening of the Euro and British Pound during the quarter, resulting in gains on outstanding notes receivable, which were partially offset by losses on third party debt denominated in British Pound.

¡ Losses of $12 million in Kazakhstan were primarily due to net foreign currency transaction losses of $12 million related to energy sales denominated and fixed in the U.S. Dollar.

¡ Losses of $11 million in Colombia were primarily due to the appreciation of the Colombian Peso by 16% resulting in losses at Chivor (a U.S. Dollar functional currency subsidiary) associated with its Colombian Peso denominated debt and $3 million loss on foreign currency derivatives.

¡ Gains of $4 million in Brazil were primarily due to the 16% appreciation of the Brazilian Real compared to the U.S. Dollar, which resulted in gains at Sul and Uruguaiana in Brazil.

¡ Losses of $3 million in Argentina were primarily due to the devaluation of Argentina Peso by 2%, resulting in losses at Alicura (an Argentina Peso functional currency subsidiary) associated with its U.S. Dollar denominated debt.

The Company recognized foreign currency transaction losses of $85 million for the three months ended June 30, 2008. These consisted primarily of losses in Chile, the Philippines, The AES Corporation and Brazil, partially offset by gains in Argentina.

¡ Losses of $46 million in Chile were primarily due to the devaluation of the Chilean Peso by 19%, resulting in losses at Gener (a U.S. Dollar functional currency subsidiary) associated with its net working capital denominated in Chilean Pesos, mainly cash, accounts receivables and VAT receivables.

¡ Losses of $28 million in the Philippines were primarily due to the weakening of the Philippine Peso to the U.S. Dollar on remeasurement of external and intercompany loans at Masinloc in the Philippines.

¡ Losses of $11 million at The AES Corporation were primarily due to the loss on foreign currency forwards related to the capital contribution for Gener, partially offset by favorable exchange rates on notes denominated in British Pound.

¡ Losses of $10 million in Brazil were primarily due to energy purchases made by Eletropaulo that were denominated in U.S. Dollar, resulting in foreign currency transaction losses of $17 million.

¡ Gains of $9 million in Argentina were primarily due to the appreciation of Argentina Peso by 5% in 2008, resulting in gains at our generation in Argentina (an Argentina Peso functional currency subsidiary) associated with U.S. Dollar denominated debt.

The Company recognized foreign currency transaction losses of $12 million for the six months ended June 30, 2009. These consisted primarily of losses in Kazakhstan, The AES Corporation, Argentina, the Philippines, Colombia and Brazil partially offset by gains in Chile.

¡ Gains of $55 million at Chile were primarily due to the appreciation of the Chilean Peso by 16%, resulting in gains at Gener (a U.S. Dollar functional currency subsidiary) associated with its net working capital denominated in Chilean Peso, mainly cash and accounts receivables. This gain was partially offset by $14 million loss on foreign currency derivatives.

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¡ Losses of $27 million in Kazakhstan were primarily due to net foreign currency transaction losses of $14 million related to energy sales denominated and fixed in the U.S. Dollar and $13 million of foreign currency transaction losses on external and intercompany debt denominated in other than functional currencies.

¡ Losses of $12 million at The AES Corporation were primarily due to the strengthening of the British Pound during the period resulting in losses related to outstanding third party debt denominated in British Pound.

¡ Losses of $12 million in Argentina were primarily due to the devaluation of Argentina Peso by 10% mainly resulting in losses at Alicura, an Argentina Peso functional currency subsidiary, associated with its U.S. Dollar denominated debt partially offset by a $2 million gain on derivative instruments; and also affecting Termoandes, a U.S. Dollar functional currency subsidiary, resulting in losses associated with its trade and tax receivables denominated in Argentinean Peso.

¡ Losses of $5 million in the Philippines were primarily due to the weakening of the Philippine Peso to the U.S. Dollar resulting in losses on remeasurement of debt at Masinloc in the Philippines.

¡ Losses of $5 million in Colombia were primarily due to the appreciation of the Colombian Peso by 4%, resulting in losses at Chivor (a U.S. Dollar functional currency subsidiary) associated with its Colombian Peso denominated debt and $3 million loss on foreign currency derivatives.

¡ Losses of $3 million in Brazil were primarily due to U.S. Dollar denominated energy purchases made by Eletropaulo resulting in losses of $7 million, which were partially offset by gains of $4 million at Sul and Uruguaiana due to the 16% appreciation of the Brazilian Real compared to the U.S. Dollar.

The Company recognized foreign currency transaction losses of $63 million for the six months ended June 30, 2008. These consisted primarily of losses in Chile, the Philippines and Brazil, partially offset by gains at The AES Corporation.

¡ Losses of $33 million in Chile were primarily due to the devaluation of the Chilean Peso by 5%, resulting in losses at Gener (a U.S. Dollar functional currency subsidiary) associated with its net working capital denominated in Chilean Pesos, mainly cash, accounts receivables and VAT receivables.

¡ Losses of $27 million in the Philippines were primarily due to the weakening of the Philippine Peso to the U.S. Dollar on remeasurement of debt at Masinloc in the Philippines.

¡ Losses of $21 million in Brazil were primarily due to energy purchases made by Eletropaulo that were denominated in U.S. Dollar, resulting in foreign currency transaction losses of $29 million.

¡ Gains of $15 million at The AES Corporation were primarily due to favorable exchange rates for cash accounts and outstanding notes denominated in Euros and British Pound, partially offset by losses on foreign currency exchange forwards related to the capital contribution for Gener.

Other non-operating expense

Other non-operating expense was zero for the three months ended June 30, 2009 and $10 million for the six months ended June 30, 2009, consisting primarily of an other-than-temporary impairment of a cost method investment. During the first quarter of 2009, the market value of the investee’s shares continued to decline due to the downward trends in the capital markets and management concluded that the decline was other-than-temporary. There was no non-operating expense for the three and six months ended June 30, 2008.

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Income taxes

Income tax expense on continuing operations decreased $213 million to $105 million for the three months ended June 30, 2009 from $318 million for the three months ended June 30, 2008. The Company’s effective tax rates were 18% and 22% for the three months ended June 30, 2009 and 2008, respectively.

Income tax expense on continuing operations decreased $277 million to $280 million for the six months ended June 30, 2009 from $557 million for the six months ended June 30, 2008. The Company’s effective tax rates were 22% and 27% for the six months ended June 30, 2009 and 2008, respectively.

The net decrease in the effective tax rate for the three and six months ended June 30, 2009 compared to the same periods in 2008 was primarily due to tax benefit recorded in the second quarter of 2009 upon the release of valuation allowance at a U.S. and a Brazilian subsidiary and the increase in U.S. taxes on distributions from the Company’s primary holding company to facilitate early retirement of parent debt in the second quarter of 2008, offset by the impact of the non-taxable Kazakhstan transactions in 2008 and 2009. See further discussion about the Kazakhstan transactions in Note 14 – Acquisitions and Dispositions.

Net equity in earnings of affiliates

Net equity in earnings of affiliates increased $30 million, or 150%, to $50 million for the three months ended June 30, 2009 compared to the three months ended June 30, 2008. The increase was primarily due to a cash settlement of $35 million received by Cartagena, in Spain, for liquidated damages including legal costs incurred related to a construction delay from December 2005 to November 2006; see further discussion of this transaction in Note 6 – Investments in and Advances to Affiliate to the condensed consolidated financial statements included in the Quarterly Report. This increase was partially offset by a payment received in the second quarter of 2008 related to a legal settlement at AES Barry Ltd.

Net equity in earnings of affiliates increased $15 million, or 36%, to $57 million for the six months ended June 30, 2009. The increase was primarily due to a cash settlement received by Cartagena, as mentioned above, and a reduction of net losses at our affiliates in Turkey. These increases were partially offset by the legal settlement at AES Barry Ltd, as mentioned above, decreased earnings at Chigen due to increased prices and lower supplies of coal, increased development costs related to AES Solar which was formed in March 2008, and decreased earnings at OPGC, in India, mainly due to lower tariff revenue.

Discontinued operations

There were no discontinued operations in 2009. For the three and six months ended June 30, 2008, income from operations of discontinued businesses was $1 million and $3 million, respectively, and reflected the operations of Jiaozuo, a coal-fired generation facility in China, previously reflected in our Asia Generation segment which was sold in December 2008.

Net income attributable to noncontrolling interests

Net income attributable to noncontrolling interests decreased $29 million, or 11%, to $228 million for the three months ended June 30, 2009 compared to the same period in 2008 primarily due to decreased earnings at Eletropaulo in Brazil and the depreciation of the Brazilian Real. These decreases were partially offset by increased earnings at Uruguaiana and Tiete in Brazil and Gener in Chile.

Net income attributable to noncontrolling interests increased $79 million, or 18%, to $511 million for the six months ended June 30, 2009 compared to the same period in 2008 primarily due to increased earnings at Uruguaiana and Tiete, Gener, Itabo in the Dominican Republic, Merida in Mexico, and Jordan which began production in July 2008, as well as the impact of an increase in noncontrolling interests from 20% to 29% as a

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result of the sale of shares at Gener in November 2008. These increases were partially offset by decreased earnings at Eletropaulo and the depreciation of the Brazilian Real.

Liquidity and Capital Resources

Overview

The Company has two types of debt reported on its balance sheet: non-recourse and recourse debt. Non-recourse debt is used to fund investments and capital expenditures for construction and acquisition of our electric power plants, wind farms and distribution facilities at our subsidiaries. Non-recourse debt is generally secured by the capital stock, physical assets, contracts and cash flows of the related subsidiary. The default risk is limited to the respective business and is without recourse to the Parent Company and other subsidiaries. Recourse debt is direct borrowings by the Parent Company and is used to fund development, construction or acquisition and to fund equity investments or provide loans to affiliates. This debt is with recourse to the Parent Company and is structurally subordinated to the affiliates’ non-recourse debt.

As of June 30, 2009, the Company had unrestricted cash and cash equivalents of $1.7 billion and short term investments of $1.2 billion. In addition, we had restricted cash and debt service reserves of $444 million. The Company also had non-recourse and recourse aggregate principal amounts of debt outstanding of $13.7 billion and $5.5 billion, respectively. Of the total $1.4 billion of our short-term non-recourse debt currently outstanding, $1.3 billion is presented as current because it is due in the next twelve months and $97 million relates to debt currently in default. We expect such maturities will be repaid from cash on hand or cash provided by operating activities of the subsidiary to which the debt relates or through opportunistic refinancing activity or some combination thereof. None of our recourse debt matures within the next twelve months.

We rely mainly on long-term debt obligations to fund our construction activities. We have, to the extent available at acceptable terms, utilized non-recourse debt to fund a significant portion of the capital expenditures and investments required to construct and acquire our electric power plants, distribution companies and related assets. Our non-recourse financing is designed to limit cross default risk to the Parent Company or other subsidiaries and affiliates and is generally secured by the capital stock, physical assets, contracts and cash flow of the related subsidiary or affiliate. Generally our non-recourse long-term debt is a combination of fixed and variable interest rate instruments. Generally, a portion or all of the variable rate debt is fixed through the use of interest rate swaps. In addition, the debt is typically denominated in the currency that matches the currency of the revenue expected to be generated from the benefiting project, thereby reducing currency risk. In certain cases the currency is matched through the use of derivative instruments. These derivatives can require that the Company post collateral to support the currency match. The majority of our non-recourse debt is funded by international commercial banks with debt capacity supplemented by multilaterals and local regional banks. For more information on our long-term debt, see Note 7 — Long-term Debt to the condensed consolidated financial statements included in Item 1 of this Form 10-Q.

Given our long-term debt obligations, the Company is subject to interest rate risk on debt balances that accrue interest at variable rates. When possible, the Company will borrow funds at fixed interest rates or hedge its variable rate debt to fix its interest costs on such obligations. In addition, the Company has historically tried to maintain at least 70% of its consolidated long-term obligations at fixed interest rates including fixing the interest rate through the use of interest rate swaps. These efforts apply to the notional amount of the swaps compared to the amount of related underlying debt. While the Company believes that this represents an economic hedge, the Company may be required to mark-to-market all or a portion of these interest rate swaps and other derivatives. Presently, the Parent Company’s only exposure to variable interest rate debt relates to indebtedness under its senior secured and senior unsecured credit facilities. On a consolidated basis, of the Company’s $19.2 billion of total debt outstanding as of June 30, 2009, approximately $3.5 billion bore interest at variable rates of interest that were not subject to derivative instruments which fixed the interest rate.

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In addition to utilizing non-recourse debt at a subsidiary level when available, the Parent Company provides a portion, or in certain instances all, of the remaining long-term financing or credit required to fund development, construction or acquisition of a particular project. These investments have generally taken the form of equity investments or intercompany loans, which are subordinated to the project’s non-recourse loans. We generally obtain the funds for these investments from our cash flows from operations, proceeds from the sales of assets and/or the proceeds from our debt issuances, common stock and other securities. Similarly, in certain of our businesses, the Parent Company may provide financial guarantees or other credit support for the benefit of counterparties who have entered into contracts for the purchase or sale of electricity with our subsidiaries or lenders. In such circumstances, if a subsidiary defaults on its payment or supply obligation, the Parent Company will be responsible for the subsidiary’s obligations up to the amount provided for in the relevant guarantee or other credit support. At June 30, 2009, the Parent Company had provided outstanding financial and performance-related guarantees or other credit support commitments to, or for the benefit of our subsidiaries, which were limited by the terms of the agreements, of approximately $404 million in aggregate (excluding investment commitments and those collateralized by letters of credit and other obligations discussed below).

As a result of the Parent Company’s below investment grade rating, counterparties may be unwilling to accept our general unsecured commitments to provide credit support. Accordingly, with respect to both new and existing commitments, the Parent Company may be required to provide some other form of assurance, such as a letter of credit, to backstop or replace our credit support. The Parent Company may not be able to provide adequate assurances to such counterparties. To the extent we are required and able to provide letters of credit or other collateral to such counterparties, this will reduce the amount of credit available to us to meet our other liquidity needs. At June 30, 2009, the Parent Company had $207 million in letters of credit outstanding, which operate to guarantee performance relating to certain project development activities and subsidiary operations. These letters of credit were provided under our senior secured and senior unsecured credit facilities. During the second quarter the Company paid letter of credit fees ranging from 3.17% to 8.84% per annum on the outstanding amounts.

We expect to continue to seek, where possible, non-recourse debt financing in connection with the assets or businesses that our affiliates or we may develop, construct or acquire. However, depending on local and global market conditions and the unique characteristics of individual businesses, non-recourse debt may not be available or may not be available on economically attractive terms. See Global Recession discussion above. If we decide not to provide any additional funding or credit support to a subsidiary project that is under construction or has near-term debt payment obligations and that subsidiary is unable to obtain additional non-recourse debt, such subsidiary may become insolvent, and we may lose our investment in that subsidiary. Additionally, if any of our subsidiaries lose a significant customer, the subsidiary may need to withdraw from a project or restructure the non-recourse debt financing. If we or the subsidiary chooses not to proceed with a project or is unable to successfully complete a restructuring of the non-recourse debt, we may lose our investment in that subsidiary.

Many of our subsidiaries depend on timely and continued access to capital markets to manage their liquidity needs. The inability to raise capital on favorable terms, to refinance existing indebtedness or to fund operations and other commitments during times of political or economic uncertainty may have material adverse effects on the financial condition and results of operations of those subsidiaries. In addition, changes in the timing of tariff increases or delays in the regulatory determinations under the relevant concessions could affect the cash flows and results of operations of our businesses.

AES Solar, one of our equity investments, was formed in March 2008 as a joint venture with Riverstone. Under the terms of the AES Solar joint venture agreement, the Company and Riverstone may each provide up to $500 million of capital through 2013. The joint venture has commitments to purchase solar panels for use in their business and, while the Company is not required to fund AES Solar’s obligations, it is possible that if we decide not to fund the joint venture in the future it could impact AES Solar’s development plans or operations.

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Cash Flows

At June 30, 2009, cash and cash equivalents increased $832 million from December 31, 2008 to $1.7 billion. The increase in cash and cash equivalents was due to $871 million of cash provided by operating activities, $384 million of cash used in investing activities, $331 million of cash provided by financing activities and the favorable effect of foreign currency exchange rates on cash of $14 million.

At June 30, 2008, cash and cash equivalents decreased by $322 million from December 31, 2007 to a total of $1.7 billion. The change in cash and cash equivalents was due to $784 million of cash provided by operating activities, $1.6 billion of cash used for investing activities, $526 million of cash provided by financing activities and the favorable effect of exchange rates on cash of $3 million.

Operating Activities

Net cash provided by operating activities increased $87 million, or 11%, to $871 million for the six months ended June 30, 2009 from $784 million for the same period in 2008. This increase was primarily due to increases of approximately $132 million, $131 million and $92 million at our Latin America Generation, Asia Generation businesses and Corporate and other, respectively, due to reduced working capital requirements, corporate overhead and development costs. In addition, our Europe and Africa Generation businesses experienced increases in net cash provided by operating activities of approximately $86 million and $30 million, respectively, due to the $80 million collection of the management performance incentive bonus and improvements in working capital. These increases were offset by a decrease of approximately $376 million at our Latin America Utilities businesses due to lower cash earnings, payment on the settlement of a swap agreement and increased settlement of legal contingencies.

Investing Activities

Net cash used in investing activities decreased $1.3 billion to net cash used of $384 million for the six months ended June 30, 2009 from net cash used of $1.6 billion for six months ended June 30, 2008. This decrease was primarily attributable to the following:

Capital expenditures decreased $192 million, or 14% to $1.2 billion for the six months ended June 30, 2009 from $1.4 billion for the six months ended June 30, 2008. This was mainly due to net decreased expenditures of $182 million for wind generation projects at our U.S. businesses and $145 million at Maritza in Bulgaria. These decreases were offset by a net increase in expenditures of $106 million for plant construction at Gener. Please refer to Management’s Priorities discussed above for a description of operations that came on-line in 2009 or are expected to come on-line during the year.

Acquisitions, net of cash acquired were $1.1 billion for the six months ended June 30, 2008, due to the purchase of a coal-fired thermal power generation facility at Masinloc in the Philippines and the purchase of Mountain View, a wind generation facility in the U.S.

Proceeds from the sales of businesses decreased $1.1 billion to $2 million for the six months ended June 30, 2009 from $1.1 billion for the same period in 2008. The 2008 activity was primarily attributable to the sale of Ekibastuz, a coal-fired generation plant, and Maikuben, a coal mine, in Kazakhstan.

The sale of short-term investments, net of purchases, increased $528 million to $529 million net sales of short-term investments for the six months ended June 30, 2009 from $1 million net sales of short-term investments for the six months ended June 30, 2008. The activity included increases in net sales of $188 million, $127 million and $122 million at Eletropaulo, Tiete and Brasiliana Energia, respectively, all located in Brazil to fund interest and dividend payments. In addition, there was an increase in net sales of $85 million at Alicura due to maturities of investments.

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Restricted cash balances decreased $305 million for the six months ended June 30, 2009, primarily due to decreases of $216 million at Gener, $72 million at Chigen, and $20 million at New York.

Debt service reserves and other assets decreased $40 million for the six months ended June 30, 2009 primarily due to decreases of $53 million at St. Nikola and $13 million at Eletropaulo. These decreases were offset by an increase of $28 million at Gener and a net increase of $5 million at other wind generation projects in Europe.

Cash used in advances to affiliate and equity investments was $87 million for the six months ended June 30, 2009, primarily driven by contributions made to AES Solar. Loan advances were $173 million for the six months ended June 30, 2008 and represented amounts paid for a convertible loan from a Brazilian wind development business. There were no loan advances made in the six months ended June 30, 2009.

Financing Activities

Net cash provided by financing activities decreased $195 million to $331 million for the six months ended June 30, 2009 compared to net cash provided of $526 million for the six months ended June 30, 2008. As discussed below, this decrease was primarily attributable to an increase in distributions to noncontrolling interests of $90 million, a decrease in contributions from noncontrolling interests of $87 million, and a net decrease in debt balances, net of repayments of $36 million.

Net repayments under revolving credit facilities were $31 million for the six months ended June 30, 2009, compared to net borrowings of $199 million for the six months ended June 30, 2008. The increase in net repayments of $230 million was primarily due to increased net repayments of $105 million at Lal Pir/Pak Gen in Pakistan due to off-taker collections, $53 million at Panama for project financing, $47 million at the Parent Company due to decreased usage of revolving credit in 2009, and $30 million at IPL due to a successful remarketing of notes that had previously failed remarketing and were supported by a letter of credit.

Issuances of recourse and non-recourse debt for the six months ended June 30, 2009 were $1.3 billion compared to $2.2 billion for the six months ended June 30, 2008. This decrease in debt issuances of $872 million was primarily due to a decrease of $593 million at Masinloc where the 2008 activity was for acquisition and improvement related costs, $262 million at IPL due to refinancing of debt, $183 million at Buffalo Gap 3 due to completion of construction, and $122 million at the Parent Company from decreased bond issuances. These decreases were offset by an increase of $200 million at Gener due to the bond issuances discussed above and construction financing.

Repayments of recourse and non-recourse debt for the six months ended June 30, 2009 were $645 million compared to $1.7 billion for the six months ended June 30, 2008. This decrease of $1.1 billion was predominately due to decreases in repayments of recourse debt of $883 million at the Parent Company and $257 million at IPL due to debt refinancing.

Payments made for deferred financing costs for the six months ended June 30, 2009 were $53 million compared to $36 million for the six months ended June 30, 2008, which was primarily due to an increase of $12 million at the Parent Company due to senior note issuances in 2009.

Distributions to noncontrolling interests increased $90 million to $334 million for the six months ended June 30, 2009 from $244 million for the six months ended June 30, 2008. The increase was primarily due to increased distributions of $73 million at Brasiliana Energia and $32 million at Eletropaulo. These increases were partially offset by a decrease in distributions of $11 million at Panama.

Contributions from noncontrolling interests decreased $87 million to $74 million for the six months ended June 30, 2009 from $161 million for the six months ended June 30, 2008. The decrease was primarily due to decreases of $78 million at Mountain View and $22 million at Masinloc. These decreases were offset by an increase of $19 million at Gener.

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Financed capital expenditures decreased $27 million to $24 million for the six months ended June 30, 2009 from $51 million for the six months ended June 30, 2008, predominately due to a decrease of $37 million at Gener due to decreased financed construction, partially offset by an increase of $6 million at Kilroot due to financed plant construction.

Parent Company Liquidity

The following discussion of “Parent Company Liquidity” has been included because we believe it is a useful measure of the liquidity available to the Parent Company, given the non-recourse nature of most of our indebtedness. Parent Company Liquidity as outlined below is not a measure under U.S. GAAP and should not be construed as an alternative to cash and cash equivalents, which are determined in accordance with U.S. GAAP, as a measure of liquidity. Cash and cash equivalents are disclosed in the condensed consolidated statement of cash flows. Parent Company Liquidity may differ from that of similarly titled measures used by other companies. Our principal sources of liquidity at the Parent Company level are:

• dividends and other distributions from our subsidiaries, including refinancing proceeds;

• proceeds from debt and equity financings at the Parent Company level, including availability under our credit facilities; and

• proceeds from asset sales.

Our cash requirements at the Parent Company level are primarily to fund:

• interest and preferred dividend payments;

• principal repayments of debt;

• acquisitions;

• construction commitments;

• other equity commitments;

• taxes; and

• Parent Company overhead and development costs.

The Company defines Parent Company Liquidity as cash available to the Parent Company and qualified holding companies plus available borrowings under existing credit facilities. The cash held at qualified holding companies represents cash sent to subsidiaries of the Company domiciled outside of the U.S. Such subsidiaries have no contractual restrictions on their ability to send cash to the Parent Company. Parent Company Liquidity is reconciled to its most directly comparable U.S. GAAP financial measure, “cash and cash equivalents” at June 30, 2009 and December 31, 2008 as follows:

Parent Company Liquidity	June 30, 2009		December 31, 2008
	(in millions)
Consolidated cash and cash equivalents	$	2,179	$	903
Less: Cash and cash equivalents at subsidiaries		1,576		656
Cash and cash equivalents at Parent and qualified holding companies		603		247
Borrowing available under senior secured credit facility		712		720
Borrowing available under senior unsecured credit facility (1)		1		423
Total Parent Company Liquidity	$	1,316	$	1,390

⁽¹⁾ During the second quarter of 2009, the Parent Company voluntarily reduced the size of its senior unsecured credit facility by $465 million. Please refer to “Recourse Debt” below for further description.

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The following table summarizes our Parent Company contingent contractual obligations as of June 30, 2009:

Contingent Contractual Obligations	Amount		Number of Agreements	Exposure Range for Each Agreement
	(in millions)			(in millions)
Guarantees	$	404	32	< $1 - $53
Letters of credit under the revolving credit facility		73	13	< $1 - $28
Letters of credit under the senior unsecured credit facility		134	10	< $1 - $119
Total	$	611	55

As of June 30, 2009, the Parent Company had $185 million of commitments to invest in subsidiaries with projects under construction and to purchase related equipment, excluding approximately $144 million of such obligations already included in the letters of credit discussed above. The Parent Company expects to fund these net investment commitments over time according to the following schedule: $89 million in 2009, $39 million in 2010 and $57 million in 2011. The exact payment schedule will be dictated by construction milestones. We expect to fund these commitments from a combination of current liquidity and internally generated Parent Company cash flow.

We have a varied portfolio of performance related contingent contractual obligations. These obligations are designed to cover potential risks and only require payment if certain targets are not met or certain contingencies occur. The risks associated with these obligations include change of control, construction cost overruns, subsidiary default, political risk, buyer and tax indemnities, equity subscription, spot market power prices, supplier support and liquidated damages under power sales agreements for projects in development, under construction and in operation. While we do not expect that we will be required to fund any material amounts under these contingent contractual obligations during 2009 or beyond, many of the events which would give rise to such obligations are beyond our control. We can provide no assurance that we will be able to fund our obligations under these contingent contractual obligations if we are required to make substantial payments thereunder.

While we believe that our sources of liquidity will be adequate to meet our needs for the foreseeable future, this belief is based on a number of material assumptions, including, without limitation, assumptions about our ability to access the capital markets, the operating and financial performance of our subsidiaries, exchange rates, power market pool prices and the ability of our subsidiaries to pay dividends. In addition, our project subsidiaries’ ability to declare and pay cash dividends to us (at the Parent Company level) is subject to certain limitations contained in project loans, governmental provisions and other agreements. We can provide no assurance that these sources will be available when needed or that our actual cash requirements will not be greater than anticipated. We have met our interim needs for shorter-term and working capital financing at the Parent Company level with our senior secured and senior unsecured credit facilities. If, due to new corporate opportunities or otherwise, our capital requirements exceed amounts available from cash on hand or borrowings under our credit facilities, we may need to access the capital markets to raise additional debt or equity financing. Various debt instruments at the Parent Company level contain certain restrictive covenants. The covenants provide for, among other items:

• limitations on other indebtedness, liens, investments and guarantees;

• restrictions on dividends and redemptions and payments of unsecured and subordinated debt and the use of proceeds;

• restrictions on mergers and acquisitions, sales of assets, leases, transactions with affiliates and off-balance sheet and derivative arrangements;

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• maintenance of certain financial ratios; and

• financial and other reporting requirements.

Recourse Debt:

On March 26, 2009, the Parent Company and certain subsidiary guarantors amended the Parent Company’s existing senior secured credit facility pursuant to the terms of Amendment No. 1 to the senior secured credit facility. The senior secured credit facility previously included a $200 million term loan facility maturing on August 10, 2011 and a $750 million revolving credit facility maturing on June 23, 2010.

The principal modification set forth in Amendment No. 1 was a one year extension of the $570 million of revolving credit facility commitments from an original maturity date of June 23, 2010 to July 5, 2011. In addition, certain lenders determined that they would increase their commitments under the revolving credit facility by $35 million from March 26, 2009 through July 5, 2011. Accordingly, Amendment No. 1 also increased the size of the revolving credit facility from $750 million to $785 million for the period between the date of Amendment No. 1 and June 23, 2010. Between June 23, 2010 and July 5, 2011, the revolving credit facility size will be $605 million. No modifications were made to the amount or maturity date of the $200 million term loan facility.

The extended commitments from this amendment were subject to new pricing that included an upfront fee of 1.25% for participating in the extensions and an increase in undrawn commitment fees from 50 to 100 basis points. The annual interest rate on the drawn loans was also increased by 200 basis points to LIBOR plus 3.50%. Pricing and all other terms remained unchanged for the revolving credit facility commitments which have not been extended.

On April 2, 2009, the Parent Company issued $535 million aggregate principal amount of 9.75% senior unsecured notes due 2016 in a private placement. The notes were priced at a discount to yield 11%. Subsequently, the Parent Company allocated a substantial portion of the proceeds to voluntarily reduce the size of its $600 million senior unsecured credit facility by $465 million. The remaining $135 million of the senior unsecured credit facility consists primarily of letters of credit, the majority of which continues to support several projects currently under construction.

On June 1, 2009, the Parent Company repaid at maturity all outstanding 9.5% senior unsecured notes at par for an aggregate principal amount of $154 million. Future maturities of recourse debt as of June 30, 2009 are set forth in the table below:

	Annual Maturities
	(in millions)
July 1 – December 31, 2009		-
2010		214
2011		471
2012		-
2013		690
Thereafter		4,140
Total recourse debt	$	5,515

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Non-Recourse Debt:

While the lenders under our non-recourse debt financings generally do not have direct recourse to the Parent Company, defaults thereunder can potentially have important consequences for our results of operations and liquidity, including, without limitation:

• reducing our cash flows as the subsidiary will typically be prohibited from distributing cash to the Parent Company during the time period of any default;

• triggering our obligation to make payments under any financial guarantee, letter of credit or other credit support we may have provided to or on behalf of such subsidiary;

• causing us to record a loss in the event the lender forecloses on the assets; and

• triggering defaults in our outstanding debt at the parent level.

Some of our subsidiaries are currently in default with respect to all or a portion of their outstanding indebtedness. The total debt classified as current in the accompanying condensed consolidated balance sheet related to such defaults was $97 million at June 30, 2009, all of which is non-recourse debt.

None of the subsidiaries that are currently in default meet the applicable definition of materiality in The AES Corporation’s debt agreements in order for such defaults to trigger an event of default or permit acceleration under such indebtedness. However, as a result of additional dispositions of assets, other significant reductions in asset carrying values or other matters in the future that may impact our financial position and results of operations, it is possible that one or more of these subsidiaries could fall within the definition of a “material subsidiary,” and thereby upon an acceleration trigger an event of default and possible acceleration of the indebtedness under the Parent Company’s outstanding debt securities.

On April 8, 2009, Gener issued $196 million aggregate principal amount of 8% unsecured notes due in 2019. The unsecured notes were priced at a discount to par resulting in an 8.5% yield. The proceeds from this issuance will be used to provide Gener’s funding requirements for projects under construction.

Critical Accounting Policies and Estimates

The consolidated financial statements of AES are prepared in conformity with generally accepted accounting principles in the United States of America, which requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The Company’s significant accounting policies are described in Note 1 — Financial Statement Presentation to the consolidated financial statements included in the Company’s 2008 Annual Report on Form 10-K. The Company’s critical accounting estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s 2008 Annual Report on Form 10-K. An accounting estimate is considered critical if the estimate requires management to make an assumption about matters that were highly uncertain at the time the estimate was made, different estimates reasonably could have been used, or if changes in the estimate that would have a material impact on the Company’s financial condition or results of operations are reasonably likely to occur from period to period. Management believes that the accounting estimates employed are appropriate and resulting balances are reasonable; however, actual results could differ from the original estimates, requiring adjustments to these balances in future periods.

The Company has reviewed and determined that those policies remain the Company’s critical accounting policies as of and for the three months ended June 30, 2009. The only significant change to our critical accounting policies and estimates is the adoption of FAS No. 157 for nonfinancial assets and liabilities as of

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January 1, 2009. See further discussion of the Company’s policy in Item 1. Financial Statements, Notes to Condensed Consolidated Financial Statements, Note 1—Financial Statement Presentation in this Form 10-Q.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Overview Regarding Market Risks

We are exposed to market risks associated with interest rates, foreign exchange rates and commodity prices. We often utilize financial instruments and other contracts to hedge against such fluctuations. We also utilize financial derivatives for the purpose of hedging exposures to market risk.

Interest Rate Risks

We are exposed to risk resulting from changes in interest rates as a result of our issuance of variable-rate debt and fixed-rate debt, as well as interest rate swap, cap and floor and option agreements.

Decisions on the fixed-floating debt ratio are made to be consistent with the risk factors faced by individual businesses or plants. Depending on whether a plant’s capacity payments or revenue stream is fixed or varies with inflation, we partially hedge against interest rate fluctuations by arranging fixed-rate or variable-rate financing. In certain cases, particularly for non-recourse financing, we execute interest rate swap, cap and floor agreements to effectively fix or limit the interest rate exposure on the underlying financing.

As of June 30, 2009, the portfolio’s interest expense exposure (adjusted to reflect noncontrolling interests) to a 100 basis point increase in U.S. Dollar and Brazilian Real interest rates is approximately $9 million. These numbers assume a one-time, 100 basis point increase in interest rates and calculating its impact on interest expense for U.S. Dollar and Brazilian Real-denominated debt for the remainder of 2009, which together account for more than 90% of the portfolio’s floating-rate debt which are primarily non-recourse financing. The numbers do not take into account the historical correlation between U.S. Dollar and Brazilian Real interest rates and do not include other currencies which account for less than 10% of the portfolio floating-rate debt.

Foreign Exchange Rate Risk

In the normal course of business, we are exposed to foreign currency risk and other foreign operations risk that arise from investments in foreign subsidiaries and affiliates. A key component of this risk stems from the fact that some of our foreign subsidiaries and affiliates utilize currencies other than our consolidated reporting currency, the U.S. Dollar. Additionally, certain of our foreign subsidiaries and affiliates have entered into monetary obligations in U.S. Dollar or currencies other than their own functional currencies. Primarily, we are exposed to changes in the exchange rate between the U.S. Dollar and the following currencies: Brazilian Real, Argentine Peso, Mexican Peso, Kazakhstani Tenge, British Pound, Euro, Hungarian Forint, Colombian Peso, Chilean Peso and Philippine Peso. These subsidiaries and affiliates have attempted to limit potential foreign exchange exposure by entering into revenue contracts that adjust to changes in foreign exchange rates. We also use foreign currency forwards, swaps and options, where possible, to manage our risk related to certain foreign currency fluctuations.

During the second quarter, we entered into hedges to partially mitigate the exposure of earnings translated into U.S. Dollar to foreign exchange volatility. Given a 10% U.S. Dollar appreciation, AES pre-tax earnings for the balance of 2009 would be reduced by approximately $26 million on a correlated basis. These numbers have been produced by applying a one-time 10% U.S. Dollar appreciation to un-hedged pre-tax earnings for the balance of 2009 coming from subsidiaries where the local currency is either not the U.S. Dollar or it is not exhibiting the characteristics of a peg or managed float relative to the U.S. Dollar and holding all other variables constant. The numbers presented above are net of any transactional gains/losses and the correlation effect is based on historical foreign exchange rate movement over a period equal in length to the period over which the simulated move occurs.

74

Commodity Price Risk

We are exposed to the impact of market fluctuations in the price of electricity, fuels and environmental credits. Although we primarily consist of businesses with long-term contracts or retail sales concessions, a portion of our current and expected future revenues are derived from businesses without significant long-term revenue or supply contracts. These businesses subject our results of operations to the volatility of prices for electricity, fuels and environmental credits in competitive markets. We have used a hedging strategy, where appropriate, to hedge our financial performance against the effects of fluctuations in energy commodity prices. The implementation of this strategy can involve the use of commodity forward contracts, futures, swaps and options. Some businesses hedge certain aspects of their commodity risks using financial and physical hedge instruments. We also enter into short-term contracts for the supply of electricity and fuel in other competitive markets in which we operate.

When hedging the output of our generation assets, we have power purchase agreements or other hedging instruments that lock in the spread in dollars per MWh between the cost of fuel to generate a unit of electricity and the price at which the electricity can be sold. The portion of our sales and fuel purchases that are not subject to such agreements will be exposed to commodity price risk. For our U.S.-based assets including Eastern Energy, Deepwater, and wholesale sales for IPALCO, a 10% decline in the price of electricity as of June 30, 2009 would produce an estimated decrease in gross margin of $5 million for the balance of 2009. We limited our analysis to the U.S. markets as they have quoted forward electricity curves. We shifted the forward electricity curves for western New York, Houston, Texas, and the Cinergy hub down by 10%. We applied the change in electricity prices to our un-hedged sales volumes. An increase of 10% in petroleum coke prices at Deepwater would result in a decline in projected gross margin of $1 million for the remainder of 2009.

Value at Risk

We have performed a company wide value at risk analysis (“VaR”) of all of our material financial assets, liabilities and derivative instruments. VaR measures the potential loss in a portfolio’s value due to market volatility, over a specified time horizon, stated with a specific degree of probability and is calculated based on volatilities and correlations of the different risk exposures of the portfolio. The quantification of market risk using VaR provides a consistent measure of risk across diverse markets and instruments. VaR is not necessarily indicative of actual results that may occur. Additionally, VaR represents changes in fair value of financial instruments and not the economic exposure to AES and its affiliates. Because of the inherent limitations of VaR, including those specific to Analytic VaR, in particular the assumption that values or returns are normally distributed, we rely on VaR as only one component in our risk assessment process. In addition to using VaR measures, we perform sensitivity and scenario analyses to estimate the economic impact of market changes to our portfolio of businesses. We use these results to complement the VaR methodology. For a further discussion of the Company’s VaR methodology and its limitations, see Item 7A — Quantitative and Qualitative Disclosures about Market Risk — Risk Management in Part II, of the 2008 Form 10-K.

Embedded derivatives are not appropriately measured here and are excluded since VaR is not representative of the overall contract valuation. The VaR calculation incorporates numerous variables that could impact the fair value of our instruments, including interest rates, foreign exchange rates and commodity prices, as well as correlation within and across these variables. The interest rate component of VaR is due to changes in the fair value of our fixed rate debt instruments and interest rate swaps. These instruments themselves would expose a holder to market risk; however, utilizing these fixed rate debt instruments as part of a fixed price contract generation business mitigates the overall exposure to interest rates. Similarly, our foreign exchange rate sensitive instruments are often part of businesses which have revenues denominated in the same currency, thus offsetting the exposure.

We express Analytic VaR herein as a dollar amount of the potential loss in the fair value of our portfolio based on a 95% confidence level and a one day holding period. Our commodity analysis is a VaR calculation

75

within the commodity transaction management system, and is reported for financially settled derivative products at our Eastern Energy business in New York State and Deepwater in Texas as these are the only businesses with commodity transactions that are deemed derivatives. These commodity transactions are marked to market on a daily basis. Collateral is then posted or recalled for any changes in exposures at Eastern Energy but is not required at Deepwater. However, not every transaction requires Eastern Energy to post collateral, as several counterparties have caps defined in their transaction agreements. For those counterparties that do require Eastern Energy to post collateral, two facilities that are non-recourse to The AES Corporation in the amounts of $75 million and $350 million are used to issue letters of credit. As of June 30, 2009, $19 million and $77 million have been utilized under these facilities.

The VaR as of June 30, 2009 for foreign exchange rate-sensitive instruments was $78 million compared with $78 million as of March 31, 2009. These amounts include foreign currency denominated debt and hedge instruments.

The VaR as of June 30, 2009 for interest rate-sensitive instruments was $155 million compared with $176 million as of March 31, 2009. These amounts include the financial instruments that serve as hedges and the underlying hedged items. The decrease in VaR relative to the first quarter is attributable to the decrease in volatility in interest rates.

The VaR as of June 30, 2009 for commodity price-sensitive instruments was $4 million compared with $4 million as of March 31, 2009. For Eastern Energy, these amounts include the financial instruments that serve as hedges and do not include the underlying physical assets or contracts that are not permitted to be settled in cash. For Deepwater, these include the physically settled derivative products that serve as hedges. For the second quarter of 2009, the VaR of Deepwater is disclosed for the first time and represents $800,000 of the aggregate VaR for commodity price-sensitive instruments.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company under the supervision and with the participation of its management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of its “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of June 30, 2009 to ensure that information required to be disclosed by the Company in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls Over Financial Reporting

There were no changes that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

76

PART II: OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

The Company is involved in certain claims, suits and legal proceedings in the normal course of business, some of which are described Note 8 — Contingencies and Commitments in Item 1 of this Form 10-Q. The Company has accrued for litigation and claims where it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company believes, based upon information it currently possesses and taking into account established reserves for estimated liabilities and its insurance coverage, that the ultimate outcome of these proceedings and actions is unlikely to have a material adverse effect on the Company’s financial statements. It is reasonably possible, however, that some matters could be decided unfavorably to the Company and could require the Company to pay damages or make expenditures in amounts that could be material but cannot be estimated as of June 30, 2009. See Note 8 — Contingencies and Commitments in Item 1 of this Form 10-Q for additional information regarding these claims and proceedings.

ITEM 1A.    RISK FACTORS

There have been no material changes to the risk factors as previously disclosed in our 2008 Form 10-K.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM  4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Please see the Company’s Form 10-Q for the period ended March 31, 2009 for a description of the Company’s 2009 annual meeting and the matters voted upon therein.

ITEM 5.    OTHER INFORMATION

None

ITEM 6.    EXHIBITS

10.1 Fourth Amended And Restated Credit And Reimbursement Agreement dated as of July 29, 2008 among THE AES CORPORATION, a Delaware corporation, the SUBSIDIARY GUARANTORS listed herein, the BANKS listed on the signature pages hereof, CITIGROUP GLOBAL MARKETS INC., as Lead Arranger and Book Runner, BANC OF AMERICA SECURITIES LLC, as Lead Arranger and Book Runner and as Co-Syndication Agent, DEUTSCHE BANK SECURITIES INC, as Lead Arranger and Book Runner, UNION BANK OF CALIFORNIA, N.A., as Co-Syndication Agent and as Lead Arranger and Book Runner and as Syndication Agent, LEHMAN COMMERCIAL PAPER INC., as Co-Documentation Agent, UBS SECURITIES LLC, as Co-Documentation Agent, SOCIÉTÉ GÉNÉRALE, as Co-Documentation Agent, CREDIT LYONNAIS NEW YORK BRANCH, as Co-Documentation Agent, CITICORP USA, INC., as Administrative Agent for the Bank Parties and CITIBANK, N.A., as Collateral Agent for the Bank Parties (filed herewith) including:

77

10.1.A	Appendix I, Revolving Credit Loan Facility pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.B	Appendix II, Initial Term Loan Facility pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.C	Appendix III, Existing Letters of Credit pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.D	Schedule I, Pledged Subsidiaries pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.E	Schedule II, Assigned Agreements pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.F	Schedule III, Non-Pledged Subsidiaries pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.G	Schedule IV, Excluded AES Entities pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.H	Schedule 5.15, Existing Agreements with Affiliates pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.I	Schedule V, Qualified Holding Companies pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.J	Schedule VI, Existing Debt pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.K	Schedule VII, Revolving Fronting Banks pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.L	Exhibit A-1, Form of Revolving Credit Loan Note pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.M	Exhibit A-2, Form of Term Loan Note pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.N	Exhibit B-1, Form of Opinion of the General Counsel of the Borrower pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.O	Exhibit B-2, Form of Opinion of Davis Polk & Wardwell, Special Counsel for the Borrower pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.P	Exhibit B-3, Form of Opinion of Special Counsel for certain Subsidiaries of the Borrower pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.Q	Exhibit B-4, Form of Opinion of Morris, Nichols, Arsht & Tunnell, Delaware counsel for the Borrower pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.R	Exhibit B-5, Form of Opinion of Maples and Calder, Cayman Islands counsel for the Borrower pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.S	Exhibit B-6, Form of Opinion of Conyers Dill & Pearman, British Virgin Islands counsel for the Borrower pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.T	Exhibit B-7, Form of Opinion of Shearman & Sterling, Special Counsel for the Agent pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.U	Exhibit C-1, Form of Revolving Credit Loan Facility Assignment and Assumption Agreement pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.V	Exhibit C-2, Form of Term Loan Facility Assignment and Assumption Agreement pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.1.W	Exhibit C-3, Form of Third Party Fronting Bank Assignment and Assumption Agreement pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).

78

10.1.X	Exhibit D, Form of Revolving Fronting Bank Agreement pursuant to the Fourth Amended and Restated Credit Agreement (filed herewith).
10.2	Credit Agreement dated as of March 29, 2006 among The AES Corporation as Borrower, Merrill Lynch Capital Corporation as Administrative Agent, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Lead Arranger (filed herewith) including:
10.2.A	Appendix I, Funding Amounts pursuant to the Credit Agreement dated as of March 29, 2006 (filed herewith).
10.2.B	Schedule I, Excluded AES Entities pursuant to the Credit Agreement dated as of March 29, 2006 (filed herewith).
10.2.C	Exhibit A, Form of Note pursuant to the Credit Agreement dated as of March 29, 2006 (filed herewith).
10.2.D	Exhibit B-1, Form of Opinion of the Assistant General Counsel of the Borrower pursuant to the Credit Agreement dated as of March 29, 2006 (filed herewith).
10.2.E	Exhibit B-2, Form of Opinion of Sherman & Sterling, Special Counsel for the Borrower pursuant to the Credit Agreement dated as of March 29, 2006 (filed herewith).
10.2.F	Exhibit C-1, Form of Loan Facility Assignment and Assumption Agreement pursuant to the Credit Agreement dated as of March 29, 2006 (filed herewith).
10.2.G	Exhibit C-2, Form of Fronting Bank Assignment and Assumption Agreement pursuant to the Credit Agreement dated as of March 29, 2006 (filed herewith).
10.2.H	Exhibit D, Form of Fronting Bank Agreement pursuant to the Credit Agreement dated as of March 29, 2006 (filed herewith).
10.2.I	Exhibit E, Form of Request for Loan pursuant to the Credit Agreement dated as of March 29, 2006 (filed herewith).
10.2.J	Exhibit F, Form of Interest Election Request pursuant to the Credit Agreement dated as of March 29, 2006 (filed herewith).
31.1	Certification of principal executive officer required by Rule 13a-14(a)/15d-14(a) of the Exchange Act.
31.2	Certification of principal financial officer required by Rule 13a-14(a)/15d-14(a) of the Exchange Act.
32.1	Certification of principal executive officer required by Rule 13a-14(b) or 15d-14(b) of the Exchange Act.
32.2	Certification of principal financial officer required by Rule 13a-14(b) or 15d-14(b) of the Exchange Act.
101	The following materials from The AES Corporation’s Quarterly Report on Form 10-Q for the interim period ended June 30, 2009 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Changes in Equity, (v) the Notes to the Condensed Consolidated Financial Statements, tagged as block text.

79

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, 2009	By:	/s/ VICTORIA D. HARKER
		Name:	Victoria D. Harker
		Title:	Executive Vice President and Chief Financial Officer (Principal Financial Officer)
	By:	/s/ MARY E. WOOD
		Name:	Mary E. Wood
		Title:	Vice President and Controller (Principal Accounting Officer)

80

EX-10.1

Exhibit 10.1

EXECUTION COPY

FOURTH AMENDED AND RESTATED CREDIT AND

REIMBURSEMENT AGREEMENT

dated as of

July 29, 2008

among

THE AES CORPORATION,

as Borrower,

AES OKLAHOMA HOLDINGS, LLC

AES HAWAII MANAGEMENT COMPANY, INC.,

AES WARRIOR RUN FUNDING, L.L.C.,

AND AES NEW YORK FUNDING, L.L.C.,

as Subsidiary Guarantors,

CITICORP USA, INC.,

as Administrative Agent,

CITIBANK, N.A.,

as Collateral Agent,

CITIGROUP GLOBAL MARKETS INC.,

as Lead Arranger and Book Runner,

BANC OF AMERICA SECURITIES LLC,

as Lead Arranger and Book Runner and as Co-Syndication Agent

(Initial Term Loan Facility),

DEUTSCHE BANK SECURITIES INC.,

as Lead Arranger and Book Runner (Initial Term Loan Facility),

UNION BANK OF CALIFORNIA, N.A.,

as Co-Syndication Agent (Initial Term Loan Facility) and as Lead Arranger and Book Runner and as Syndication

Agent

(Revolving Credit Loan Facility),

LEHMAN COMMERCIAL PAPER INC.,

as Co-Documentation Agent (Initial Term Loan Facility),

UBS SECURITIES LLC,

as Co-Documentation Agent (Initial Term Loan Facility),

SOCIÉTÉ GÉNÉRALE,

as Co-Documentation Agent (Revolving Credit Loan Facility),

CREDIT LYONNAIS NEW YORK BRANCH,

as Co-Documentation Agent (Revolving Credit Loan Facility), and

THE BANKS LISTED HEREIN

TABLE OF CONTENTS

	Page
ARTICLE I
DEFINITIONS
Section 1.01 Definitions	2
Section 1.02 Accounting Terms and Determinations	32
Section 1.03 Types of Borrowing	33
Section 1.04 Currency Equivalents Generally	33
ARTICLE II
THE CREDITS
Section 2.01 Commitment to Lend	33
Section 2.02 Notice of Borrowing	34
Section 2.03 Revolving Letters of Credit	35
Section 2.04 Evidence of Debt	42
Section 2.05 Maturity of Loans	43
Section 2.06 Interest Rates	43
Section 2.07 Method of Electing Interest Rates	45
Section 2.08 Commitment Fee	46
Section 2.09 Termination or Reduction of Revolving Credit Loan Commitments	46
Section 2.10 Prepayment of the Loans	47
Section 2.11 General Provisions as to Payments	48
Section 2.12 Funding Losses	49
Section 2.13 Computation of Interest and Fees	49
Section 2.14 Revolving L/C Cash Collateral Account	49
Section 2.15 Computations of Outstandings; Determination of Available Amount of Alternative Currency Letters of Credit	51
Section 2.16 Alternative Currency Letter of Credit Issuances	52
Section 2.17 Increase in Term Loan Commitments	53
Section 2.18 Increase in Revolving Credit Loan Commitments	55
ARTICLE III
CONDITIONS
Section 3.01 Closing	57
Section 3.02 Extension of Credit	59

i

ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Corporate Existence and Power	60
Section 4.02 Corporate and Governmental Authorization and Filings; No Contravention	60
Section 4.03 Compliance with Laws	61
Section 4.04 Binding Effect	61
Section 4.05 Financial Information	61
Section 4.06 Litigation	62
Section 4.07 Compliance with ERISA	62
Section 4.08 Environmental Matters	62
Section 4.09 Taxes	63
Section 4.10 Material AES Entities	63
Section 4.11 Not an Investment Company	63
Section 4.12 Public Utility Holding Company Act	63
Section 4.13 Full Disclosure	64
Section 4.14 Collateral Documents and Collateral	64
Section 4.15 Existing Letters of Credit	65
Section 4.16 Solvency	65
Section 4.17 Pledged Subsidiaries	66
Section 4.18 Qualified Holding Companies Debt	66
ARTICLE V
COVENANTS
Section 5.01 Information	66
Section 5.02 Payment of Obligations	70
Section 5.03 Maintenance of Property; Insurance	70
Section 5.04 Conduct of Business and Maintenance of Existence	70
Section 5.05 Compliance with Laws	71
Section 5.06 Inspection of Property, Books and Records	71
Section 5.07 Limitation on Debt	71
Section 5.08 Use of Proceeds	76
Section 5.09 Restricted Payments	76
Section 5.10 Negative Pledge	78
Section 5.11 Consolidations and Mergers	81
Section 5.12 [Intentionally omitted.]	81
Section 5.13 Cash Flow Coverage	81
Section 5.14 Recourse Debt to Cash Flow Ratio	82
Section 5.15 Transaction with Affiliates	83
Section 5.16 Investments in Other Persons	84
Section 5.17 Upstreaming of Net Cash Proceeds by Subsidiaries	87
Section 5.18 Sales, Etc., of Assets	87
Section 5.19 Derivative Obligations	90
Section 5.20 Covenant to Give Security	90

ii

Section 5.21 Further Assurances	91
ARTICLE VI
DEFAULTS
Section 6.01 Events of Default	92
Section 6.02 Notice of Default	94
Section 6.03 Cash Collateral	94
ARTICLE VII
THE AGENT
Section 7.01 Appointment and Authorization	95
Section 7.02 Agent and Affiliates	95
Section 7.03 Consultation with Experts	96
Section 7.04 Liability of Agent and Collateral Agent	96
Section 7.05 Indemnification	96
Section 7.06 Credit Decision	97
Section 7.07 Successor Agent or Collateral Agent	97
Section 7.08 Administrative Agent May File Proofs of Claim	98
Section 7.09 Agents’ Fee	98
Section 7.10 [Intentionally Omitted]	98
Section 7.11 Delivery of Information	98
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
Section 8.01 Basis for Determining Interest Rate Inadequate or Unfair	100
Section 8.02 Illegality	100
Section 8.03 Increased Cost and Reduced Return	101
Section 8.04 Taxes	102
Section 8.05 Base Rate Loans Substituted for Affected Euro-Dollar Loans	105
ARTICLE IX
SUBSIDIARY GUARANTY
Section 9.01 The Subsidiary Guaranty	105
Section 9.02 Guaranty Absolute	106
Section 9.03 Discharge Only Upon Payment in Full, Reinstatement in Certain Circumstances	107
Section 9.04 Revolving L/C Cash Collateral Account	107
Section 9.05 Waiver by the Subsidiary Guarantors	108
Section 9.06 Subrogation	108
Section 9.07 Stay of Acceleration	108
Section 9.08 Limitation of Liability	109

iii

Section 9.09 Release of Subsidiary Guarantors	109
Section 9.10 Representations and Warranties	109
Section 9.11 Covenants	109
ARTICLE X
MISCELLANEOUS
Section 10.01 Notices	109
Section 10.02 No Waivers	110
Section 10.03 Expenses; Indemnification	110
Section 10.04 Sharing of Set-offs	110
Section 10.05 Amendments and Waivers	111
Section 10.06 Successors and Assigns	112
Section 10.07 No Margin Stock	115
Section 10.08 Governing Law; Submission to Jurisdiction	115
Section 10.09 Release of Collateral	115
Section 10.10 Counterparts; Integration; Effectiveness	116
Section 10.11 Confidentiality	116
Section 10.12 WAIVER OF JURY TRIAL	116
Section 10.13 Severability; Modification to Conform to Law	117
Section 10.14 Judgment Currency	117
Section 10.15 Revolving Fronting Banks	117
Section 10.16 Replacement of Banks	118

iv

Appendix I	–	Revolving Credit Loan Facility
Appendix II	–	Initial Term Loan Facility
Appendix III	–	Existing Letters of Credit
Schedule I	–	Pledged Subsidiaries
Schedule II	–	Assigned Agreements
Schedule III	–	Non-Pledged Subsidiaries
Schedule IV	–	Excluded AES Entities
Schedule 5.15	–	Existing Agreements with Affiliates
Schedule V	–	Qualified Holding Companies
Schedule VI	–	Existing Debt
Schedule VII	_	Revolving Fronting Banks
Exhibit A-1	–	Form of Revolving Credit Loan Note
Exhibit A-2	–	Form of Term Loan Note
Exhibit B-1	–	Form of Opinion of the General Counsel of the Borrower
Exhibit B-2	–	Form of Opinion of Davis Polk & Wardwell, Special Counsel for the Borrower
Exhibit B-3	–	Form of Opinion of Special Counsel for certain Subsidiaries of the Borrower
Exhibit B-4	–	Form of Opinion of Morris, Nichols, Arsht & Tunnell, Delaware counsel for the Borrower
Exhibit B-5	–	Form of Opinion of Maples and Calder, Cayman Islands counsel for the Borrower
Exhibit B-6	–	Form of Opinion of Conyers Dill & Pearman, British Virgin Islands counsel for the Borrower
Exhibit B-7	–	Form of Opinion of Shearman & Sterling, Special Counsel for the Agent
Exhibit C-1	–	Form of Revolving Credit Loan Facility Assignment and Assumption Agreement
Exhibit C-2	–	Form of Term Loan Facility Assignment and Assumption Agreement
Exhibit C-3	–	Form of Third Party Fronting Bank Assignment and Assumption Agreement
Exhibit D	–	Form of Revolving Fronting Bank Agreement

v

FOURTH AMENDED AND RESTATED CREDIT AND

REIMBURSEMENT AGREEMENT

FOURTH AMENDED AND RESTATED CREDIT AND REIMBURSEMENT AGREEMENT dated as of July 29, 2008 (this “Agreement”) among THE AES CORPORATION, a Delaware corporation (the “Borrower”), the SUBSIDIARY GUARANTORS listed herein, the BANKS listed on the signature pages hereof, CITIGROUP GLOBAL MARKETS INC., as Lead Arranger and Book Runner, BANC OF AMERICA SECURITIES LLC, as Lead Arranger and Book Runner and as Co-Syndication Agent (for the Initial Term Loan Facility (as hereinafter defined)), DEUTSCHE BANK SECURITIES INC, as Lead Arranger and Book Runner (for the Initial Term Loan Facility), UNION BANK OF CALIFORNIA, N.A., as Co-Syndication Agent (for the Initial Term Loan Facility) and as Lead Arranger and Book Runner and as Syndication Agent (for the Revolving Credit Loan Facility (as hereinafter defined)), LEHMAN COMMERCIAL PAPER INC., as Co-Documentation Agent (Initial Term Loan Facility), UBS SECURITIES LLC, as Co-Documentation Agent (Initial Term Loan Facility), SOCIÉTÉ GÉNÉRALE, as Co-Documentation Agent (Revolving Credit Loan Facility), CREDIT LYONNAIS NEW YORK BRANCH, as Co-Documentation Agent (Revolving Credit Loan Facility), CITICORP USA, INC., as Administrative Agent for the Bank Parties (the “Agent”) and CITIBANK, N.A., as Collateral Agent for the Bank Parties (the “Collateral Agent”).

PRELIMINARY STATEMENTS:

1. The Borrower is party to a Third Amended and Restated Credit and Reimbursement Agreement dated as of March 17, 2004 (as amended, amended and restated, supplemented or otherwise modified up to the date hereof, the “Existing Bank Credit Agreement”) among the subsidiary guarantors listed therein, the banks listed on the signatures pages thereof, Citigroup Global Markets, Inc., as Lead Arranger and Book Runner, Banc of America Securities LLC, as Lead Arranger and Book Runner and as Co-Syndication Agent (term loan facility), Deutsche Bank Securities Inc., as Lead Arranger and Book Runner (term loan facility), Union Bank of California, N.A., as Co-Syndication Agent (term loan facility) and as Lead Arranger and Book Runner and as Syndication Agent (Revolving Credit Loan Facility), Lehman Commercial Paper Inc., as Co-Documentation Agent (term loan facility), UBS Securities LLC, as Co-Documentation Agent (term loan facility), Société Générale, as Co-Documentation Agent (Revolving Credit Loan Facility), Credit Lyonnaise New York Branch, as Co-Documentation Agent (Revolving Credit Loan Facility), Citicorp USA, Inc., as Administrative Agent for the Bank Parties and Citibank, N.A., as Collateral Agent for the bank parties.

2. The Borrower wishes to amend and restate the Existing Bank Credit Agreement to, among other things, restructure certain provisions of the Existing Bank Credit Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree to amend and restate the Existing Bank Credit Agreement, and the Existing Bank Credit Agreement is hereby amended and restated, in its entirety as follows:

AES Fourth Amended and Restated Credit Agreement

ARTICLE I

DEFINITIONS

Section 1.01 Definitions.

The following terms, as used herein, have the following meanings:

“Actionable Default” means an Event of Default described in clauses (a), (g) and (h) of Section 6.01.

“Acquired Debt” means Debt of a Person existing at the time the Person merges with or into any Subsidiary or becomes a Subsidiary and not incurred in connection with, or in contemplation of, such merger or such Person becoming a Subsidiary.

“Additional Collateral Trust Agreement Collateral” means the “Additional Collateral” referred to in the Collateral Trust Agreement.

“Additional Term Loan Bank” means any Eligible Assignee who agrees, in accordance with the provisions of Section 2.17, to commit to one of the Term Loan Facilities existing at the time of the request for a Commitment Increase.

“Adjusted London Interbank Offered Rate” means, for any Interest Period and subject to Section 2.02(a)(iv), a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher  ¹/100^th of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.

“Adjusted Parent Operating Cash Flow” means, for any period, (i) Parent Operating Cash Flow for such period less (ii) the sum of the following expenses (determined without duplication), in each case to the extent paid by the Borrower during such period in cash and regardless of whether any such amount was accrued during such period:

(A) income tax expenses of the Borrower and its Subsidiaries; and

(B) corporate overhead expenses (including rental expense of the Borrower).

“Administrative Questionnaire” means, with respect to each Bank Party, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Borrower) duly completed by such Bank.

“Adverse Alternative Currency Letters of Credit” has the meaning set forth in Section 2.16.

“AES” means The AES Corporation, a Delaware corporation, and its successors.

“AES Business” shall have the meaning set forth in Section 5.07(b)(ii).

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“AES BVI II” means AES International Holdings II, Ltd., a company organized under the laws of the British Virgin Islands.

“AES Electric” means Applied Energy Services Electric Limited, an English corporation, and its successors.

“AES Hawaii Management” means AES Hawaii Management Company, Inc., a Delaware corporation and a Subsidiary of the Borrower, and its successors.

“AES Management Group” means (i) individuals who are members of the board of directors or officers of the Borrower or the president of any Material AES Entity; (ii) their respective spouses, children, grandchildren, siblings and parents; (iii) trusts established for the sole or principal benefit of Persons described in clauses (i) and (ii) above; (iv) heirs, executors, administrators and personal or legal representatives of Persons described in clauses (i) and (ii) above; and (v) any corporation or other Person that is controlled by, and a majority of the equity interests in which are directly owned by, Persons described in clauses (i) and (ii) above.

“AES New York” means AES New York Funding, L.L.C., a Delaware limited liability company and a wholly-owned Subsidiary of the Borrower, and its successors.

“AES OKLAHOMA” means AES Oklahoma Holdings, L.L.C., a Delaware limited liability company and a Subsidiary of the Borrower, and its successors.

“AES Sonel” means AES-SONEL S.A., a société anonyme organised and existing under the laws of Cameroon.

“AES Warrior Run” means AES Warrior Run Funding, L.L.C., a Delaware limited liability company and a Wholly-Owned Consolidated Subsidiary of the Borrower, and its successors.

“Affiliate” means (i) any Person that directly, or indirectly through one or more intermediaries, controls the Borrower (a “Controlling Person”), or (ii) any Person (other than the Borrower or a Subsidiary) which is controlled by or is under common control with a Controlling Person or (iii) as to any Person (other than the Borrower and its Subsidiaries), any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. As used herein, the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Agent” means Citicorp USA, Inc., in its capacity as administrative agent for the Bank Parties hereunder, and its successors in such capacity.

“Agreement” has the meaning specified in the recital of the parties to this Agreement.

“Alternative Currency” means (i) any lawful currency (other than Dollars) that is freely transferable and convertible into Dollars or (ii) with respect to any Revolving Letter of

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Credit issued by a Revolving Fronting Bank, any other lawful currency (other than Dollars) that such Revolving Fronting Bank agrees may be used as the designated currency of such Revolving Letter of Credit; provided that such Revolving Fronting Bank is able to provide, and continues to provide, to the Agent the information required pursuant to Section 2.15(b) with respect to such Revolving Letter of Credit.

“Alternative Currency Letter of Credit” means any Revolving Letter of Credit having a stated amount denominated in an Alternative Currency.

“Amendment No. 2 to the Collateral Trust Agreement” means Amendment No. 2 to the Collateral Trust Agreement dated as of the Effective Date, by and among each grantor thereunder, the Representatives (as defined in the Collateral Trust Agreement) and the Corporate Trustee.

“Amendment and Restatement Effective Date” means the date that Amendment No. 13 to the Existing Bank Credit Agreement, dated as of July 29, 2008, becomes effective in accordance with Section 2 thereof.

“Applicable Lending Office” means, with respect to any Bank Party, (i) in the case of its Base Rate Loans, its Domestic Lending Office and (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.

“Applicable Revolving Margin” means, on any date, the percentage set forth in the table below based on the ratings assigned to the Facilities on such date by Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services:

Rating (Moody’s/S&P)	Margin
Ba1 (or higher)/BB+ (or higher)	1.50	%
Ba2/BB	1.75	%
Ba3/BB-	2.00	%
B1 (or lower)/B+ (or lower)	2.50	%

If the Facilities are rated by only one such rating agency, the rating of such rating agency shall be used in determining the Applicable Revolving Margin. If the Facilities are rated by both such rating agencies and (x) the ratings differential is one level, the lower rating will apply or (y) the ratings differential is two levels or more, the midpoint rating will apply; provided that if there is no midpoint rating, the lower of the two intermediate ratings surrounding the midpoint will apply. If the Facilities are not rated by either of such rating agencies, the Facilities shall be deemed to be rated one level higher than (i) in the case of Moody’s Investors Service Inc., the Borrower’s corporate family rating and (ii) in the case of Standard & Poor’s Rating Services, the Borrower’s corporate credit rating and, in each case, the rules of the preceding two sentences shall apply to such deemed ratings. If the Facilities are not rated (or deemed rated in accordance with the preceding sentence) by either or such rating agencies, the Applicable Revolving Margin shall be 2.50%.

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“Arranger Parties” means Citigroup Global Markets Inc., as Lead Arranger and Book Runner, Banc of America Securities LLC, as Lead Arranger and Book Runner and as Co-Syndication Agent (Initial Term Loan Facility), Deutsche Bank Securities Inc., as Lead Arranger and Book Runner (Initial Term Loan Facility) and Union Bank of California, N.A., as Co-Syndication Agent (Initial Term Loan Facility) and as Lead Arranger and Book Runner and as Syndication Agent (Revolving Credit Loan Facility).

“Asset Sale” means any sale, lease, transfer or other disposition (including any such transaction effected by way of merger or consolidation or by way of an Equity Issuance by a Subsidiary) by the Borrower or any of its Subsidiaries, but excluding any transactions permitted by the provisions of Section 5.18 (other than sales of assets or Equity Interests of, or other Investments in, IPALCO or any of its Subsidiaries or any Subsidiary Guarantor or Subsidiary thereof permitted by subsection (iv) thereof); provided that a disposition of such assets not excluded during any fiscal year shall not constitute an Asset Sale unless and until (and only to the extent that) the aggregate Net Cash Proceeds from such disposition, when combined with all other such dispositions previously made during such fiscal year, exceeds $10,000,000.

“Assigned Agreements” has the meaning set forth in Section 4.14(d).

“Assignee” has the meaning set forth in Section 10.06(c).

“Assignment and Assumption” means an assignment and assumption agreement substantially in the form of Exhibit C-1, C-2 or C-3 hereto, as applicable.

“Assumption Agreement” has the meaning set forth in Section 2.17(d).

“Automatic Acceleration Event” means the occurrence, with respect to the Borrower, of any of the Events of Default listed in clauses (g) and (h) of Section 6.01.

“Available Amount” means, for any Revolving Letter of Credit on any date of determination, the maximum aggregate amount (which, in the case of an Alternative Currency Letter of Credit, shall be the Dollar Equivalent on such date of determination of such amount) available to be drawn under such Revolving Letter of Credit at any time on or after such date, the determination of such maximum amount to assume the compliance with and satisfaction of all conditions for drawing enumerated therein.

“Bank” means each lender listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 10.06(c), each Incremental Term Loan Bank and their respective successors. Without limiting the generality of the foregoing sentence, the term “Banks” shall include the Term Loan Banks.

“Bank Party” means any Bank.

“Banks’ Ratable Share” means, in respect of any Net Cash Proceeds, a percentage of the Creditors’ Portion equal to a fraction (x) the numerator of which is the Total Bank Exposure at such time and (y) the denominator of which is the sum of the Total Bank Exposure at such time plus the aggregate principal amount of First Priority Secured Debt, the proceeds of which were used to permanently reduce Total Bank Exposure.

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“Bankruptcy Law” means any law relating to bankruptcy, insolvency, winding up, reorganization, suspension of payments, arrangement, liquidation, relief of debtors, receivership, compromise, amalgamation, assignment for the benefit of creditors or composition or readjustment of debts, or any equivalent or similar proceeding or action.

“Base Rate” means, for any day, a rate per annum equal to the higher of (i) the rate of interest publicly announced by Citicorp USA, Inc. from time to time as its Base Rate for such day and (ii) the sum of  ¹/2 of 1% plus the Federal Funds Rate for such day.

“Base Rate Borrowing” has the meaning set forth in the definition of “Borrowing” herein.

“Base Rate Loan” means a Loan which bears interest at the Base Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate Election or the provisions of Section 2.07(a) or Article 8 plus the Base Rate Margin.

“Base Rate Margin” means (i) in respect of the Revolving Credit Loans, a rate per annum equal to the Applicable Revolving Margin less 1.00%, (ii) in respect of the Initial Term Loans, a rate per annum equal to 0.75% (subject to the provisions of Section 2.06(f) hereof), and (iii) in respect of the Incremental Term Loan Facility, a rate per annum to be agreed to by the Borrower, the Agent and the Incremental Term Loan Banks.

“Benefit Arrangement” means, at any time, an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group.

“Borrower” has the meaning specified in the recital of the parties to this Agreement.

“Borrowing” means (i) a borrowing hereunder consisting of Revolving Credit Loans made to the Borrower at the same time by the Revolving Credit Loan Banks pursuant to Section 2.01(a) or (ii) a borrowing hereunder consisting of Incremental Term Loans made to the Borrower at the same time by the Incremental Term Loan Banks pursuant to Section 2.17. A Borrowing is a “Base Rate Borrowing” if such Loans are Base Rate Loans or a “Euro-Dollar Borrowing” if such Loans are Euro-Dollar Loans.

“Bridge Debt” means any Debt incurred pursuant to Section 5.07(b)(iv) relating to a bridge financing of any Asset Sale.

“Business Day” means either (i) a Domestic Business Day or (ii) a Euro-Dollar Business Day, as applicable.

“BVI Cayman Pledge Agreement” means the Pledge Agreement dated as of December 12, 2002, made by AES BVI II in favor of the Collateral Trustees.

“BVI Collateral” means the “Collateral” referred to in the BVI Cayman Pledge Agreement.

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“Cameroon Business” means any AES Business located in the Republic of Cameroon, including, without limitation, AES Sonel.

“Capital Commitment” means any contractual commitment or obligation under an equity contribution or other agreement the primary purpose of which is for the Borrower to provide to an AES Business a portion of the capital required to finance construction projects, the acquisition of additional assets or capital improvements being undertaken by such AES Business.

“Capital Stock” means, with respect to any Person, any and all shares, interests, participants or other equivalents (however designated, whether voting or non-voting) of, or interests in (however designated), the equity of such Person, including, without limitation, all common stock and preferred stock and partnership and joint venture interests of such Person.

“Cash Flow Coverage Ratio” means, for any period, the ratio of (i) Adjusted Parent Operating Cash Flow for such period to (ii) Corporate Charges for such period.

“CFC” means any entity that is a controlled foreign corporation under Section 957 of the Internal Revenue Code (or any successor provision thereto).

“Closing Date” means March 17, 2004, the date on which the Agent received the fees and documents specified in or pursuant to Section 3.01.

“Collateral” means the Creditor Group Collateral.

“Collateral Account” has the meaning as set forth in the Collateral Trust Agreement.

“Collateral Agent” means Citibank N.A., in its capacity as collateral agent for the Lender Parties under the Financing Documents and its successors in such capacity.

“Collateral Documents” means the Security Agreement, the Collateral Trust Agreement, the BVI Cayman Pledge Agreement and any other agreement that creates or purports to create a Lien in favor of the Collateral Trustees for the benefit of the Secured Holders.

“Collateral Trust Agreement” means the Collateral Trust Agreement dated as of December 12, 2002 made by the grantors thereunder in favor of the Collateral Trustees, as amended by Amendment No. 1 dated as of July 29, 2003 and as further amended from time to time.

“Collateral Trustees” has the meaning as set forth in the Collateral Trust Agreement.

“Collateral Value” means, at any time, the aggregate book value at such time of the percentage of Equity Interests pledged in favor of the Secured Holders (other than the Equity Interests of the Excluded AES Entities); provided that the book value of each Subsidiary whose Equity Interests are being pledged shall be determined at such time (without giving effect to any accumulated other comprehensive gain or loss) by the sum of (i) its contributed capital less (ii) its intercompany receivables, plus (iii) its pre-tax retained earnings, plus (iv) its

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intercompany payables and less (v) dividends paid to the Borrower by such Subsidiary; provided further that for purposes of determining IPALCO’s book value, IPALCO’s contributed capital shall be calculated on a purchase accounting basis.

“Commitment Increase” has the meaning set forth in Section 2.17(a).

“Communications” has the meaning set forth in Section 7.11(a).

“Conduit Lender” means any special purpose corporation organized and administered by any Bank for the purpose of making Loans hereunder otherwise required to be made by such Bank and designated by such Bank in a written instrument, subject to the consent of the Agent and the Borrower (which, in each case, shall not be unreasonably withheld or delayed); provided that the designation by any Bank of a Conduit Lender shall not relieve the designating Bank of any of its obligations to fund a Loan under the Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Bank (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Lender, and provided further that no Conduit Lender shall (i) be entitled to receive any greater amount pursuant to Section 8.03, 8.04 or 10.03 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (ii) be deemed to have any Revolving Credit Commitment hereunder.

“Consolidated Subsidiary” means, at any date with respect to any Person, any Subsidiary of such Person or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date.

“Controlling Person” has the meaning set forth in the definition of “Affiliate” herein.

“Corporate Charges” means, for any period, the sum of the following amounts (determined without duplication), in each case to the extent paid in cash by the Borrower during such period and regardless of whether any such amount was accrued during such period:

(i) interest expense of the Borrower for such period:

(A) including, without limitation, interest expense attributable to (x) the accretion of original issue discount on Debt issued at less than face value thereof and (y) any interest added to the principal amount of Debt; but

(B) excluding any interest expense to the extent that (x) the Borrower has the option or obligation to pay or satisfy such interest expense by the issuance of Capital Stock of the Borrower or other securities of the Borrower which would not constitute Recourse Debt and (y) the Borrower has not paid or satisfied such interest expense during such period with cash or by the issuance of Recourse Debt;

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(ii) regularly scheduled dividend (including cumulative payments made as a result of any deferral) payments paid on the Borrower’s Redeemable Stock during such period;

(iii) regularly scheduled dividend (including cumulative payments made as a result of any deferral) payments paid on Trust Preferred Securities during such period; and

(iv) regularly scheduled dividend (including cumulative payments made as a result of any deferral) payments paid on the Borrower’s preferred stock or Hybrid Securities during such period.

“Corporate Trustee” means Wilmington Trust Company, a Delaware banking corporation, as Corporate Trustee under the Collateral Trust Agreement and any successor in such capacity.

“Covered Transaction” has the meaning set forth in the definition of “Net Cash Proceeds” herein.

“Credit Agreement Documents” has the meaning set forth in the Collateral Trust Agreement.

“Credit Party” has the meaning set forth in Section 8.03.

“Creditor Group Collateral” means the Security Agreement Collateral, the Additional Collateral Trust Agreement Collateral and the BVI Collateral.

“Creditors’ Portion” means, in respect of any Net Cash Proceeds, (i) 60% of such Net Cash Proceeds at any time that the Recourse Debt to Cash Flow Ratio is greater than or equal to 5.0:1.0 or (ii) 50% of such Net Cash Proceeds at any time that the Recourse Debt to Cash Flow Ratio is less than 5.0:1.0.

“Debt” of any Person means at any date, without duplication, (i) all Obligations 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 to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business; (iv) all Obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles; (v) all Obligations (whether contingent or non-contingent) of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit, surety or performance bond or similar instrument; (vi) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person; (vii) all Debt of others Guaranteed by such Person and (viii) all Redeemable Stock of such Person valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends. For purposes hereof, contingent obligations of the type described in clause (v) of this definition with respect to letters of credit not issued hereunder shall not be treated as “Debt” hereunder to the extent that such obligations are cash collateralized or to the extent that the issuer of any such letter of credit is entitled to draw under a

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Revolving Letter of Credit issued hereunder which by its terms requires that Revolving L/C Drawings under such letter of credit be applied only to reimburse such issuer for amounts paid by such issuer under such letter of credit. The obligations of the Borrower under any Capital Commitment or under any agreement, in the form of indemnity or contingent equity contribution agreement or otherwise, pursuant to which the Borrower agrees to protect any Person, in whole or in part, from tax liabilities, environmental liabilities, political risks, including currency convertibility and transferability risk and changes in law, or construction cost overruns shall not constitute Debt. For the avoidance of doubt, Qualified Equity-Linked or Hybrid Securities shall not be considered Debt for any purpose of this Agreement (other than for purposes of the definition of Material Debt and Section 6.01 hereof).

“Default” means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.

“Derivatives Obligations” of any Person means all obligations of such Person in respect of any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, credit derivative transaction, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions; provided that Derivatives Obligations shall not include any obligations of such Person in relation to an equity forward contract, equity or equity index swap or equity or equity index option pertaining, linked or indexed to the common stock of such Person or any affiliate thereof. For purposes of determining the aggregate amount of Derivative Obligations on any date or the Recourse Debt to Cash Flow Ratio on any date, the Derivative Obligations of the applicable Person in respect of any Hedge Agreement shall be the maximum aggregate amount (after giving effect to any netting agreements to the extent such netting agreements are with the same Person to whom any such Derivative Obligations are owed or with Affiliates of such Person) that the applicable Person would be required to pay if such Hedge Agreement were terminated at such time.

“Direct Exposure” has the meaning set forth in Section 2.14(c).

“Disclosed Matters” means matters disclosed in any SEC Filings made prior to March 15, 2004 or in written materials sent by or on behalf of the Borrower to all of the Bank Parties prior to March 15, 2004.

“Dollar Equivalent” means, on any date of determination with respect to any Alternative Currency Letter of Credit, (i) in calculating the maximum aggregate amount available to be drawn under such Alternative Currency Letter of Credit at any time on or after such date, the amount thereof in Dollars most recently reported to the Agent pursuant to Section 2.15 in calculating the amount of any Revolving L/C Drawing under such Alternative Currency Letter of Credit, the aggregate amount of Dollars paid by the relevant Revolving Fronting Bank to purchase the Alternative Currency paid by such Revolving Fronting Bank in respect of such Revolving L/C Drawing.

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“Dollars” has the meaning set forth in Section 2.16.

“Domestic Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close.

“Domestic Lending Office” means, as to each Bank Party, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank Party may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Agent.

“Effective Date” means March 17, 2004, the date the Existing Bank Credit Agreement became effective in accordance with Section 10.10 of the Existing Bank Credit Agreement.

“Eligible Assignee” means any commercial bank or financial institution (including, without limitation, any fund that regularly invests in loans similar to the Term Loans) as approved (which approval shall be required only so long as no Event of Default has occurred and is continuing at the time of an assignment) by the Borrower (such approval not to be unreasonably withheld or delayed); provided, however, that neither any Loan Party nor any Subsidiary of a Loan Party shall qualify as an Eligible Assignee under this definition.

“Environmental Laws” means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment, including, without limitation, ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof.

“Equity Credit Preferred Securities” means, at any date:

(i) Debt of the Borrower (A) that is owed to a Special Purpose Financing Subsidiary of the Borrower; (B) that is issued in connection with the issuance by such Special Purpose Financing Subsidiary of Existing Trust Preferred Securities; (C) that is subordinated in right of payment to other Debt of the Borrower of at least the types and to at least the extent as was, on the date of issuance thereof, the Junior Subordinated Debentures issued by AES in connection with the issuance by AES Trust III of its $3.375 Term Convertible Securities, Series C, on October 7, 1999 (or otherwise satisfactory to the Agent); and (D) as to which, at such date, AES has the right to defer the payment of all interest for the period of at least 19 consecutive quarters beginning at such date; and

(ii) Guarantees by the Borrower of the obligations of the issuer of any Existing Trust Preferred Securities in respect of such Existing Trust Preferred Securities; and

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(iii) Mandatorily convertible securities (such as those known as “DECS” (including tax deductible DECS)) consisting of Debt of the Borrower that is subordinated in right of payment to other Debt of the Borrower of at least the types and to at least the extent as was, on the date of issuance thereof, the Junior Subordinated Debentures issued by the Borrower in connection with the issuance by AES Trust III of its $3.375 Term Convertible Securities, Series C, on October 7, 1999, (or otherwise satisfactory to the Agent) and which is mandatorily convertible into, or redeemable with the proceeds of, Capital Stock of the Borrower (other than Redeemable Stock).

“Equity Interest” means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination; provided that Equity Interest shall not include Trust Preferred Securities (other than the Existing Trust Preferred Securities) or any debt security that constitutes Debt and is convertible into, or exchangeable for, Equity Interests.

“Equity Issuances” means, in respect of any Person, the issuance or sale of Equity Interests of such Person other than any such issuance to directors, officers or employees pursuant to employee benefit plans in the ordinary course of business (including by way of exercise of stock options).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute.

“ERISA Group” means the Borrower, its Subsidiaries and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Internal Revenue Code.

“Euro-Dollar Borrowing” has the meaning set forth in the definition of “Borrowing” herein.

“Euro-Dollar Business Day” means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London.

“Euro-Dollar Default Rate” has the meaning set forth in Section 2.06(c).

“Euro-Dollar Lending Office” means, as to each Bank Party, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or

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affiliate of such Bank Party as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Agent.

“Euro-Dollar Loan” means a Loan which bears interest at the Adjusted London Interbank Offered Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate Election plus the Euro-Dollar Margin.

“Euro-Dollar Margin” means (i) in respect of the Revolving Credit Loans, a rate per annum equal to the Applicable Revolving Margin, (ii) in respect of the Initial Term Loans, a rate per annum equal to 1.75% (subject to the provisions of Section 2.06(f) hereof) and (iii) in respect of the Incremental Term Loan Facility, a rate per annum to be agreed to by the Borrower, the Agent and the Incremental Term Loan Banks.

“Euro-Dollar Reserve Percentage” means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of “Eurocurrency liabilities” (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage.

“Event of Default” has the meaning set forth in Section 6.01.

“Excess Revolving L/C Collateral” has the meaning set forth in Section 2.14(d).

“Exchange Note Holders” means the holders of the Senior Secured Exchange Notes.

“Excluded AES Business” means any AES Business located in Brazil or Argentina; provided that the Borrower may by written notice to the Agent make an election not to treat one or more AES Businesses in Brazil or Argentina as an “Excluded AES Business”. Once the Borrower elects not to treat an AES Business as an “Excluded AES Business” it may not thereafter change or revoke such election with respect to such AES Business without the consent of the Required Banks.

“Excluded AES Entity” means any Person set forth on Schedule IV, as such Schedule IV may be updated pursuant to Section 5.01(l)(2) whose assets consist only of any of the Excluded AES Businesses and direct or indirect Investments therein.

“Existing Bank Credit Agreement” has the meaning set forth in the first preliminary statement hereto.

“Existing Letter of Credit” means a “Letter of Credit” (as defined in the Former Bank Credit Agreement) issued under the Former Bank Credit Agreement that was

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outstanding on the Effective Date and listed on Appendix III under the heading “Existing Revolving Letters of Credit”.

“Existing Trust Preferred Securities” means (i) the $3.375 Trust Preferred Securities, Series C issued by AES Trust III on October 7, 1999 and (ii) the $3.00 Trust Convertible Preferred Securities issued by AES Trust VII on May 17, 2000.

“Extension of Credit” means (i) a Borrowing pursuant to Section 2.01 or Section 2.17 or (ii) the issuance of a Revolving Letter of Credit pursuant to Section 2.03.

“Facilities” means the Revolving Credit Loan Facility, the Initial Term Loan Facility and any Incremental Term Loan Facility made available to the Borrower pursuant to Section 2.17.

“Federal Funds Rate” means, for any day, the rate per annum (rounded upward, if necessary, to the nearest  ¹/100^th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day; provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Citicorp USA, Inc. on such day on such transactions as determined by the Agent.

“Financing Documents” means this Agreement, the Collateral Documents and the Notes.

“Financing Parties” means (i) the Bank Parties hereunder and (ii) Exchange Note Holders.

“First Priority Secured Debt” means Debt of the Borrower secured by a first-priority lien on the Creditor Group Collateral (subject to the limitations set forth in Section 5.10(p)), provided that Debt owed to an Affiliate of the Borrower shall not be First-Priority Secured Debt.

“Foreign Subsidiary” means a Pledged Subsidiary or a Subsidiary of a Pledged Subsidiary (other than an Excluded AES Entity) organized under the laws of a jurisdiction other than the United States or any State thereof.

“Form 10-K” means the Borrower’s annual report on Form 10-K for the year ended December 31, 2003, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934.

“Form 10-Q” means the Borrower’s quarterly report on Form 10-Q for the quarter ended September 30, 2003, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934.

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“Former Bank Credit Agreement” means the “Existing Bank Credit Agreement” as defined in the Existing Bank Credit Agreement.

“GAAP” has the meaning set forth in Section 1.02.

“Group of Loans” means, at any time, a group of Loans consisting of (i) all Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans having the same Interest Period at such time; provided that if a Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made.

“Guarantee” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business or, for the avoidance of doubt, obligations of the Borrower to provide capital to an AES Business under a Capital Commitment. The term “Guarantee” used as a verb has a corresponding meaning.

“Guaranteed Obligations” has the meaning set forth in Section 9.01.

“Hazardous Substances” means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics.

“Hedge Agreement” means any contract, instrument or agreement in respect of Derivative Obligations.

“Hedge Bank” means any Bank Party or an Affiliate of a Bank Party in its capacity as a party to a Secured Hedge Agreement.

“Hybrid Securities” means, with respect to any Person, any securities of such Person that, at the time of issuance, received at least two of the following treatments: (a) “intermediate equity content” or better equity treatment from Standard & Poor’s Rating Services, (b) “Basket C Equity Credit” or better equity treatment from Moody’s Investors Service, Inc. and (c) “Class C- Moderate Equity Content” or better equity treatment from Fitch Ratings; provided that to the extent any such category of a rating agency is no longer in existence, the applicable references in this definition shall be deemed to be a reference to the nearest equivalent category of such rating agency.

“Increase Commitment Date” has the meaning set forth in Section 2.17(b).

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“Increase Date” has the meaning set forth in Section 2.17(a).

“Incremental Term Loan” means each term loan made by an Incremental Term Loan Bank under the Incremental Term Loan Facility in accordance with the terms of Section 2.17.

“Incremental Term Loan Bank” means each Bank (including any Additional Term Loan Bank) having an Incremental Term Loan.

“Incremental Term Borrowings” means a borrowing consisting of simultaneous Incremental Term Loans of the same type made by the Incremental Term Loan Banks.

“Incremental Term Loan Commitment” means, with respect to each Incremental Term Loan Bank, the amount set forth for such Bank in respect of the Incremental Term Loan Facility in the Register maintained by the Agent pursuant to Section 10.06(f).

“Incremental Term Loan Facility” has the meaning set forth in Section 2.17(a).

“Incremental Term Loan Note” means a promissory note of the Borrower to the order of any Incremental Term Loan Bank, in substantially the form of Exhibit A-2 hereto (with such modifications as the Borrower and the Agent may agree are necessary to evidence the terms of the Incremental Term Loan Facility), evidencing the indebtedness of the Borrower to such Bank resulting from the Incremental Term Loan deemed to have been made by such Lender.

“Incremental Term Loan Termination Date” has the meaning set forth in the definition of “Termination Date” herein.

“Indemnitee” has the meaning set forth in Section 10.03(b).

“Initial Term Loan” means each “Term Loan” under the Existing Bank Credit Agreement continued as an Initial Term Loan hereunder in accordance with the terms of Section 2.01(b) and each Initial Term Loan made as a result of a Commitment Increase in accordance with the terms of Section 2.17.

“Initial Term Loan Bank” means each Bank (including any Additional Term Loan Bank) having an Initial Term Loan.

“Initial Term Loan Commitment” means, with respect to each Initial Term Loan Bank, the amount set forth opposite its name on Appendix II hereto or, if such Bank has entered into one or more Assignment and Assumptions or Assumption Agreements or is an Additional Term Loan Bank, the amount set forth for such Bank in respect of the Initial Term Loan Facility in the Register maintained by the Agent pursuant to Section 10.06(f).

“Initial Term Loan Facility” means, at any time, the aggregate amount of the Initial Term Loan Banks’ Initial Term Loans at such time.

“Initial Term Loan Note” means a promissory note of the Borrower to the order of any Initial Term Loan Bank, in substantially the form of Exhibit A-2 hereto, evidencing the

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indebtedness of the Borrower to such Bank resulting from the Initial Term Loan deemed to have been made by such Lender.

“Initial Term Loan Termination Date” has the meaning set forth in the definition of “Termination Date” herein.

“Interest Period” means, with respect to each Euro-Dollar Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Interest Rate Election and ending one, two, three, six or, with the consent of all affected Banks, nine or twelve months thereafter, as the Borrower may elect in such notice; provided that:

(i) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day;

(ii) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (iii) below, end on the last Euro-Dollar Business Day of a calendar month; and

(iii) any Interest Period that would otherwise end after the Termination Date shall end on the Termination Date.

“Intermediate Holding Companies” has the meaning set forth in Section 5.16(b).

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, or any successor statute.

“Investment” means any investment in any Person, whether by means of share purchase, capital contribution, loan, Guarantee, time deposit or otherwise (but not including any demand deposit).

“IPALCO” means Ipalco Enterprises, Inc., an Indiana corporation.

“IPALCO Asset Sale” has the meaning set forth in Section 2.09(b)(ii).

“Lender Parties” has the meaning set forth in the Collateral Trust Agreement.

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. For the purposes of this Agreement, the Borrower or any of its Subsidiaries shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.

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“Loan” means a Revolving Credit Loan or a Term Loan, each of which may be a Base Rate Loan or a Euro-Dollar Loan and “Loans” means Revolving Credit Loans or Term Loans, each of which may be Base Rate Loans or Euro-Dollar Loans or any combination of the foregoing.

“Loan Party” means each Obligor and AES BVI II.

“London Interbank Offered Rate” means, for any Interest Period, the average (rounded upward, if necessary, to the next higher  ¹/16^th of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two business days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period.

“Material Adverse Effect” means a material adverse effect on (i) the business, consolidated results of operations, consolidated financial condition or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Loan Parties to perform their material obligations under any Financing Document or (iii) the rights of and remedies available to any Bank Party under any Financing Document.

“Material AES Entity” means (i) any Subsidiary Guarantor and (ii) any other Person in which the Borrower has a direct or indirect equity Investment if such Person’s contribution to Parent Operating Cash Flow for the four most recently completed fiscal quarters of the Borrower constitutes 15% or more of Parent Operating Cash Flow for such period.

“Material Debt” means, with respect to any Person, Debt (other than the Loans and the Reimbursement Obligations) of such Person arising in one transaction, in an aggregate principal amount exceeding $50,000,000.

“Material Hedge Agreement” means, with respect to any Person, a Hedge Agreement entered into by such Person in respect of which the Derivative Obligations of such Person exceed $50,000,000.

“Material Obligation” means any obligation or liability in an amount equal to or in excess of $50,000,000.

“Material Plan” means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $50,000,000.

“Maximum Outstanding Exposure” has the meaning set forth in Section 2.15(a).

“Minimum CP Rating” means (i) A-1 for Standard & Poor’s Ratings Services; (ii) P-1 for Moody’s Investors Service, Inc.; (iii) F-1 for Fitch IBCA, Inc. and (iv) D-1 for Duff & Phelps Credit Rating Co.

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“Minimum Ratings Condition” means, at any time of determination, that the Facilities are rated at least Ba1 from Moody’s Investors Service, Inc. and the corporate credit rating of the Borrower is at least BB- from Standard & Poor’s Ratings Services, in each case without any negative outlook.

“Multiemployer Plan” means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period.

“Net Cash Proceeds”: (a) with respect to an Equity Issuance by a Subsidiary or the incurrence of Debt (a “Covered Transaction”), means the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred consideration) by the Borrower and its Subsidiaries from such Covered Transaction after deducting therefrom (without duplication) (i) brokerage commissions, underwriting fees and discounts, legal fees, finder’s fees and other similar fees and commissions, (ii) in the case of a Covered Transaction in the form of incurrence of Debt by a Subsidiary, the amount of any Debt of such Subsidiary that, by the terms of the agreement or instrument governing such Debt or applicable law, is required to be repaid or prepaid and is actually so repaid or prepaid with all or a portion of the proceeds of such Covered Transaction and (iii) any portion of the proceeds of such Covered Transaction required to prepay or collateralize interest or dividends payable in respect of such Covered Transaction during one six-month period; and

(b) with respect to any Asset Sale, means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received (including any cash received upon sale or disposition of such note or receivable), excluding any other consideration received in the form of assumption by the acquiring Person of Debt or other obligations relating to the property disposed of in such Asset Sale or received in any other noncash form) therefrom, in each case, net of:

(i) all legal, title and recording tax expenses, commissions and other customary fees and expenses incurred (including, without limitation, consent and waiver fees and any applicable premiums, earn-out or working interest payments or payments in lieu or in termination thereof), and all federal, state, provincial, foreign and local taxes payable to the relevant tax authority (x) as a direct consequence of such Asset Sale, (y) as a result of the required repayment of any Debt in any jurisdiction other than the jurisdiction where the property disposed of was located or (z) as a result of any repatriation to the U.S. of any proceeds of such Asset Sale,

(ii) a reasonable reserve (which reserve if required by the applicable sale agreement, shall be deposited into a third party escrow account with an escrow agent and shall be maintained in such account until such time as the applicable indemnification obligation expires or the amounts on deposit are required to make indemnification payments) for any indemnification payments

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(fixed and contingent) attributable to seller’s indemnities to the purchaser undertaken by the Borrower or any of its Subsidiaries in connection with such Asset Sale (but excluding any payments, which by the terms of the indemnities will not, under any circumstances, be made prior to the Termination Date); provided that any amounts in such reserve to the extent not paid to the purchaser as an indemnification payment after the expiration of any applicable time period set forth in the agreements in respect of such Asset Sale shall be treated as “Net Cash Proceeds” for all purposes of this Agreement,

(iii) all payments made on any Debt which must by its terms or by applicable law be repaid out of the proceeds from such Asset Sale, and

(iv) all required distributions and other required payments made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Sale;

provided that for purposes of determining Net Cash Proceeds received by a Subsidiary required to be applied pursuant to Section 2.10, only that portion of such Net Cash Proceeds received by the Borrower or a Qualified Holding Company whose Equity Interests have been pledged to the Secured Holders pursuant to the Collateral Documents from such Subsidiary in accordance with Section 5.17 shall be included.

“Non-Consenting Bank” has the meaning set forth in Section 10.16.

“Non- Pledged Subsidiaries” means (i) as of the Closing Date, each of the direct Subsidiaries of the Borrower or of AES BVI II listed on Schedule III or (ii) after the Closing Date, in addition to the “Non- Pledged Subsidiaries” set forth on Schedule III, any newly formed or acquired direct (1) Subsidiary of the Borrower whose aggregate assets have a fair market value not in excess of $3,000,000 and, together with the fair market value of the assets of all Non- Pledged Subsidiaries (other than any Subsidiary which is described in clause (2) below), does not exceed $50,000,000 or (2) Subsidiaries of the Borrower for which a grant or perfection of a Lien on such Subsidiary stock would require approvals and consents from foreign and domestic regulators and from lenders to, and suppliers, customers or other contractual counterparties of, such Subsidiary.

“Note” means a Revolving Credit Loan Note or a Term Loan Note.

“Notice of Borrowing” has the meaning set forth in Section 2.02.

“Notice of Interest Rate Election” has the meaning set forth in Section 2.07(a).

“Notice of Issuance” has the meaning set forth in Section 2.03(d).

“Obligation” means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged,

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stayed or otherwise affected by any proceeding referred to in Section 6.01(g) or (h). Without limiting the generality of the foregoing, the Obligations of the Borrower and the Subsidiary Guarantor’s under the Loan Documents include (i) the obligation to pay principal, interest, Revolving Letter of Credit commissions, charges, expenses, fees, attorneys’ fees and disbursements, indemnities and other amounts payable by the Borrower and such Subsidiary Guarantor under any Financing Document and (ii) the obligation of the Borrower and such Subsidiary Guarantor to reimburse any amount in respect of any of the foregoing that any Bank Party, in its sole discretion, may elect to pay or advance on behalf of the Borrower and such Subsidiary Guarantor.

“Obligors” means the Borrower and the Subsidiary Guarantor’s.

“Off Balance Sheet Obligation” means, with respect to any Person, any Obligation of such Person under a synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing classified as an operating lease in accordance with GAAP, if such Obligations would give rise to a claim against such Person in a proceeding referred to in Section 6.01(h).

“Other Taxes” has the meaning set forth in Section 8.04(b).

“Parent” means, with respect to any Bank Party, any Person controlling such Bank Party.

“Parent Operating Cash Flow” means, for any period, the sum of the following amounts (determined without duplication) as calculated below:

(i) dividends paid to the Borrower by its Subsidiaries during such period;

(ii) consulting and management fees paid to the Borrower for such period;

(iii) tax sharing payments made to the Borrower during such period;

(iv) interest and other distributions paid to the Borrower during such period with respect to cash and other Temporary Cash Investments of the Borrower (other than with respect to amounts on deposit in the Revolving L/C Cash Collateral Account);

(v) cash payments made to the Borrower in respect of foreign exchange Hedge Agreements or other foreign exchange activities entered into by the Borrower on behalf of any of its Subsidiaries; and

(vi) other cash payments made to the Borrower by its Subsidiaries other than (A) returns of invested capital; (B) payments of the principal of Debt of any such Subsidiary to the Borrower and (C) payments in an amount equal to the aggregate amount released from debt service reserve accounts upon the issuance of letters of credit for the account of the Borrower and the benefit of the beneficiaries of such accounts.

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For purposes of determining Parent Operating Cash Flow:

(1) net cash payments received by a Qualified Holding Company whose Equity Interests have been pledged to the Secured Holders pursuant to the Collateral Documents during any period which could have been (without regard for any cash held by such Qualified Holding Company at the beginning of such period), but were not, paid as a dividend to the Borrower during such period due to tax or other cash management considerations may be included in Parent Operating Cash Flow for such period; provided that any amounts so included will not be included in Parent Operating Cash Flow if and when paid to the Borrower in any subsequent period; and

(2) Net Cash Proceeds from Asset Sales, Equity Issuances or the incurrence of Debt (but only to the extent that the Net Cash Proceeds from such incurrence of Debt are paid to the Borrower or a Qualified Holding Company as a return of capital) shall not be included in Parent Operating Cash Flow for any period.

“Participant” has the meaning set forth in Section 10.06(b).

“Payment Restriction” means any provision in any agreement limiting the ability of any of the Borrower’s Subsidiaries to declare or pay dividends or other distributions in respect of its Equity Interests or repay or prepay any Debt owed to, make loans or advances to, or otherwise transfer assets to or invest in, the Borrower or any Subsidiary of the Borrower (whether through a covenant restricting dividends, loans, asset transfers or investments, a financial covenant or otherwise).

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

“Permitted Business” means, with respect to any Person, (i) a line of business which is substantially the same line of business as one or more of the principal businesses of such Person and its Subsidiaries, (ii) a line of business which is complementary or ancillary to, one or more of the principal businesses of such Person and its Subsidiaries, (iii) any energy business, (iv) any infrastructure business, (v) any power business, (vi) any public utility business, (vii) the ownership, extraction, processing, transportation, distribution and sales of fossil fuels and derivatives thereof, (viii) any line of business relating or in connection with, climate solutions, carbon offsets, biofuels or battery storage and (ix) any business ancillary, complementary or related to any of the business described in clauses (i) through (viii), including without limitation trading activities.

“Permitted Credit Derivative Transaction” means any credit derivative transaction referencing a government, governmental agency or quasi-governmental agency, sovereign or sovereign agency or a super- or multi-national agency or any debt obligation issued by any such entity, in each case to the extent such transaction is not entered into for speculative purposes.

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“Person” means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

“Plan” means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group.

“Pledged Debt” shall have the meaning specified in the Security Agreement.

“Pledged Subsidiary” means a direct Subsidiary of the Borrower or AES BVI II listed on Schedule I hereto, whose Equity Interests have been pledged to the Collateral Trustees for the benefit of the Secured Holders by the Borrower or AES BVI II, as applicable, pursuant to the Security Agreement or the BVI Cayman Pledge Agreement.

“Power Supply Business” means an electric power or thermal energy generation or cogeneration facility or related facilities, or an electric power transmission, distribution, fuel supply and fuel transportation facilities, or any combination thereof (all subject to relevant security, if any, under related project financing arrangements), together with its or their related power supply, thermal energy and fuel contracts as well as other contractual arrangements with customers, suppliers and contractors.

“PUHCA” has the meaning set forth in Section 4.12.

“Qualified Equity-Linked or Hybrid Securities” means preferred stock, mandatorily convertible debt securities and Hybrid Securities, in each case, that does not constitute Redeemable Stock.

“Qualified Holding Company” means any Wholly-Owned Consolidated Subsidiary of the Borrower that satisfies, and all of whose direct or indirect holding companies (other than the Borrower) are Wholly-Owned Consolidated Subsidiaries of AES that satisfy, the following conditions:

(i) its direct and indirect interest in any AES Business shall be limited to the ownership of Capital Stock or Debt obligations of a Person with a direct or indirect interest in such AES Business;

(ii) except as a result of the Financing Documents (and permitted refinancings thereof), no consensual encumbrance or restriction of any kind shall exist on its ability to make payments, distributions, loans, advances or transfers to the Borrower;

(iii) it shall not have outstanding any Debt other than Guarantees of Debt under, or Liens constituting Debt under, the Financing Documents (and

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permitted refinancings thereof) and Debt to the Borrower or to other Qualified Holding Companies (other than AES BVI II);

(iv) it shall engage in no business or other activity, shall enter into no binding agreements and shall incur no obligations (other than agreements with, and obligations to, the Borrower or other Qualified Holding Companies (other than AES BVI II)) other than (A) the holding of the Capital Stock and Debt obligations permitted under clause (i) above, including entering into retention agreements and subordination agreements relating to such Capital Stock and Debt, (B) the holding of cash received from its Subsidiaries and the investment thereof in Temporary Cash Investments, (C) the payment of dividends and other amounts to the Borrower, (D) ordinary business development activities, (E) the making (but not the entering into binding obligations to make) of Investments in AES Businesses owned by its Subsidiaries, (F) in the case of AES Electric, the making of Investments in Power Supply Business owned by NIGEN Limited and Medway Power Limited or the repayment of up to GBP10,000,000 owed to AES Barry as of the Effective Date under any agreement by which it is bound as of the Effective Date and (G) entering into foreign exchange Hedge Agreements (otherwise permitted under Section 5.19) in respect of dividends received or expected to be received from Subsidiaries of such Qualified Holding Company, in a notional amount not to exceed $100,000,000 outstanding at any time for each Qualified Holding Company and for a term of no more than six months from the date the relevant Hedge Agreement is entered into; and

(v) is listed on Schedule V hereto (as supplemented from time to time by written notice to the Agent by the Borrower).

“Quarterly Payment Date” means each March 31, June 30, September 30 and December 31.

“Recourse Debt” means, on any date, the sum of (i) Debt of the Borrower (other than Equity Credit Preferred Securities and Qualified Equity-Linked or Hybrid Securities) plus (ii) Derivative Obligations of the Borrower plus (iii) Off Balance Sheet Obligations of the Borrower.

“Recourse Debt to Cash Flow Ratio” means, for any period, the ratio of:

(i) the sum of the Recourse Debt as of the end of such period to;

(ii) the Adjusted Parent Operating Cash Flow during such period.

“Redeemable Stock” means any class or series of Capital Stock or Hybrid Securities of any Person that by its terms or otherwise is (i) required to be redeemed prior to the date that is 180 days following the Termination Date (other than a redemption solely in the form of Capital Stock that does not constitute Redeemable Stock), (ii) redeemable at the option of the holder of such class or series of Capital Stock or Hybrid Securities at any time prior to the date that is 180 days following the Termination Date or (iii) convertible into or exchangeable for (unless solely at the option of such person) Capital Stock or Hybrid Securities referred to in

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clause (i) or (ii) above or Debt having a scheduled maturity prior to the date that is 180 days following the Termination Date; provided that any Capital Stock or Hybrid Securities that would not constitute Redeemable Stock but for provisions thereof giving holders thereof the right to require such person to repurchase or redeem such Capital Stock or Hybrid Securities upon the occurrence of an “asset sale” or a “change of control” occurring prior to the date that is 180 days following the Termination Date shall not constitute Redeemable Stock if such Capital Stock or Hybrid Securities specifically provides that such person will not repurchase or redeem any such Capital Stock or Hybrid Securities pursuant to such provisions unless such repurchase or redemption is permitted under the terms of this Agreement.

“Reference Banks” means the respective principal London offices of Citicorp USA, Inc., Bank of America, N.A. and Union Bank of California, N.A. and “Reference Bank” means any one of such Reference Banks.

“Refunding Borrowing” means a Borrowing which, after application of the proceeds thereof, results in no net increase in the Total Outstandings of any Revolving Credit Loan Bank.

“Register” has the meaning set forth in Section 10.06(f).

“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“Reimbursement Obligations” means at any date the obligations then outstanding of the Borrower under Section 2.03(f) to reimburse the Revolving Fronting Banks for Revolving L/C Drawings under Revolving Letters of Credit.

“Related Fund” means with respect to any Bank Party that is a fund that invests in bank loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Bank party or by an Affiliate of such investment advisor.

“Relevant Contingent Exposure” has the meaning set forth in Section 2.14(c).

“Required Banks” means, at any time, Bank Parties owed or holding at least a majority in interest of the aggregate principal amount (based in the case of any Revolving Letter of Credit denominated in an Alternative Currency other than Dollars, on the Dollar Equivalent at such time) of the sum of (i) the aggregate principal amount of the Loans outstanding at such time, (ii) the aggregate Revolving Letter of Credit Liabilities outstanding at such time and (iii) the aggregate Unused Revolving Credit Loan Commitments at such time.

“Required Revolving Credit Loan Banks” means at any time the Revolving Credit Loan Banks having at least a majority of the aggregate Total Exposures at such time.

“Responsible Officer” means any duly authorized officer of the Borrower or any of its Subsidiaries.

“Restricted Payment” has the meaning set forth in Section 5.09(a).

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“Revolving Credit Assumption Agreement” has the meaning set forth in Section 2.18(d)(ii).

“Revolving Credit Increase Date” has the meaning set forth in Section 2.18(a).

“Revolving Credit Loan” has the meaning set forth in Section 2.01(a).

“Revolving Credit Loan Bank” means each Bank having a Revolving Credit Loan Commitment.

“Revolving Credit Loan Commitment” means, at any time, with respect to any Revolving Credit Loan Bank at any time, the amount set forth opposite such Bank’s name on Appendix I hereto under the caption “Revolving Credit Loan Commitment” or, if such Bank has entered into one or more Assignment and Assumptions, the amount set forth for such Bank in the Register maintained by the Agent pursuant to Section 10.06(f) as such Bank’s “Revolving Credit Loan Commitment”, as such amount may be reduced at or prior to such time pursuant to Sections 2.09 or 2.10.

“Revolving Credit Loan Commitment Increase” has the meaning set forth in Section 2.18(a).

“Revolving Credit Loan Facility” means, at any time, the aggregate amount of the Revolving Credit Loan Banks’ Revolving Credit Loan Commitments.

“Revolving Credit Loan Increase Commitment Date” has the meaning set forth in Section 2.18(b).

“Revolving Credit Loan Note” means a promissory note of the Borrower to the order of any Revolving Credit Loan Bank, in substantially the form of Exhibit A-1 hereto, evidencing the indebtedness of the Borrower to such Bank resulting from the Revolving Credit Loans made or deemed to have been made by such Lender.

“Revolving Credit Loan/Term Loan Obligations” shall have the meaning set forth in Section 9.01.

“Revolving Credit Period” means the period from and including the Effective Date to but excluding the Termination Date.

“Revolving Fronting Bank” means (i) with respect to each Existing Letter of Credit deemed to have been issued pursuant to the second sentence of Section 2.03(a), each Bank listed as issuer thereof on Appendix III hereto, as the case may be, (ii) each Revolving Credit Loan Bank listed on Schedule VII hereto and (iii) any other Revolving Credit Loan Bank and/or any Third Party Fronting Bank which has executed and delivered to the Agent a Revolving Fronting Bank Agreement pursuant to Section 10.15, in each case, unless such Bank has been released from its obligation as a Revolving Fronting Bank pursuant to Section 10.15(b).

“Revolving Fronting Bank Agreement” means an agreement, in substantially the form of Exhibit E hereto.

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“Revolving L/C Cash Collateral Account” has the meaning set forth in Section 2.14(a).

“Revolving L/C Collateral” has the meaning set forth in Section 2.14(b).

“Revolving L/C Drawing” means a drawing effected under any Revolving Letter of Credit.

“Revolving Letter of Credit” means a letter of credit issued by a Revolving Fronting Bank pursuant to Section 2.03(a) and shall also include each Existing Letter of Credit.

“Revolving Letter of Credit Commission Rate” means a rate per annum equal to the Applicable Revolving Margin.

“Revolving Letter of Credit Liabilities” means, at any time and in respect of any Revolving Letter of Credit, the sum, without duplication, of (i) the Available Amount of such Revolving Letter of Credit plus (ii) the aggregate unpaid amount of all Reimbursement Obligations in respect of previous Revolving L/C Drawings made under such Revolving Letter of Credit.

“Revolving Letter of Credit Termination Date” has the meaning set forth in Section 2.03(h)(i).

“SEC Filings” means public filings made by the Borrower with the Securities and Exchange Commission on Form 8-K, Form 10-Q or Form 10-K, and any filed amendments to any of the foregoing.

“Second-Priority Secured Debt” means (i) the Borrower’s 8 ³/4% Second Priority Senior Secured Notes due 2013, (ii) the Borrower’s 9% Second Priority Notes due 2015 and (iii) Debt of the Borrower that is secured by a Lien on the Creditor Group Collateral that is pari passu with the Lien securing the Notes described in clauses (i) or (ii) (or permitted refinancings thereof).

“Secured Hedge Agreement” means any Hedge Agreement permitted under Article V that (i) is entered into by and between the Borrower and any Hedge Bank and (ii) specifies by its terms that it is secured by the Collateral.

“Secured Holders” has the meaning set forth in the Collateral Trust Agreement.

“Secured Obligations” has the meaning specified in the Collateral Trust Agreement.

“Secured Treasury Management Service Agreements” means any agreement between the Borrower or any of its Subsidiaries and a Bank Party or an Affiliate of a Bank Party to provide treasury management services to the Borrower.

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“Security Agreement” means the Security Agreement dated as of December 12, 2002 made by the grantors thereunder in favor of the Collateral Trustees, as amended by Amendment No. 1 dated as of July 29, 2003 and as further amended from time to time.

“Security Agreement Collateral” means the “Collateral” referred to in the Security Agreement.

“Senior Secured Exchange Notes” means the 10% Exchange Notes due December 15, 2005 issued by the Borrower pursuant to the Senior Secured Exchange Note Indenture and any other Debt issued by the Borrower under the Senior Secured Exchange Note Indenture.

“Senior Secured Exchange Note Indenture” means that certain indenture between the Borrower and Wells Fargo Bank Minnesota, National Association, as Trustee to be dated as of December 13, 2002.

“Senior Subordinated Notes” means the 8.375% Senior Subordinated Notes due August 2007 and the 8.50% Senior Subordinated Notes due November 2007 issued by the Borrower pursuant to the Senior Subordinated Notes Indentures.

“Senior Subordinated Notes Indentures” means (i) that certain indenture between the Borrower and The Bank of New York, as Trustee dated as of July 17, 1997 and (ii) that certain indenture between the Borrower and Wells Fargo Bank Minnesota, National Association (successor to The First National Bank of Chicago), as Trustee dated as of October 29, 1997.

“Shared Collateral Documents” means the Security Agreement, the Collateral Trust Agreement, the BVI Cayman Pledge Agreement and any other agreement that creates or purports to create a Lien in favor of the Collateral Trustees for the Lender Parties.

“Significant AES Entity” means (i) any Material AES Entity, (ii) AES BVI II and (iii) any other Person (other than any Excluded AES Entity) in which the Borrower has a direct or indirect equity Investment if (A) such Person’s contribution to Parent Operating Cash Flow for the four most recently completed fiscal quarters of the Borrower constitutes 10% or more of Parent Operating Cash Flow for such period, or (B) on any date of determination, the Borrower’s direct or indirect interest in the total assets of such Person if such Person is a Consolidated Subsidiary or in the net assets of such Person in all other cases is at least equal to 10% of the consolidated assets of the Borrower and its Consolidated Subsidiaries, taken as a whole, on such date of determination.

“Solvent” and “Solvency” mean, with respect to any Person on a particular date, that on such date (i) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (ii) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (iv) such Person is not engaged in business or a transaction, and is not about to engage in business or a

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transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Special Purpose Financing Subsidiary” means a Consolidated Subsidiary that has no direct or indirect interest in a Power Supply Business or other AES Business and (1) for purposes of Section 5.09(a)(v), was formed solely for the purpose of acquiring Equity Interests in the Borrower and obtaining financing (including the issuance of securities) the proceeds of which were intended to be used to acquire Equity Interests in the Borrower or (2) for any other purpose hereunder, was formed solely for the purpose of issuing Trust Preferred Securities.

“Subsidiary” means, with respect to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person.

“Subsidiary Guarantors” means AES Oklahoma, AES Hawaii Management, AES Warrior Run and AES New York.

“Subsidiary Guaranty” has the meaning set forth in Section 9.01.

“Sul Guarantee” means the Guarantee in the Sponsor Agreement dated as of March 7, 2001 between the Borrower and BankBoston, N.A. Nassau Branch, as agent (“BankBoston”) for the lenders under the Sul Credit Agreement referred to below by the Borrower to Guarantee the obligations of AES Cayman Guaiba, Ltd., a Cayman Islands corporation (the “Sul Borrower”) under the Credit Agreement dated as of March 6, 2001 (the “Sul Credit Agreement”), with BankBoston, Banc of America Securities, LLC, Unibanco – Uniao de Bancos Brasilieros S.A. and Westdeutsche Landesbank Girozentrale, New York Branch, and the lenders named therein (as the same may be amended or amended and restated from time to time) in an amount of up to a maximum aggregate amount of $50,000,000.

“Supermajority Banks” means, at any time, Bank Parties owed or holding at least a 66 2/3% interest of the aggregate principal amount (based in the case of any Revolving Letter of Credit denominated in an Alternative Currency other than Dollars, on the Dollar Equivalent at such time) of the sum of (i) the aggregate principal amount of the Loans outstanding at such time, (ii) the aggregate Revolving Letter of Credit Liabilities outstanding at such time and (iii) the aggregate Unused Revolving Credit Loan Commitments at such time.

“Taxes” has the meaning set forth in Section 8.04(a).

“Temporary Cash Investment” means any Investment (having a maturity of not greater than 60 days from the date of issuance thereof) in (A)(i) direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof; (ii) commercial paper rated at least the Minimum CP Rating by any two of Standard & Poor’s Ratings Services, Moody’s Investors Service, Inc., Fitch IBCA, Inc. and Duff & Phelps Credit Rating Co., provided that one of such two Minimum CP Ratings is by Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc.; (iii) time deposits with, including

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certificates of deposit issued by, any office located in the United States of any bank or trust company which is organized or licensed under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500,000,000; (iv) medium term notes, auction rate preferred stock, asset backed securities, bonds, notes and letter of credit supported instruments, issued by any entity organized under the laws of the United States, or any state or municipality of the United States and rated in any of the three highest rated categories by Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc.; (v) repurchase agreements with respect to securities described in clause (i) above entered into with an office of a bank or trust company meeting the criteria specified in clause (iii) above; (vi) Euro-Dollar certificates of deposit issued by any bank or trust company which has capital and unimpaired surplus of not less than $500,000,000 or (vii) with respect to a Subsidiary, any category of investment designated as permissible investments under such Subsidiary’s loan documentation; provided that in each case (except clause (vii)) that such Investment matures within fifteen months from the date of acquisition thereof by the Borrower or a Subsidiary and (B) registered investment companies that are “money market funds” within the meaning of Rule 2a-7 under the Investment Company Act of 1940.

“Term Loan” means each Initial Term Loan and each Incremental Term Loan.

“Term Loan Bank” means each Initial Term Loan Bank and each Incremental Term Loan Bank.

“Term Borrowings” means a borrowing consisting of simultaneous Term Loans of the same type made by the appropriate Term Loan Banks.

“Term Loan Commitments” means the Initial Term Loan Commitments of the Initial Term Loan Banks at such time and the Incremental Term Loan Commitments of the Incremental Term Loan Banks at such time.

“Term Loan Facilities” means the Initial Term Loan Facility and the Incremental Term Loan Facility.

“Term Loan Notes” means the Initial Term Loan Notes and the Incremental Term Loan Notes.

“Termination Date” means (i) June 23, 2010 in the case of the Revolving Credit Loan Facility, (ii) August 10, 2011, in the case of the Initial Term Loan Facility (the “Initial Term Loan Termination Date”) and (iii) the date agreed to by the Borrower, the Agent and the Incremental Term Loan Banks in the case of any Incremental Term Loan Facility (the “Incremental Term Loan Termination Date”); provided that the Incremental Term Loan Termination Date shall not occur prior to the Initial Term Loan Termination Date; provided, in each case, that if the Termination Date occurs on a day that is not a Euro-Dollar Business Day, the Termination Date shall occur on the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the Termination Date shall be the next preceding Euro-Dollar Business Day.

“Third Party Fronting Bank” means (i) the Agent, (ii) any Term Loan Bank or any Affiliate of any Term Loan Bank (A) a majority of whose common equity is owned, directly

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or indirectly, by such Term Loan Bank, (B) that owns, directly or indirectly, a majority of the common equity of such Term Loan Bank or (C) a majority of whose common equity is owned, directly or indirectly, by a Person that owns, directly or indirectly, a majority of the common equity of such Term Loan Bank and any Subsidiary of any Term Loan Bank a majority of whose common equity is owned directly or indirectly, by such Term Loan Bank, (iii) any commercial bank having total assets in excess of $5,000,000,000, (iv) any savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having a net worth in excess of $250,000,000 or (v) any other Person approved by the Agent, that shall, in the case of any such Agent, Term Loan Bank, Affiliate, Parent, Subsidiary or other financial institution or Person agree to issue letters of credit hereunder with the consent of the Agent (which consent will be deemed to have been given unless the Agent shall have notified the Borrower to the contrary within one day of the Agent’s receipt of notice that such Bank, Affiliate, Parent, Subsidiary or other financial institution or Person is to be a Third Party Fronting Bank).

“Total Bank Exposure” at any time means the sum of (i) the aggregate principal amount of the Loans outstanding at such time plus (ii) the aggregate amount of the Revolving Letter of Credit Liabilities at such time plus (iii) the aggregate amount of the Unused Revolving Credit Loan Commitments.

“Total Exposure” means at any time with respect to each Revolving Credit Loan Bank, its Revolving Credit Loan Commitment or, if the Revolving Credit Loan Commitments shall have terminated, its Total Outstandings.

“Total Outstandings” means at any time, as to any Revolving Credit Loan Bank, the sum of the aggregate outstanding principal amount of such Revolving Credit Loan Bank’s Loans and its participation in the Revolving Letter of Credit Liabilities and all unreimbursed Revolving L/C Drawings.

“Total Term Loan Commitments” means at any time in respect of a Term Loan Bank the sum of such Term Loan Bank’s Initial Term Loan Commitment at such time plus such Term Loan Bank’s Incremental Term Loan Commitment at such time.

“Trust Preferred Securities” means, at any date:

(i) any Existing Trust Preferred Securities, and

(ii) any other equity interests in a Special Purpose Financing Subsidiary of AES (such as those known as “TECONS”, “MIPS” or “RHINOS”): (I) that are not (A) required to be redeemed or redeemable at the option of the holder thereof prior to the fifth anniversary of the Termination Date or (B) convertible into or exchangeable for (unless solely at the option of AES) equity interests referred to in clause (A) above or Debt having a scheduled maturity, or requiring any repayments or prepayments of principal or any sinking fund or similar payments in respect of principal or providing for any such repayment, prepayment, sinking fund or other payment at the option of the holder thereof prior to the fifth anniversary of the Termination Date and (II) as to which,

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at such date, AES has the right to defer the payment of all dividends and other distributions in respect thereof for the period of at least 19 consecutive quarters beginning at such date.

“Unfunded Liabilities” means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA.

“United States” means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions.

“Unrestricted Cash” means all cash or cash equivalents of the Borrower and its Subsidiaries that would not appear as “restricted” on the consolidated balance sheet of the Borrower or any of its Subsidiaries; provided that Unrestricted Cash shall not include cash or cash equivalents of a Subsidiary that is not an Obligor to the extent such Subsidiary is not permitted (by law, contract or otherwise) from distributing such cash or cash equivalents to the Borrower.

“Unused Revolving Credit Loan Commitments” means, with respect to any Revolving Credit Loan Bank at any time, (i) such Bank’s Revolving Credit Loan Commitment at such time minus (ii) the sum of (A) the aggregate principal amount of all Revolving Credit Loans outstanding at such time and owed to such Revolving Credit Loan Bank plus (B) such Bank’s pro rata share of the Revolving Letter of Credit Liabilities and all unreimbursed Revolving L/C Drawings at such time.

“Wholly-Owned Consolidated Subsidiary” means any Consolidated Subsidiary all of the shares of Capital Stock or other ownership interests of which (except directors’ qualifying shares and shares owned by foreign nationals mandated by applicable law) are at the time directly or indirectly owned by AES.

Section 1.02 Accounting Terms and Determinations.

Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower’s independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks (“GAAP”); provided that, if the Borrower notifies the Agent that the Borrower wishes to amend any covenant in Article 5 to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Borrower that the Required Banks wish to amend Article 5 for such purpose), then

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the Borrower’s compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks.

Section 1.03 Types of Borrowing.

The term “Borrowing” denotes (a) the aggregation of Loans made (or deemed to have been made) or to be made to the Borrower by one or more Banks pursuant to Article 2 on the same day, all of which Loans are of the same type (subject to Article 8) and, except in the case of Base Rate Loans, have the same initial Interest Period or (b) if the context so requires, the borrowing of such Loans. Borrowings are classified for purposes hereof by reference to the pricing of Loans comprising such Borrowing (e.g., a “Euro-Dollar Borrowing” is a Borrowing comprised of Euro-Dollar Loans). It is understood and agreed that all Borrowings will be made in Dollars.

Section 1.04 Currency Equivalents Generally.

For purposes of this Agreement, the equivalent in any Alternative Currency of an amount in Dollars shall be determined at the rate of exchange quoted by the Agent in New York, at 11:00 A.M. (New York time) on the date of determination, to prime banks in New York for the spot purchase in the New York foreign exchange market of such amount of Dollars with such Alternative Currency.

ARTICLE II

THE CREDITS

Section 2.01 Commitment to Lend.

(a) Revolving Credit Loan Facility. (i) Each Revolving Credit Loan Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans (each a “Revolving Credit Loan”) in Dollars to the Borrower pursuant to this Section 2.01(a) from time to time during the Revolving Credit Period in amounts such that the Total Outstandings of such Revolving Credit Loan Bank at any time shall not exceed the amount of its Revolving Credit Loan Commitment at such time. Each Borrowing under this subsection (a) shall be in an aggregate principal amount of $5,000,000 or any larger multiple of $1,000,000 (except for Refunding Borrowings and that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(b)) and shall be made from the several Revolving Credit Loan Banks ratably in proportion to their respective Revolving Credit Loan Commitments. Within the foregoing limits, the Borrower may borrow under this Section 2.01(a), repay, or, to the extent permitted by Section 2.10, prepay Revolving Credit Loans and reborrow at any time during the Revolving Credit Period.

(ii) Any “Revolving Credit Loans” outstanding under the Existing Bank Credit Agreement on the Amendment and Restatement Effective Date shall be continued as Revolving Credit Loans hereunder. As of the Amendment and Restatement Effective Date, the aggregate amount of outstanding Revolving Credit Loans is $263,257,731.61.

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(b) Initial Term Loan Facility. Subject to the terms and conditions set forth herein, on the Amendment and Restatement Effective Date any “Term Loan” outstanding under the Existing Bank Credit Agreement shall be continued as an Initial Term Loan hereunder. As of the Amendment and Restatement Effective Date, the aggregate amount of outstanding Initial Term Loans is $200 million.

(c) Term Loan Facilities. The Term Loans are not revolving in nature, and amounts repaid or prepaid in respect thereof may not be reborrowed.

Section 2.02 Notice of Borrowing.

(a) The Borrower shall give the Agent notice (a “Notice of Borrowing”) not later than 11:00 A.M. (New York City time) on (x) the date of each Base Rate Borrowing and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:

(i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing;

(ii) the aggregate amount of such Borrowing;

(iii) whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate or the Adjusted London Interbank Offered Rate; and

(iv) in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of “Interest Period.”

(b) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank’s ratable share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower.

(c) Not later than 2:00 P.M. (New York City time) on the date of each Borrowing, each Bank shall (except as provided in subsection (d) of this Section 2.02) make available its ratable share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 10.01. Unless the Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Agent will make the funds so received from the Banks available to the Borrower requesting such Borrowing at the Agent’s aforesaid address.

(d) If any Bank makes a new Loan hereunder to the Borrower on a day on which the Borrower is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Bank to the Agent as provided in subsection (c) of this Section 2.02, or remitted by the Borrower to the Agent as provided in Section 2.11, as the case may be.

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(e) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Agent such Bank’s share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsections (c) and (d) of this Section 2.02 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.06 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank’s Loan included in such Borrowing for purposes of this Agreement.

Section 2.03 Revolving Letters of Credit.

(a) Issuance of Letters of Credit. Subject to the terms and conditions hereof, each Revolving Fronting Bank agrees to issue letters of credit under this Section 2.03(a) upon the Borrower’s request and for the Borrower account or the account of any of the Borrower’s Subsidiaries, from time to time during the Revolving Credit Period; provided, however, that in no event shall (i) the aggregate Available Amount for all Revolving Letters of Credit exceed the Revolving Credit Loan Facility at such time and (ii) a Revolving Letter of Credit be issued with an Available Amount in excess of the Unused Revolving Credit Commitments of the Revolving Credit Loan Banks at such time. In addition, and notwithstanding any reference in any Existing Letter of Credit to the Former Bank Credit Agreement, on and as of the Effective Date, (x) each Existing Letter of Credit shall be deemed to be a Revolving Letter of Credit and to have been issued on the Effective Date (by the Revolving Fronting Bank that issued or was deemed to have issued such Existing Letter of Credit under the Former Bank Credit Agreement) pursuant to this Section 2.03(a), (y) participations in such Existing Letters of Credit held by the Revolving Credit Loan Banks under the Former Bank Credit Agreement shall be deemed to be cancelled and (z) the Revolving Credit Loan Banks under this Agreement shall be deemed to hold participations in such Existing Letters of Credit in the amount required so that the participations of such Revolving Credit Loan Banks shall be in proportion to their respective Revolving Credit Loan Commitments; provided, however, that nothing in this Section 2.03(a) shall extend, modify or otherwise affect the existing expiry date under any such Existing Letter of Credit. Notwithstanding the foregoing, (x) each Revolving Credit Loan Bank that is a Revolving Fronting Bank, in its separate capacity as a Revolving Fronting Bank, shall only be obligated to issue at any time Revolving Letters of Credit having an aggregate face amount at any time that is equal to the unused Revolving Credit Loan Commitment of such Revolving Credit Loan Bank at such time and (y) each other Revolving Fronting Bank shall only be obligated to issue Revolving Letters of Credit having an aggregate face amount at any time that is equal to such Revolving Fronting Bank’s commitment at such time as set forth in the relevant Revolving Fronting Bank Agreement. Any “Revolving Letters of Credit” outstanding under the Existing Bank Credit Agreement on the Amendment and Restatement Effective Date shall remain outstanding as Revolving Letters of Credit hereunder.

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(b) Participations in Letters of Credit. Upon the issuance (or deemed issuance) of each Revolving Letter of Credit by a Revolving Fronting Bank pursuant to Section 2.03(a), such Revolving Fronting Bank shall be deemed, without further action by any party hereto, to have sold to each Revolving Credit Loan Bank (other than such Revolving Fronting Bank in the case of Revolving Letters of Credit not issued by a Third Party Fronting Bank) and each such Revolving Credit Loan Bank shall be deemed, without further action by any party hereto, to have purchased from such Revolving Fronting Bank a participation in such Revolving Letter of Credit and the related Revolving Letter of Credit Liabilities in the amount required so that the participations of the Revolving Credit Loan Banks (including such Revolving Fronting Bank’s retained participation in the case of Revolving Letters of Credit not issued by a Third Party Fronting Bank) therein shall be in proportion to their respective Revolving Credit Loan Commitments.

(c) Required Terms. Each Revolving Letter of Credit issued hereunder shall:

(i) by its terms expire no later than five Domestic Business Days prior to the Termination Date for the Revolving Credit Loan Facility; except that a Revolving Fronting Bank, at it sole discretion and without recourse to the Agent or any other Bank Party, may issue a Revolving Letter of Credit which expires after the Termination Date for the Revolving Credit Loan Facility, provided that five Domestic Business Days prior to the Termination Date for the Revolving Credit Loan Facility, the Borrower shall pay to such issuing Revolving Fronting Bank an amount in immediately available funds equal to the Available Amount of such Revolving Letter of Credit, to be held by such issuing Revolving Fronting Bank as cash collateral;

(ii) be in a face amount of (x) not less than $300,000 (or the equivalent thereof in an Alternative Currency); provided that up to five Revolving Letters of Credit may be issued with stated amounts less than $300,000 (or the equivalent thereof in an Alternative Currency) and (y) not more than the amount that would, after giving effect to the issuance thereof (and the related purchase and sale of participations therein pursuant to Section 2.03(b)) cause the Total Outstandings of any Revolving Credit Loan Bank to equal its Revolving Credit Loan Commitment; and

(iii) be in a form acceptable to the relevant Revolving Fronting Bank.

(d) Notice of Issuance. Except in the case of Existing Letters of Credit, the Borrower may request that a Revolving Letter of Credit be issued by giving the Agent and the Revolving Fronting Banks for such Revolving Letter of Credit a notice (a “Notice of Issuance”) at least two Domestic Business Days before such Revolving Letter of Credit is to be issued (or such shorter period of time as shall be acceptable to the Agent and the relevant Revolving Fronting Banks), specifying:

(i) the date of issuance of such Revolving Letter of Credit;

(ii) the expiry date of such Revolving Letter of Credit (which shall comply with the requirements of Section 2.03(c)(i));

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(iii) the proposed terms of such Revolving Letter of Credit (or the proposed form thereof shall be attached to such Notice of Issuance), including the face amount thereof (which shall comply with the requirements of Section 2.03(c)(ii));

(iv) the transaction that is to be supported or financed with such Revolving Letter of Credit, including identification of the Power Supply Business or other AES Business, if any, to which such transaction relates and the name of the proposed account party for such Revolving Letter of Credit (which may be the Borrower and any subsidiary of the Borrower); and

(v) the identity of the Revolving Fronting Banks for such Revolving Letter of Credit, which shall comply with the definition of “Revolving Fronting Bank” hereunder.

Upon the receipt of a Notice of Issuance, the Agent shall promptly notify each Revolving Credit Loan Bank of the contents thereof and of the amount of such Revolving Credit Loan Bank’s participation in such Revolving Letter of Credit and such Notice of Issuance shall not thereafter be revocable by the Borrower.

(e) Revolving L/C Drawings under Revolving Letters of Credit.

(i) Upon receipt from the beneficiary of any Revolving Letter of Credit of demand for payment under such Revolving Letter of Credit, the relevant Revolving Fronting Bank shall determine in accordance with the terms of such Revolving Letter of Credit whether such request for payment should be honored.

(ii) If the relevant Revolving Fronting Bank determines that a demand for payment by the beneficiary of a Revolving Letter of Credit should be honored, such Revolving Fronting Bank shall make available to the beneficiary in accordance with the terms of such Revolving Letter of Credit the amount of the Revolving L/C Drawing under such Revolving Letter of Credit. Such Revolving Fronting Bank shall thereupon promptly notify the Borrower and the Agent of the amount of such Revolving L/C Drawing paid by it. Upon receipt by the Agent of such notice from the relevant Revolving Fronting Bank, the Agent shall promptly notify each Revolving Credit Loan Bank of the amount of each such Revolving Credit Loan Bank’s participation therein (which, in the case of any Revolving L/C Drawing under an Alternative Currency Letter of Credit shall be the Dollar Equivalent thereof).

(f) Reimbursement and Other Payments by the Borrower.

(i) If any amount is drawn under any Revolving Letter of Credit issued at the request of or for the account of the Borrower or any Subsidiary of the Borrower, the Borrower irrevocably and unconditionally agrees to reimburse the applicable Revolving Fronting Bank in Dollars for all amounts paid by such Revolving Fronting Bank upon such Revolving L/C Drawing (which, in the case of any Revolving L/C Drawing under an Alternative Currency Letter of Credit shall be the Dollar Equivalent thereof), together with any and all reasonable charges and expenses which any Revolving Credit Loan Bank or Revolving Fronting Bank may pay or incur relative to such Revolving L/C Drawing and all such amounts due from the Borrower shall bear interest, payable on the date upon which such amounts shall be due and payable, on the amount drawn for each day from and including the date such amount is drawn to

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but excluding the date such reimbursement payment is due and payable at a rate per annum equal to the rate applicable to Base Rate Loans for such day. If a Revolving Fronting Bank makes any payment under a Revolving Letter of Credit, the Borrower shall reimburse such Revolving Fronting Bank by paying such amount to the relevant Revolving Fronting Bank not later than 12:00 noon (New York City time) on the day that such payment is made, if the Borrower receives notice of such payment before 10:00 A.M. (New York City time) on such day, or if such notice has not been received by the Borrower before such time on such day, then not later than 12:00 noon (New York City time) on (i) the Domestic Business Day that the Borrower receives such notice, if such notice is received before 10:00 A.M. (New York City time) on the day of receipt, or (ii) the next Domestic Business Day, if such notice is not received before such time on the day of receipt; provided that if such payment is at least $1,000,000, the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.02, that such payment be made with the proceeds of a Base Rate Borrowing (which shall consist of Revolving Credit Loans) in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting Base Rate Borrowing (which shall consist of Revolving Credit Loans). Any overdue reimbursement payment, or overdue interest thereon, shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of the rate applicable to Base Rate Loans for such day plus 2%.

(ii) Each payment to be made by the Borrower pursuant to this Section 2.03(f) shall be made, in Federal or other funds immediately available, to the applicable Revolving Fronting Bank at its address referred to in Section 10.01.

(iii) The obligations of the Borrower to reimburse any Revolving Fronting Bank under this Section 2.03(f) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including without limitation the following circumstances:

(A) any lack of validity or enforceability of any Financing Document;

(B) any amendment or waiver of or any consent to departure from any Financing Document (except, in the case of an effective amendment to, waiver of or consent to a departure from any provision of this Agreement, to the extent specified herein);

(C) the existence of any claim, set-off, defense or other right which the Borrower may have at any time against the beneficiary of any Revolving Letter of Credit (or any Person or entity for whom such beneficiary may be acting), the Agent, any Revolving Fronting Bank or any Revolving Credit Loan Bank or any other Person or entity, whether in connection with this Agreement, any other Financing Document or any unrelated transaction;

(D) any statement or any other document presented under any Revolving Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever;

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(E) payment by a Revolving Fronting Bank under any Revolving Letter of Credit against presentation of a draft or document which does not comply with the terms of such Revolving Letter of Credit; or

(F) to the extent permitted under applicable law, any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.

(g) Payments by Revolving Credit Loan Banks with Respect to Revolving Letters of Credit.

(i) Each Revolving Credit Loan Bank shall make available an amount equal to its ratable share of any Revolving L/C Drawing under a Revolving Letter of Credit, in Federal or other funds immediately available in New York City, to the applicable Revolving Fronting Bank by 3:00 P.M. (New York City time) on the date on which the Borrower is required to reimburse such Revolving Fronting Bank with respect to such Revolving L/C Drawing pursuant to Section 2.03(f)(i), together with interest on such amount for the period from and including the date of such Revolving L/C Drawing to but excluding the date upon which such amount is to be made available at the Federal Funds Rate on the date of such Revolving L/C Drawing, at such Revolving Fronting Bank’s address referred to in Section 10.01; provided that each Revolving Credit Loan Bank’s obligation shall be reduced by its pro rata share of any reimbursement theretofore paid by the Borrower in respect of such Revolving L/C Drawing pursuant to Section 2.03(f)(i). The applicable Revolving Fronting Bank shall notify each Revolving Credit Loan Bank of the amount of such Revolving Credit Loan Bank’s obligation (which, in the case of any payment under an Alternative Currency Letter of Credit, shall be the Dollar Equivalent thereof) in respect of any Revolving L/C Drawing under a Revolving Letter of Credit not later than 1:30 P.M. (New York City time) on the day such payment by such Revolving Credit Loan Bank is due. Each Revolving Credit Loan Bank shall be subrogated to the rights of the applicable Revolving Fronting Bank against the Borrower to the extent such payment due from such Revolving Credit Loan Bank to such Revolving Fronting Bank is paid, plus interest thereon, from and including the day such amount is due from such Revolving Credit Loan Bank to such Revolving Fronting Bank to but excluding the day the Borrower makes payment to such Revolving Fronting Bank pursuant to Section 2.03(f)(i), whether before or after judgment, at a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate Loans for such day. In the event that, on the date of any Revolving L/C Drawing, (x) Total Outstandings exceeds the Maximum Outstanding Exposure, (y) the applicable Revolving Fronting Bank is not reimbursed by the Borrower on such date for the entire amount of such Revolving L/C Drawing, and (z) the Revolving Credit Loan Banks, pursuant to the last sentence of subsection (iv) below, are not obligated to reimburse such Revolving Fronting Bank for the entire amount of such Revolving L/C Drawing, the Agent shall, solely for purposes of determining the portion of such Revolving L/C Drawing to be reimbursed by each Revolving Credit Loan Bank, (A) allocate the respective Revolving Credit Loan Commitments of the Revolving Credit Loan Banks to the Revolving Letter of Credit Liabilities of each Revolving Letter of Credit on such date on a pro rata basis (based upon (1) the proportion of the Revolving Credit Loan Commitments to the aggregate amount of the Revolving Letter of Credit Liabilities of all outstanding Revolving Letters of Credit and (2) each Revolving Credit Loan Bank’s pro rata share of the Revolving Credit Loan Commitments), (B) based on such allocation, determine the reimbursement obligation of each Revolving Credit Loan Bank with respect to such Revolving L/C Drawing and (C) promptly

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notify each Revolving Credit Loan Bank of the amount of its reimbursement obligation with respect to such Revolving L/C Drawing.

(ii) If any Revolving Credit Loan Bank fails to pay any amount required pursuant to subsection (i) of this Section 2.03(g) on the date on which such payment is due, interest, payable on demand, shall accrue on such Revolving Credit Loan Bank’s obligation to make such payment, for each day from and including the date such payment becomes due to but excluding the date such Revolving Credit Loan Bank makes such payment at a rate per annum equal to the Federal Funds Rate. Any payment made by any Revolving Credit Loan Bank after 3:00 P.M. (New York City time) on any Domestic Business Day shall be deemed for purposes of the preceding sentence to have been made on the next succeeding Domestic Business Day.

(iii) If the Borrower shall reimburse a Revolving Fronting Bank for any Revolving L/C Drawing under a Revolving Letter of Credit after the Revolving Credit Loan Banks shall have made funds available to such Revolving Fronting Bank with respect to such Revolving L/C Drawing in accordance with subsection (i) of this Section 2.03(g), such Revolving Fronting Bank shall promptly upon receipt of such reimbursement distribute to each Revolving Credit Loan Bank its pro rata share thereof, including interest, to the extent received by such Revolving Fronting Bank.

(iv) The several obligations of the Revolving Credit Loan Banks to the Revolving Fronting Banks hereunder shall be absolute, irrevocable and unconditional under any and all circumstances whatsoever and shall not be affected by any circumstance, including, without limitation, (1) any set-off, counterclaim, recoupment, defense or other right which any such Revolving Credit Loan Bank or any other Person may have against the Agent, any Revolving Fronting Bank or any other Person for any reason whatsoever; (2) the occurrence or continuance of a Default or an Event of Default or the termination of the Revolving Credit Loan or any Revolving Letter of Credit; (3) any adverse change in the condition (financial or otherwise) of any Obligor or any other Person; (4) any breach of any Financing Document by any party thereto; (5) the fact that any condition precedent to the issuance of, or the making of any payment under, any Revolving Letter of Credit was not in fact met; (6) any violation or asserted violation of law by any Revolving Credit Loan Bank or any affiliate thereof; or (7) to the extent permitted under applicable law, any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. Each payment by each Revolving Credit Loan Bank to a Revolving Fronting Bank for its own account shall be made without any offset, abatement, withholding or reduction whatsoever. If a Revolving Fronting Bank is required at any time (whether before or after the Termination Date) to return to the Borrower or to a trustee, receiver, liquidator, custodian or other similar official any portion of the payments made by the Borrower to such Revolving Fronting Bank in payment of any Reimbursement Obligation or interest thereon upon the insolvency of the Borrower, or the commencement of any case or proceeding under any bankruptcy, insolvency or other similar law with respect to the Borrower, each Revolving Credit Loan Bank shall, on demand of such Revolving Fronting Bank, forthwith return to such Revolving Fronting Bank any amounts transferred to such Revolving Credit Loan Bank by such Revolving Fronting Bank in respect thereof pursuant to this subsection plus such Revolving Credit Loan Bank’s pro rata share of any interest on such payments required to be paid to the Person recovering such payments plus interest on the amount so demanded from the day such demand is made, if such demand is made by 2:00 P.M. (New

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York City time), or from the next following Domestic Business Day, if such demand is made after 2:00 P.M. (New York City time), to but not including the day such amounts are returned by such Revolving Credit Loan Bank to such Revolving Fronting Bank at a rate per annum for each day equal to (A) the Federal Funds Rate for the day of such demand and (B) the Base Rate plus 1% for each day thereafter. Notwithstanding the foregoing or any other provision contained herein, in no event shall any Revolving Credit Loan Bank be obligated to make any payment to a Revolving Fronting Bank to the extent that such payment would cause such Bank’s pro rata share of the Total Outstandings hereunder to exceed such Bank’s Revolving Credit Loan Commitment; provided that the foregoing shall not affect the obligation of the Borrower (which is absolute, unconditional and irrevocable) to reimburse each Revolving Fronting Bank for the entire amount of each payment made by such Revolving Fronting Bank under a Revolving Letter of Credit, including any amount thereof that is not paid by any Revolving Credit Loan Bank to such Revolving Fronting Bank (pursuant to this sentence or otherwise).

(h) Revolving Letter of Credit Commission; Issuance Fee.

(i) Revolving Letter of Credit Commission. The Borrower agrees to pay to the Agent a letter of credit commission with respect to each Revolving Letter of Credit issued at its request or for its account, computed for each day from and including the date of issuance of such Revolving Letter of Credit through and including the last day a Revolving L/C Drawing is available under such Revolving Letter of Credit (the “Revolving Letter of Credit Termination Date”), at the Revolving Letter of Credit Commission Rate on the aggregate amount available for drawing under such Revolving Letter of Credit from time to time (whether or not any conditions to drawing can then be met), such fee to be for the account of the Revolving Credit Loan Banks ratably in proportion to their Total Exposures. Such fee shall be payable quarterly in arrears (A) on the last Domestic Business Day of each January, April, July and October occurring on or before October 31, 2005, (B) on each March 31, June 30, September 30 and December 31 commencing with December 31, 2005 and (C) upon the Termination Date.

(ii) Issuance Fee. The Borrower shall pay to each Revolving Fronting Bank for its own account such fees with respect to each Revolving Letter of Credit issued by such Revolving Fronting Bank for the account of the Borrower as shall have been agreed between the Borrower and such Revolving Fronting Bank.

(iii) Limited Liability of the Revolving Fronting Bank. As between a Revolving Fronting Bank, on the one hand, and the Borrower, on the other, the Borrower assumes all risks of any acts or omissions of the beneficiary and any transferee of any Revolving Letter of Credit with respect to its use of such Revolving Letter of Credit. Neither a Revolving Fronting Bank nor any of its respective employees, officers or directors shall be liable or responsible for: (1) the use which may be made of any Revolving Letter of Credit or for any acts or omissions of any beneficiary or transferee in connection therewith; (2) the validity, sufficiency or genuineness of documents, or of any endorsement(s) thereon, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged; (3) payment by the Revolving Fronting Bank against presentation of documents which do not comply with the terms of any Revolving Letter of Credit, including failure of any documents to bear any reference or adequate reference to such Revolving Letter of Credit; or (4) any other circumstance whatsoever in making or failing to make payment under any Revolving Letter of Credit;

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provided that the Borrower shall have a claim against the applicable Revolving Fronting Bank, and such Revolving Fronting Bank shall be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or special, damages suffered by the Borrower which are found in a final, unappealable judgment of a court of competent jurisdiction to have been caused by (x) such Revolving Fronting Bank’s willful misconduct or gross negligence in determining whether documents presented under any Revolving Letter of Credit comply with the terms thereof or (y) such Revolving Fronting Bank’s willful failure to pay, or gross negligence resulting in a failure to pay, any Revolving L/C Drawing after the presentation to it by the beneficiary (or any transferee of the Revolving Letter of Credit) of a draft and other required documentation strictly complying with the terms and conditions of the Revolving Letter of Credit. In furtherance and not in limitation of the foregoing, a Revolving Fronting Bank may accept documents that appear on their face to be in order, without responsibility for further investigation.

(iv) Revolving Fronting Banks and Affiliates. Each Revolving Fronting Bank shall have the same rights and powers under the Financing Documents as any other Bank and may exercise or refrain from exercising the same as though they were not Revolving Fronting Banks (in each case to the extent such Revolving Fronting Bank is also a Bank), and the Revolving Fronting Banks and their respective affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if they were not Revolving Fronting Banks hereunder.

(i) Applicability of ISP98. Unless otherwise expressly agreed by the Revolving Fronting Bank and the Borrower when a Revolving Letter of Credit is issued (or deemed issued), the rules of the “International Standby Practices 1998” published by the Institute of International Banking Law and Practice (or such later version thereof as may be in effect at the time issuance) shall apply to the Revolving Letter of Credit.

Section 2.04 Evidence of Debt.

(a) Each Bank Party shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Bank Party resulting from each Loan owing to such Bank Party from time to time, including the amounts of principal and interest payable and paid to such Bank Party from time to time hereunder. The Borrower agrees that upon notice by any Bank Party to the Borrower (with a copy of such notice to the Agent) to the effect that a promissory note or other evidence of indebtedness is required or appropriate in order for such Bank Party to evidence (whether for purposes of pledge, enforcement or otherwise) the Loans owing to, or to be made by, such Bank Party, the Borrower shall promptly execute and deliver to such Bank Party, with a copy to the Agent, a Revolving Credit Loan Note or a Term Loan Note, as applicable, in substantially the form of Exhibits A-1 and A-2 hereto, respectively, payable to the order of such Bank Party in a principal amount equal to the Loans owing to, or to be made by, such Bank Party. All references to Notes in the Financing Documents shall mean Notes, if any, issued hereunder.

(b) The Register maintained by the Agent pursuant to Section 10.06(f) shall include a control account, and a subsidiary account for each Bank Party, in which accounts

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(taken together) shall be recorded (i) the date and amount of each Loan made hereunder (or deemed to be made hereunder), whether such Loan bears interest at the Base Rate or the Adjusted London Interbank Offered Rate, and, if appropriate, the Interest Period applicable thereto; (ii) the terms of each Assignment and Assumption delivered to and accepted by it; (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Bank Party hereunder; and (iv) the amount of any sums received by the Agent from the Borrower hereunder and each Bank Party’s share thereof.

(c) Entries made in good faith by the Agent in the Register pursuant to subsection (b) above, and by each Bank Party in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Bank Party and, in the case of such account or accounts, such Bank Party, under this Agreement, absent manifest error; provided, however, that the failure of the Agent or such Bank Party to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts, shall not limit or otherwise affect the obligations of the Borrower under this Agreement.

Section 2.05 Maturity of Loans.

(a) Each Revolving Credit Loan shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon), on the Termination Date in respect of the Revolving Credit Loan Facility, (b) each Initial Term Loan shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon), on the Initial Term Loan Termination Date and (c) each Incremental Term Loan shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon) on the Incremental Term Loan Termination Date in respect of such Incremental Term Loan Facility.

Section 2.06 Interest Rates.

(a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate Margin applicable to such Loan plus the Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Payment Date.

(b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin applicable to such Loan for such day plus the Adjusted London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof.

(c) Upon the occurrence and during the continuance of an Event of Default described in Section 6.01(a) or an Event of Default described in Section 6.01(g) or 6.01(h) with respect to the Borrower, the Borrower shall pay interest on (x) (i) the outstanding principal amount of each Base Rate Loan owing to each Bank Party, payable on demand, at a

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rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Base Rate Loan pursuant to Section 2.06(a) above and (ii) to the fullest extent permitted by law, the amount of any interest that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, at a rate per annum equal to 2% per annum above the rate per annum required to be paid on the Base Rate Loans on which such interest has accrued pursuant to Section 2.06(a) above and (y)(i) the outstanding principal amount of each Euro-Dollar Loan owing to each Bank Party payable on demand, at a rate per annum equal at all times to a rate per annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin applicable to such Loan plus the Adjusted London Interbank Offered Rate applicable to such Euro-Dollar Loan and (ii) the sum of 2% plus the Euro-Dollar Margin applicable to such Loan plus the quotient obtained (rounded upward, if necessary, to the next higher  ¹/100^th of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher  ¹/16^th of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than three months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Reference Banks are offered to such Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the relevant rate applicable to Base Rate Loans) (the “Euro-Dollar Default Rate”) and (ii) to the fullest extent permitted by law, the amount of any interest that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, at a rate per annum equal to the Euro-Dollar Default Rate for the Euro-Dollar Loans on which such interest has accrued pursuant to Section 2.06(b) above.

(d) The Agent shall determine each interest rate applicable to the Loans and Reimbursement Obligations hereunder. The Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error.

(e) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply.

(f) The yield to maturity with respect to any First Priority Secured Debt issued after the Effective Date and consisting of a term loan facility or similar bank credit facility (taking into account upfront fees paid to the lenders under such new First Priority Secured Debt) may be no more than 0.25% per annum greater than the yield to maturity with respect to the Initial Term Loans on the Closing Date (and the Borrower agrees that the pricing of the Initial Term Loans (if any) will be increased and or additional fees will be paid to the Banks (if any) to the extent necessary to satisfy such requirement).

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Section 2.07 Method of Electing Interest Rates.

(a) The Loans included in each Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject to Section 2.07(d) and the provisions of Article 8), as follows:

(i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day;

(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans as of any Domestic Business Day or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, subject to Section 2.13 if any such conversion is effective on any day other than the last day of an Interest Period applicable to such Loans.

Each such election shall be made by delivering a notice (a “Notice of Interest Rate Election”) to the Agent not later than 11:00 A.M. (New York City time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective (unless the relevant Loans are to be converted from Euro-Dollar Loans to Base Rate Loans, in which case such notice shall be delivered to the Agent not later than 11:00 A.M. (New York City time) on the date such conversion is to be effective). A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group of Loans and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each at least $5,000,000 (unless such portion is comprised of Base Rate Loans). If no such notice is timely received before the end of an Interest Period for any Group of Loans consisting of all Euro-Dollar Loans, the Borrower shall be deemed to have elected that such Group of Loans be converted to Base Rate Loans at the end of such Interest Period.

(b) Each Notice of Interest Rate Election shall specify:

(i) the Group of Loans (or portion thereof) to which such notice applies;

(ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of Section 2.07(a) above;

(iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if the Loans resulting from such conversion are to be Euro-Dollar Loans, the duration of the next succeeding Interest Period applicable thereto; and

(iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period.

Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period.

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(c) Promptly after receiving a Notice of Interest Rate Election from the Borrower pursuant to Section 2.07(a) above, the Agent shall notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower.

(d) The Borrower shall not be entitled to elect to convert any Loans to, or continue any Loans for an additional Interest Period as, Euro-Dollar Loans if (i) the aggregate principal amount of any Group of Loans consisting of all Euro-Dollar Loans created or continued as a result of such election would be less than $5,000,000 or (ii) a Default shall have occurred and be continuing when the Borrower delivers notice of such election to the Agent.

(e) If any Loan is converted to a different type of Loan, the Borrower shall pay, on the date of such conversion, the interest accrued to such date on the principal amount being converted.

Section 2.08 Commitment Fee.

The Borrower shall pay to the Agent, for the account of the Revolving Credit Loan Banks, ratably in proportion to their Revolving Credit Loan Commitments, a commitment fee of  ¹/2 of 1% per annum on the daily amount by which the aggregate amount of the Revolving Credit Loan Commitments exceeds the aggregate Total Outstandings. Such commitment fee shall accrue from and including the Effective Date to but excluding the Termination Date (or earlier date of termination of the Revolving Credit Loan Commitments in their entirety). Accrued commitment fees under this Section 2.08 shall be payable quarterly in arrears on each March 31, June 30, September 30 and December 31 and upon the date of termination of the Revolving Credit Commitments in their entirety.

Section 2.09 Termination or Reduction of Revolving Credit Loan Commitments.

(a) Optional. The Borrower may, upon at least three Domestic Business Days’ notice to the Agent, (i) terminate the Revolving Credit Loan Commitments in their entirety at any time, if no Revolving Credit Loans or Revolving Letters of Credit are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $5,000,000 or any larger multiple thereof, the aggregate amount of the Revolving Credit Loan Commitments in excess of the aggregate Total Outstandings.

(b) Mandatory. (i) Scheduled Termination. The Revolving Credit Loan Commitments shall terminate on the Termination Date, and any Revolving Credit Loans and Reimbursement Obligations then outstanding (together with accrued interest thereon) shall be due and payable on such date.

(ii) Net Cash Proceeds of Asset Sales.

(x) Other than in the case of an Asset Sale involving the sale of assets or Equity Interests of, or other Investments in, IPALCO or any of its Subsidiaries (an “IPALCO Asset Sale”), on and after the date on which all of the Term Loan Facilities have been paid in full, in the event that the Borrower shall at any time, or from time to time, receive any Net Cash

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Proceeds from Asset Sales, the Revolving Credit Loan Commitments of the Revolving Credit Loan Banks shall, unless the Required Banks otherwise agree, be ratably reduced by such amounts and at such times as may be required to avoid any requirement that all or any portion of such Net Cash Proceeds be applied to repay, prepay, repurchase or defease any Debt of the Borrower that is subordinated in right of payment to the Debt of the Borrower under the Financing Documents.

(y) In the case of an IPALCO Asset Sale, following the application of the Net Cash Proceeds thereof to repay Term Loans in accordance with Section 2.10(b)(i) or if the Term Loan Facilities have been paid in full, the Revolving Credit Loan Commitments of the Revolving Credit Loan Banks shall, (A) unless the Supermajority Banks otherwise agree or the Minimum Ratings Condition is met at such time (after giving effect to such IPALCO Asset Sale), be ratably reduced by an amount equal to the Banks’ Ratable Share of such remaining Net Cash Proceeds (concurrently with the prepayment of outstanding Revolving Credit Loans in accordance with Section 2.10(b)(i)) and (B) after giving effect to any reduction in clause (A), unless the Required Banks otherwise agree, be ratably reduced by such amounts and at such times as may be required to avoid any requirement that all or any portion of such Net Cash Proceeds be applied to repay, prepay, repurchase or defease any Debt of the Borrower that is subordinated in right of payment to the Debt of the Borrower under the Financing Documents.

(c) Reductions Permanent. All reductions of the Revolving Credit Loan Commitments pursuant to this Section 2.09 shall be permanent.

Section 2.10 Prepayment of the Loans.

(a) Optional. (i) Subject in the case of any Euro-Dollar Loans to Section 2.12, the Borrower may, upon at least one Domestic Business Day’s notice to the Agent, prepay any Loans that bear interest at the Base Rate or upon at least three Euro-Dollar Business Days’ notice to the Agent, prepay any Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $5,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with (x) accrued interest thereon to the date of prepayment and (y) in the case of prepayments of Initial Term Loans prior to July 29, 2004, a premium equal to 1.00% of the aggregate principal amount so prepaid.

(ii) Upon receipt of a notice of prepayment pursuant to this Section 2.10, the Agent shall promptly notify each Bank of the contents thereof and of such Bank’s ratable share of such prepayment and such notice shall not thereafter be revocable by the Borrower.

(b) Mandatory. (i) The Borrower shall, on the third Business Day following the receipt by the Borrower after the Effective Date of (A) Net Cash Proceeds from any Asset Sales or (B) Net Cash Proceeds from the incurrence of any Bridge Debt, offer to prepay, on a pro rata basis, an aggregate principal amount of the Term Loans in an amount equal to the Banks’ Ratable Share of such Net Cash Proceeds and the Term Loan Banks shall have the option to accept or refuse such prepayment in accordance with the provisions set forth in Section 2.10(c). Upon the payment in full of the Term Loans, the Borrower shall apply such Net Cash Proceeds to prepay the Revolving Credit Loans outstanding at such time (without

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any reduction of Revolving Credit Loan Commitments, except as set forth in Section 2.09(b)(ii)).

(ii) The Borrower shall, on the third Business Day following the date of receipt of Net Cash Proceeds from the issuance of Debt by any Subsidiary of the Borrower permitted pursuant to Section 5.07(b)(ii) (but only to the extent applicable pursuant to the proviso thereof) and Section 5.07(b)(vi) (but only to the extent the Debt was incurred by IPALCO or a Subsidiary Guarantor), offer to prepay an aggregate principal amount of the Term Loans in an aggregate amount equal to the Banks’ Ratable Share of such Net Cash Proceeds (other than $200,000,000 of additional Debt of IPALCO and the Subsidiary Guarantors incurred after the Effective Date). The Term Loan Banks shall have the option to accept or refuse any prepayment pursuant to this Section 2.10(b)(ii) in accordance with the provisions set forth in Section 2.10(c). So long as Net Cash Proceeds referred to in this Section 2.10(b)(ii) are received by the Borrower, the Borrower agrees to use all reasonable efforts to cause all such Net Cash Proceeds permitted to be distributed to be so distributed. Upon the payment in full of the Term Loans, the Borrower shall apply such Net Cash Proceeds to prepay the Revolving Credit Loans outstanding at such time (without any reduction of Revolving Credit Loan Commitments).

(c) Term Loan Opt-Out. With respect to any prepayment of a Term Loan Facility pursuant to Section 2.10(b) above, the Borrower shall notify the Agent by 12:00 Noon (New York City time) on or before the third Business Day after the Borrower is in receipt of the applicable Net Cash Proceeds of the receipt of such Net Cash Proceeds and its offer to prepay the Term Loans on the fourth Business Day following receipt of such notice by the Agent. The Agent shall then notify each of the Term Loan Banks of such offer. Each Term Loan Bank, at its option, may elect not to accept such prepayment. Any Term Loan Bank declining such prepayment shall give written notice to the Agent by 12:00 Noon (New York City time) on the third Business Day immediately following the date the Term Loan Banks receive notice of such prepayment. If a Term Loan Bank fails to give notice by 12:00 Noon as set forth in the immediately preceding sentence, such Term Loan Bank shall be deemed to have accepted the offer. Any amounts that would otherwise have been applied to prepay such declining Term Loan Bank shall instead be retained by the Borrower.

Section 2.11 General Provisions as to Payments.

(a) The Borrower shall make each payment of principal of, and interest on, the Loans and Reimbursement Obligations and of fees hereunder, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, without set-off, counterclaim or other deduction, to the Agent at its address referred to in Section 10.01. The Agent will promptly distribute to each Bank Party its ratable share of each such payment received by the Agent for the account of the Bank Parties. Whenever any payment of principal of, or interest on, the Base Rate Loans or Reimbursement Obligations or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for

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payment thereof shall be the next preceding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time.

(b) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due from the Borrower to the Bank Parties hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank Party on such due date an amount equal to the amount then due such Bank Party. If and to the extent that the Borrower shall not have so made such payment, each Bank Party shall repay to the Agent forthwith on demand such amount distributed to such Bank Party together with interest thereon, for each day from the date such amount is distributed to such Bank Party until the date such Bank Party repays such amount to the Agent, at the Federal Funds Rate.

Section 2.12 Funding Losses.

If the Borrower makes any payment of principal with respect to any Euro-Dollar Loan or any Euro-Dollar Loan is converted to a Base Rate Loan (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.06(c), or if the Borrower fails to borrow, prepay, convert or continue any Euro-Dollar Loans after notice has been given to any Bank Party in accordance with Section 2.02(b), 2.07(c) or 2.10(a), the Borrower shall reimburse each Bank Party within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after such payment or conversion or failure to borrow, prepay, convert or continue; provided that such Bank Party shall have delivered to the Borrower a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error.

Section 2.13 Computation of Interest and Fees.

Interest based on the Base Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day).

Section 2.14 Revolving L/C Cash Collateral Account.

(a) All amounts required to be deposited as cash collateral with the Collateral Agent pursuant to Section 2.15 or Section 6.03 shall be deposited in a cash collateral account (the “Revolving L/C Cash Collateral Account”) established by the Borrower with the Collateral Agent, to be held, applied or released for application as provided in this Section 2.14 and Section 2.15.

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(b) The Borrower hereby grants to the Collateral Agent for the ratable benefit of the Revolving Fronting Banks and the other Lender Parties as their respective interests appear, a security interest in the Borrower’s right, title and interest in and to the Revolving L/C Cash Collateral Account and all funds and financial assets from time to time credited thereto, all interest, dividends, distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such funds and financial assets, and all certificates and instruments, if any, from time to time representing or evidencing the Revolving L/C Cash Collateral Account and all of proceeds of any of the foregoing (the “Revolving L/C Collateral”), to secure all of the Borrower’s Obligations hereunder and the other Credit Agreement Documents.

(c) If and when any portion of the Revolving Letter of Credit Liabilities on which any deposit of cash collateral was based (the “Relevant Contingent Exposure”) shall become fixed (a “Direct Exposure”) as a result of the payment by a Revolving Fronting Bank of a draft presented under any relevant Revolving Letter of Credit, (including any such payment under an Alternative Currency Letter of Credit for which the relevant Revolving Fronting Bank, as a result of fluctuations in currency exchange rates, is not reimbursed in full by the Revolving Credit Loan Banks) the amount of such Direct Exposure (but not more than the amount in the Revolving L/C Cash Collateral Account at the time) shall be withdrawn by the Agent from the Revolving L/C Cash Collateral Account and shall be paid to the relevant Revolving Fronting Bank to be applied against such Direct Exposure and the Relevant Contingent Exposure shall thereupon be reduced by such amount.

(d) Interest and other payments and distributions made on or with respect to the Revolving L/C Collateral held by the Collateral Agent shall be for the account of the Borrower and shall constitute additional Revolving L/C Collateral to be held by the Agent; provided that the Agent shall have no obligation to invest any Revolving L/C Collateral on behalf of the Borrower or any other Person. Beyond the exercise of reasonable care in the custody thereof, the Agent shall have no duty as to any Revolving L/C Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Revolving L/C Collateral in its possession if the Revolving L/C Collateral is accorded treatment substantially equal to that which it accords its own property, and shall not be liable or responsible for any loss or damage to any of the Revolving L/C Collateral, or for any diminution in the value thereof, by reason of the act or omission of any agent or bailee selected by the Collateral Agent in good faith. All expenses and liabilities incurred by the Collateral Agent in connection with taking, holding and disposing of any Revolving L/C Collateral (including customary custody and similar fees with respect to any Revolving L/C Collateral held directly by the Agent and the Revolving L/C Cash Collateral Account) shall be paid by the Borrower from time to time upon demand. Upon an Actionable Default, the Collateral Agent shall be entitled to apply (and, at the request of the Required Banks but subject to applicable law, shall apply) Revolving L/C Collateral or the proceeds thereof to payment of any such expenses, liabilities and fees. After the termination of the Revolving Credit Loan Commitments of the Revolving Loan Credit Loan Banks, the termination of all Revolving Letters of Credit and the repayment in full of all outstanding Reimbursement Obligations in respect of the Revolving Letters of Credit, the

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Collateral Agent shall transfer the remaining Revolving L/C Collateral or the proceeds thereof (the “Excess Revolving L/C Collateral”) to the Collateral Account. Notwithstanding any other term or provision of this Agreement, and for the avoidance of doubt, the Revolving L/C Collateral shall be paid first to the relevant Revolving Fronting Bank in satisfaction of any Direct Exposures or Relevant Contingent Exposures and no Revolving L/C Collateral shall be released or disbursed to any party other than the relevant Revolving Fronting Bank until the satisfaction of all Revolving Letter of Credit Liabilities and the termination of the Revolving Credit Loan Commitments and all Revolving Letters of Credit.

Section 2.15 Computations of Outstandings; Determination of Available Amount of Alternative Currency Letters of Credit.

(a) Whenever reference is made in this Agreement to the Total Outstandings on any date under this Agreement, such reference shall refer to the Total Outstandings on such date after giving effect to all Extensions of Credit to be made on such date. For purposes of calculating the Total Outstandings on any date of determination, the aggregate Available Amount in respect of all Alternative Currency Letters of Credit shall be deemed to equal the amount thereof most recently reported to the Agent pursuant to subsection (b) below. At no time shall the Total Outstandings under this Agreement exceed the sum of (i) the aggregate amount of the Revolving Credit Loan Commitments, plus (ii) the amounts on deposit in the Revolving L/C Cash Collateral Account (such sum being referred to herein as the “Maximum Outstanding Exposure”). References to the Unused Revolving Credit Loan Commitments shall refer to the excess, if any, of the Revolving Credit Loan Commitments over the Total Outstandings; and references to the unused portion of any Revolving Credit Loan Commitment shall refer to the Unused Revolving Credit Loan Commitment of such Bank.

(b) Each Revolving Fronting Bank that issues an Alternative Currency Letter of Credit shall (i) on the first Domestic Business Day of each calendar month, deliver to the Agent a schedule listing (A) each outstanding Alternative Currency Letter of Credit issued by such Revolving Fronting Bank, (B) the maximum aggregate amount available to be drawn under each such Alternative Currency Letter of Credit at any time on or after such date (denominated in the applicable Alternative Currency, assuming the compliance with and satisfaction of all conditions for Revolving L/C Drawing enumerated therein) and (C) the equivalent in Dollars of such amount (as determined by such Revolving Fronting Bank on the basis of exchange rates available to or otherwise used by such Revolving Fronting Bank), together with the applicable exchange rate utilized by such Revolving Fronting Bank and the source thereof (it being agreed and understood that such applicable exchange rate may be adjusted by a reasonable and customary volatility factor as agreed by the Borrower and such Revolving Fronting Bank); (ii) on the date of issuance of any Alternative Currency Letter of Credit (including, if any Alternative Currency Letters of Credit are issued or deemed issued on the Closing Date, on the Closing Date), deliver to the Agent a schedule listing the information described in clauses (B) and (C) above; (iii) on the date of any increase or decrease in the Available Amount of any Alternative Currency Letter of Credit (other than any increase or decrease attributable solely to currency exchange rate fluctuations), deliver to the Agent a schedule listing the information described in clauses (B) and (C) above after

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giving effect to such increase or decrease (as the case may be) and (iv) not later than one Domestic Business Day after its receipt of a written request therefor from the Agent or any Bank, deliver to the Agent a schedule listing the information described in clauses (A), (B) and (C) above. The Agent shall promptly after its receipt thereof deliver a copy of each such schedule to the Collateral Agent, the Borrower and the Banks. For all purposes under this Agreement, unless otherwise expressly set forth herein, the Available Amount in respect of each Alternative Currency Letter of Credit shall be deemed to equal, on any date of determination, the Dollar Equivalent thereof as most recently reported to the Agent by the relevant Revolving Fronting Bank pursuant to this subsection (b).

(c) If, on (i) the date that any schedule is delivered by a Revolving Fronting Bank to the Agent pursuant to subsection (b) above; (ii) any date, after giving effect to reduction in the Revolving Credit Loan Commitments or (iii) any other date, Total Outstandings on such date (calculated pursuant to subsection (a) and (b) above) exceeds the Maximum Outstanding Exposure, then within two Domestic Business Days thereafter the Borrower shall be obligated to deposit cash collateral with the Collateral Agent in the Revolving L/C Cash Collateral Account in an amount equal to such excess to be held, applied or released for application as provided in Section 2.14.

(d) If at any time the Maximum Outstanding Exposure exceeds the Total Outstandings hereunder, the Borrower may provide a written notice to the Collateral Agent requesting the Collateral Agent to withdraw such excess amount from the Revolving L/C Cash Collateral Account and pay such amount to the Borrower, and, provided that no Actionable Default shall have occurred and be continuing, the Collateral Agent shall promptly undertake such actions in accordance with the instructions of the Borrower. If an Actionable Default shall have occurred and be continuing, the Collateral Agent shall not take any of the foregoing actions and, if and when requested by the Required Banks, the amounts held in the Revolving L/C Cash Collateral Account shall be withdrawn by the Collateral Agent, and the proceeds thereof shall be first applied by the Collateral Agent to repay the Total Outstandings and other due and unpaid amounts required to be paid by the Borrower hereunder and second, held, applied or transferred as provided in Section 2.14.

Section 2.16 Alternative Currency Letter of Credit Issuances.

It is understood that, if Revolving Letters of Credit are issued in an Alternative Currency, a circumstance may arise where the United States dollars (“Dollars”) needed to reimburse a Revolving Fronting Bank may exceed the Unused Revolving Credit Loan Commitment of the Revolving Credit Loan Banks and the amounts on deposit in the Revolving L/C Cash Collateral Account available for that purpose. This situation could occur if an Alternative Currency exchange rate between the currency of a Revolving Letter of Credit issuance and Dollars changes between the date of issuance of, and the date of funding a Revolving L/C Drawing on, an Alternative Currency Letter of Credit (or funding a deposit to the Revolving L/C Cash Collateral Account to cover issuances in excess of the Revolving Credit Loan Commitments) so that more Dollars are needed to purchase the Alternative Currency on the date of funding of the Revolving L/C Drawing on an Alternative Currency Letter of Credit (or funding a deposit to the Revolving L/C Cash Collateral Account) than would have been needed to fund a Revolving L/C Drawing made on the issuance date of such Revolving Letter of Credit

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(i.e., the currency of issuance has appreciated against the Dollar between the date of issuance and the date of funding or cash collateral deposit). In such a circumstance, the Revolving Fronting Banks agree as follows: (a) (x) Any shortfall under the Revolving Credit Loan Commitment to purchase participations in Revolving L/C Drawings under Revolving Letters of Credit shall be allocated pro rata among the Revolving Fronting Banks who have issued Alternative Currency Letters of Credit for which the currency of issuance has appreciated against the Dollar (“Adverse Alternative Currency Letters of Credit”); (y) the pro rata allocation shall be based on the Dollar Equivalent of the face amount of each Adverse Alternative Currency Letter of Credit, measured at the issuance date of each such Adverse Alternative Currency Letter of Credit and (z) Revolving Credit Loan Commitments shall not be used to purchase participations in Adverse Alternative Currency Letters of Credit to the extent that use of those Revolving Credit Loan Commitments covers any increase in the Dollar Equivalent of an Adverse Alternative Currency Letters of Credit since the date of issuance of the Revolving Letter of Credit if following such purchase remaining Unused Revolving Credit Loan Commitments are insufficient to purchase participations in the remaining outstanding Revolving Letters of Credit and (b) amounts deposited in the Revolving L/C Cash Collateral Account shall be allocated first to cover shortfalls to the extent existing on the last date of actual deposit to the Revolving L/C Cash Collateral Account, or if later, the most recent date of determination pursuant to Section 2.15(b), and second to any additional shortfalls (allocated pro rata among such shortfalls); provided that funds on deposit in the Revolving L/C Cash Collateral Account, if any, may not be applied to fund a Revolving L/C Drawing on an Adverse Alternative Currency Letter of Credit to the extent those funds have been allocated to cover an exposure existing on the last date of deposit to the Revolving L/C Cash Collateral Account if following the application a previously covered exposure is left without cash collateral.

Section 2.17 Increase in Term Loan Commitments.

(a) The Borrower may, at any time and from time to time prior to the later of (x) the Initial Term Loan Termination Date and (y) any Incremental Term Loan Termination Date, by notice to the Agent, request the addition of one or more new term loan facilities (each, an “Incremental Term Loan Facility”) or one or more increases in the Commitments under a Term Loan Facility existing at the time of such request (each, a “Commitment Increase”) in an aggregate amount up to $500,000,000 plus the sum of all amounts applied from time to time after the Effective Date to permanently prepay Term Loans pursuant to Section 2.10 hereof or to permanently reduce Revolving Credit Loan Commitments pursuant to Section 2.09 hereof less the aggregate amount of Revolving Credit Loan Commitment Increases pursuant to Section 2.18, to be effective as of a date that is at least 90 days prior to the scheduled Termination Date then in effect (each, an “Increase Date”) as specified in the related notice to the Agent; provided, however, that (i) in no event shall the aggregate amount of such Commitment Increases exceed $700,000,000 less the aggregate amount of Revolving Credit Loan Commitment Increases pursuant to Section 2.18, (ii) on the date of any request by the Borrower for a Commitment Increase and on the related Increase Date, the applicable conditions set forth in Section 3.02 and in clause (d) of this Section 2.17 shall be satisfied and (iii) if the request is for an Incremental Term Loan Facility, such Incremental Term Loan Facility shall contain such other terms as may be agreed by the Borrower, the Agent and the Incremental Term Loan Banks, provided that (A) the final scheduled maturity date of the Incremental Term Loan Facility shall in no event be

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prior to the Initial Term Loan Termination Date and (B) no Bank shall have any obligation to participate in any Incremental Term Loan Facility or any Commitment Increase.

(b) The Agent shall promptly notify the Initial Term Loan Banks of any request by the Borrower for a Commitment Increase, which notice shall include (i) the proposed amount of such requested Commitment Increase, (ii) the proposed Increase Date and (iii) the date by which Initial Term Loan Banks wishing to participate in the Commitment Increase must commit to an increase in the amount of their respective Commitments (the “Increase Commitment Date”). Each Initial Term Loan Bank that is willing to participate in the requested Commitment Increase shall, in its sole discretion, give written notice to the Agent on or prior to the applicable Increase Commitment Date of the amount by which it is willing either to increase its Initial Term Loan Commitment or commit to the Incremental Term Loan Facility. If the Initial Term Loan Banks notify the Agent that they are willing to participate in a Commitment Increase by an aggregate amount that exceeds the amount of the requested Commitment Increase, the requested Commitment Increase shall be allocated among the Initial Term Loan Banks willing to participate therein in such amounts as are agreed between the Borrower and the Agent.

(c) Promptly following the applicable Increase Commitment Date, the Agent shall notify the Borrower as to the amount, if any, by which the Initial Term Loan Banks are willing to participate in the requested Commitment Increase. If the aggregate amount by which the Initial Term Loan Banks are willing to participate in the requested Commitment Increase on any such Increase Date is less than the requested Commitment Increase, then the Borrower may extend offers to one or more Eligible Assignees to participate in any portion of the requested Commitment Increase that has not been committed to by the Initial Term Loan Banks as of the applicable Increase Commitment Date; provided, however, that the Initial Term Loan Commitment or Incremental Term Loan Commitment, as the case may be, of each such Eligible Assignee shall be in an amount equal to at least $1,000,000.

(d) On the applicable Increase Date, each Eligible Assignee that accepts an offer to participate in a requested Commitment Increase in accordance with Section 2.17(c) shall become a Bank party to this Agreement as of the applicable Increase Date and the Initial Term Loan Commitment or the Incremental Term Loan Commitment, as the case may be, of each Initial Term Loan Bank participating in such Commitment Increase shall be so increased by such amount (or by the amount allocated to such Initial Term Loan Bank pursuant to the last sentence of Section 2.17(b)) as of such Commitment Increase Date; provided, however, that the Agent shall have received on or before the applicable Increase Date the following, each dated such date:

(i) (A) certified copies of resolutions of the Board of Directors (or a committee thereof) of the Loan Parties approving the applicable Commitment Increase and the corresponding modifications to this Agreement and (B) an opinion of counsel for each of the Loan Parties (which may be an opinion of in-house counsel), each in form and substance reasonably satisfactory to the Agent;

(ii) an assumption agreement from each Eligible Assignee, if any, in form and substance satisfactory to the Borrower and the Agent (each an “Assumption Agreement”), duly executed by such Eligible Assignee, the Agent and the Borrower; and

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(iii) confirmation from each Initial Term Loan Bank of the increase in the amount of its Initial Term Loan Commitment or Incremental Term Loan Commitment, as the case may be, in a writing satisfactory to the Borrower and the Agent.

On the applicable Increase Date, upon fulfillment of the conditions set forth in the immediately preceding sentence of this Section 2.17(d) and the conditions set forth in Section 3.02, (x) the Agent shall notify the Initial Term Loan Banks and the Additional Term Loan Banks participating in such Commitment Increase and the Borrower, on or before 11:00 A.M. (New York City time), by telecopier or telex, of the occurrence of the applicable Commitment Increase to be effected on the related Increase Date, (y) each Initial Term Loan Bank participating in such Commitment Increase and each Additional Term Loan Bank participating in such Commitment Increase shall make a single advance to the Borrower in an amount equal to its agreed commitment in respect of the Commitment Increase; provided that after taking into account such advance, the aggregate principal amount of the Term Loans of each such participating Term Loan Bank shall not exceed such Term Loan Bank’s Total Term Loan Commitments and (z) the Agent shall record in the Register maintained by the Agent pursuant to Section 10.06(f) the relevant information with respect to each Initial Term Loan Bank and each Additional Term Loan Bank participating in such Commitment Increase on such date.

Section 2.18 Increase in Revolving Credit Loan Commitments.

(a) The Borrower may, at any time and from time to time prior to the Termination Date of the Revolving Credit Loan Facility, by notice to the Agent, request one or more increases in the Commitments under the Revolving Credit Loan Facility existing at the time of such request (each, a “Revolving Credit Loan Commitment Increase”) in an aggregate amount up to $500,000,000 plus the sum of all amounts applied from time to time after the Effective Date to permanently reduce Revolving Credit Loan Commitments pursuant to Section 2.09 hereof or to permanently repay Term Loans pursuant to Section 2.10 hereof less the aggregate amount of Incremental Term Loan Facilities and Commitment Increases pursuant to Section 2.17, to be effective as of a date that is at least 90 days prior to the scheduled Termination Date then in effect (each, a “Revolving Credit Increase Date”) as specified in the related notice to the Agent; provided, however, that (i) in no event shall the aggregate amount of such Revolving Credit Loan Commitment Increases exceed $700,000,000 less the aggregate amount of Incremental Term Loan Facilities and Commitment Increases pursuant to Section 2.17 and (ii) on the date of any request by the Borrower for a Revolving Credit Loan Commitment Increase and on the related Revolving Credit Increase Date, the applicable conditions set forth in Section 3.02 and in clause (d) of this Section 2.18 shall be satisfied, provided that no Bank shall have any obligation to participate in any Revolving Credit Loan Commitment Increase.

(b) The Agent shall promptly notify the Revolving Credit Loan Banks of any request by the Borrower for a Revolving Credit Loan Commitment Increase, which notice shall include (i) the proposed amount of such requested Revolving Credit Loan Commitment Increase, (ii) the proposed Revolving Credit Increase Date and (iii) the date by which Revolving Credit Loan Banks wishing to participate in the Revolving Credit Loan Commitment Increase must commit to an increase in the amount of their respective

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Revolving Credit Loan Commitments (the “Revolving Credit Loan Increase Commitment Date”). Each Revolving Credit Loan Bank that desires to participate in the requested Revolving Credit Loan Commitment Increase shall, in its sole discretion, give written notice to the Agent on or prior to the applicable Revolving Credit Loan Increase Commitment Date of the amount by which it desires to increase its Revolving Credit Loan Commitment.

(c) The Borrower may extend offers to one or more Eligible Assignees to participate in any portion of the requested Revolving Credit Loan Commitment Increase; provided, however, that the Revolving Credit Loan Commitment of each such Eligible Assignee shall be in an amount equal to at least $1,000,000. Promptly following the applicable Revolving Credit Loan Increase Commitment Date, the Agent shall notify the Borrower as to the amount, if any, by which the Revolving Credit Loan Banks and any Eligible Assignees are willing to participate in the requested Revolving Credit Loan Commitment Increase. In all cases (including if the aggregate amount by which the Revolving Credit Loan Banks and any Eligible Assignees are willing to participate in the requested Revolving Credit Loan Commitment Increase on any such Revolving Credit Increase Date exceeds the amount of the requested Revolving Credit Loan Commitment Increase), the requested Revolving Credit Loan Commitment Increase shall be allocated among the Revolving Credit Loan Banks and any Eligible Assignees willing to participate therein in such amounts as are agreed between the Borrower and the Agent.

(d) On the applicable Revolving Credit Increase Date, each Eligible Assignee that accepts an offer to participate in a requested Revolving Credit Loan Commitment Increase in accordance with Section 2.18(c) shall become a Bank party to this Agreement as of the applicable Revolving Credit Increase Date and the Revolving Credit Loan Commitment of each Revolving Credit Loan Bank participating in such Revolving Credit Loan Commitment Increase shall be increased by the amount allocated to such Revolving Credit Loan Bank pursuant to the last sentence of Section 2.18(c)) as of such Revolving Credit Increase Date; provided, however, that the Agent shall have received on or before the applicable Revolving Credit Increase Date the following, each dated such date:

(i) (A) certified copies of resolutions of the Board of Directors (or a committee thereof) of the Loan Parties approving the applicable Revolving Credit Loan Commitment Increase and the corresponding modifications to this Agreement and (B) an opinion of counsel for each of the Loan Parties (which may be an opinion of in-house counsel), each in form and substance reasonably satisfactory to the Agent;

(ii) an assumption agreement from each Eligible Assignee, if any, in form and substance satisfactory to the Borrower and the Agent (each a “Revolving Credit Assumption Agreement”), duly executed by such Eligible Assignee, the Agent and the Borrower; and

(iii) confirmation from each Revolving Credit Loan Bank of the increase in the amount of its Revolving Credit Loan Commitment in a writing satisfactory to the Borrower and the Agent.

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On the applicable Revolving Credit Increase Date, upon fulfillment of the conditions set forth in the immediately preceding sentence of this Section 2.18(d) and the conditions set forth in Section 3.02, (x) the Agent shall notify the existing Revolving Credit Loan Banks and any new Revolving Credit Loan Banks participating in such Revolving Credit Loan Commitment Increase and the Borrower, on or before 11:00 A.M. (New York City time), by telecopier or telex, of the occurrence of the applicable Revolving Credit Loan Commitment Increase to be effected on the related Revolving Credit Increase Date and (y) the Agent shall record in the Register maintained by the Agent pursuant to Section 10.06(f) the relevant information with respect to each existing Revolving Credit Loan Bank and each new Revolving Credit Loan Bank participating in such Revolving Credit Loan Commitment Increase on such date.

ARTICLE III

CONDITIONS

Section 3.01 Closing.

The closing under the Existing Bank Credit Agreement occurred on March 17, 2004 when all the following conditions had been satisfied:

(a) The Borrower shall have paid all accrued fees of the Agent, the Collateral Agent, the Arranger Parties and the Banks and all accrued expenses of the Agent and the Collateral Agent (including, without limitation, all fees and expenses of counsel to the Agent payable pursuant to Section 10.03);

(b) The Agent shall have received, if requested, duly executed Notes of the Borrower for the account of each Bank that has so requested, dated on or before the Closing Date complying with the provisions of Section 2.04;

(c) The Agent shall have received (i) an opinion of the Assistant General Counsel of the Borrower, substantially in the form of Exhibit B-1 hereto, (ii) an opinion of Davis Polk & Wardwell, special counsel for the Borrower, substantially in the form of Exhibit B-2 hereto, (iii) opinions of special counsel for certain Subsidiaries of the Borrower in each of the jurisdictions in which the Required Banks may reasonably request, substantially in the form of Exhibit B-3 hereto, (iv) an opinion of Morris, Nichols, Arsht & Tunnell, Delaware counsel for the Borrower, substantially in the form of Exhibit B-4 hereto, (v) an opinion of Maples and Calder, Cayman Islands counsel for the Borrower, substantially in the form of Exhibit B-5 hereto, and (vi) an opinion of Conyers Dill & Pearman, British Virgin Islands counsel for the Borrower, substantially in the form of Exhibit B-6 hereto, each dated the Closing Date (except for the opinions to be delivered pursuant to clause (iii) above which shall be dated on or about the Closing Date) and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request;

(d) The Agent shall have received an opinion of Shearman & Sterling, special counsel for the Agent, substantially in the form of Exhibit B-7 hereto, dated the Closing

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Date and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request;

(e) The Agent shall have received evidence, satisfactory to it, in the form of pro forma calculations, that the making of Borrowings and the issuance (or deemed issuance) of, and Revolving L/C Drawings under, the Revolving Letters of Credit, under this Agreement are permitted under the terms of the Debt of the Borrower outstanding on the Closing Date;

(f) The Agent shall have received executed counterparts of Amendment No. 2 to the Collateral Trust Agreement reflecting such amendments as the Agent may deem necessary.

(g) The Agent shall have received copies of the resolutions of the Board of Directors (or, in the case of any limited liability companies, Board of Representatives or the equivalent) of each Loan Party authorizing the execution, delivery and performance by such Loan Party of the Financing Documents to which it is a party, certified by a duly authorized officer of such Loan Party (which certificate shall state that such resolutions are in full force and effect on the Closing Date);

(h) The Agent shall have received certified copies of all approvals, authorizations or consents of, or notices to or registrations with, any governmental body or agency required for each Loan Party, if necessary, to enter into the Financing Documents to which it is a party;

(i) The Agent shall have received a certificate of a duly authorized officer of each Loan Party certifying the names and true signatures of the officers of such Loan Party authorized to sign the Financing Documents to which it is a party and the other documents to be delivered by such Loan Party hereunder;

(j) The Agent shall have received a certificate signed by a duly authorized officer of the Borrower dated the Closing Date, to the effect that: (i) the representations and warranties contained in Article 4 hereof are true and correct on and as of the Closing Date as though made on and as of such date; and (ii) no Default has occurred and is continuing or would result from the issuance of the Revolving Letters of Credit requested by the Borrower to be issued on such date and the Borrowings requested by the Borrower to be made on such date (including, without limitation, the deemed issuance of Revolving Letters of Credit pursuant to the second sentence of Section 2.03(a));

(k) The Agent shall have received a certificate signed by a duly authorized officer of the Borrower to the effect that the execution, delivery and performance by each Loan Party of the Financing Documents to which it is a party are within such Loan Party’s corporate or other organizational powers, have been duly authorized by all necessary corporate or other organizational action, require no action by or in respect of, or filing with, any governmental body, agency or official (other than the filing of UCC-1 financing statements and other filings required to perfect security interests) and do not contravene, or constitute a default under, any provision of applicable law or regulation or

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of the certificate of incorporation (or certificate of formation, as applicable) or by-laws (or other organizational documents, as applicable) of such Loan Party or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries that could reasonably be expected to result in a Material Adverse Effect or result in the creation or imposition of any Lien on any asset of the Borrower or of AES BVI II or of any Material AES Entity or of any Pledged Subsidiary (except for Liens created by the Financing Documents) provided that any foreclosure or other exercise of remedies by the Collateral Trustees or the Collateral Agent will require additional approvals and consents that have not been obtained from foreign and domestic regulators and from lenders to, and suppliers, customers or other contractual parties of one or more Subsidiaries and failure to obtain such approval or consent could result in a default, or a breach of agreement or other legal obligations of such Subsidiaries; and

(l) The Agent shall have received all documents it may reasonably request relating to the existence of the Loan Parties, the corporate or other organizational authority for and the validity of this Agreement and the other Financing Documents, and any other matters relevant hereto, all in form and substance satisfactory to the Agent.

Section 3.02 Extension of Credit.

The obligation of each Bank to make a Loan on the occasion of each Borrowing and the obligation of the Revolving Fronting Banks to issue a Revolving Letter of Credit on the occasion of each request therefor by the Borrower shall in each case be subject to the satisfaction of the following conditions:

(a) receipt by the Agent of a Notice of Borrowing (except in the case of the deemed issuance of Revolving Letters of Credit pursuant to the second sentence of Section 2.03(a)) or a Notice of Issuance as required by Section 2.02 or 2.03, as the case may be;

(b) the fact that, immediately after such Extension of Credit, after giving effect to all direct and indirect applications of the proceeds of such Extension of Credit made substantially simultaneously with the extension thereof, the aggregate Total Outstandings of any Revolving Credit Loan Bank will not exceed its Revolving Credit Loan Commitment;

(c) the fact that the making of the Borrowings, the continuation of certain Loans and the issuance of, and the Revolving L/C Drawings and the Revolving Letters of Credit under this Agreement are permitted under the terms of the Debt of the Borrower outstanding as of the date of the making of such Loan or the issuance of, and the Revolving L/C Drawings under such Revolving Letter of Credit;

(d) the fact that, immediately before and after such Extension of Credit, no Default shall have occurred and be continuing; and

(e) the fact that the representations and warranties of the Obligors contained in the Financing Documents (except (i) in the case of a Refunding Borrowing, the

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representations and warranties set forth in Section 4.05(b) and 4.06 as to any matter which has heretofore been disclosed in writing by the Borrower to the Bank Parties and (ii) in the case of the representations and warranties set forth in Section 4.16 which shall be true on and as of the date hereof) shall be true on and as of the date of such Extension of Credit.

Each Extension of Credit hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Extension of Credit as to the facts specified in clauses (b) through (e) of this Section.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants that:

Section 4.01 Corporate Existence and Power.

Each Loan Party is a corporation (or limited liability company, as applicable) duly incorporated (or formed, as applicable), validly existing and in good standing under the laws of the jurisdiction of its incorporation (or formation) and has all corporate or other organizational powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted.

Section 4.02 Corporate and Governmental Authorization and Filings; No Contravention.

(a) The execution, delivery and performance by each Loan Party of the Financing Documents to which it is a party are within such Loan Party’s corporate or other organizational powers, have been duly authorized by all necessary corporate or other organizational action, require no action by or in respect of, or filing with, any governmental body, agency or official (other than the filing of UCC-1 financing statements and other filings required to perfect security interests) and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation (or certificate of formation, as applicable) or by-laws (or other organizational documents, as applicable) of such Loan Party or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries that could reasonably be expected to result in a Material Adverse Effect or result in the creation or imposition of any Lien on any asset of the Borrower, AES BVI II or of any Material AES Entity or of any Pledged Subsidiary (except for Liens created by the Financing Documents).

(b) All filings and other actions necessary to perfect the security interest granted by each Loan Party in the Collateral created under the Collateral Documents have been duly made or taken and are in full force and effect, and (w) the Security Agreement creates in favor of the Collateral Trustees for the benefit of the Secured Holders a valid and, together with such filings and other actions, perfected first priority security interest in the Security Agreement Collateral (subject to no Liens other than Liens permitted by the Financing Documents), securing the payment of the Secured Obligations, and (x) the BVI

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Cayman Pledge Agreement creates in favor of the Collateral Trustees for the benefit of the Secured Holders a valid and, together with such other actions, perfected first priority security interests in the BVI Collateral (subject to no Liens other than Liens permitted by the Financing Documents), securing the payment of the Secured Obligations and (y) the Collateral Trust Agreement creates in favor of the Collateral Trustees for the benefit of the Secured Holders, a valid and, together with such filings and other actions, perfected first priority security interest in the Additional Collateral Trust Agreement Collateral; provided that any foreclosure or other exercise of remedies by the Collateral Trustees will require additional approvals and consents that have not been obtained from foreign and domestic regulators and from lenders to, and suppliers, customers or other contractual counterparties of one or more Subsidiaries and failure to obtain such approval or consent could result in a default, or a breach of agreement or other legal obligations of such Subsidiaries. The Borrower is the legal and beneficial owner of the Security Agreement Collateral and the Additional Collateral Trust Agreement Collateral and AES BVI II is the legal and beneficial owner of the BVI Collateral, in each case free and clear of any Lien, except for Liens permitted by the Financing Documents.

Section 4.03 Compliance with Laws.

The Borrower is and each of its Subsidiaries are in compliance with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder) except for any non-compliance that could not reasonably be expected to have a Material Adverse Effect.

Section 4.04 Binding Effect.

This Agreement constitutes a valid and binding agreement of each Obligor and each other Financing Document, when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of each Loan Party that is a party thereto, in each case enforceable in accordance with its terms.

Section 4.05 Financial Information.

(a) The most recent consolidated balance sheet of the Borrower and its Consolidated Subsidiaries and the related consolidated statements of operations and cash flows, in each case reported on by Ernst & Young or other independent public accountants of nationally recognized standing and set forth in the Annual Report on Form 10-K most recently filed by the Borrower with the Securities and Exchange Commission, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year.

(b) Except for Disclosed Matters, since December 31, 2003 there has been no material adverse change in the business, financial position, results of operations or prospects of the Borrower and its Consolidated Subsidiaries, considered as a whole.

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Section 4.06 Litigation.

Except for Disclosed Matters, there is no action, suit, investigation, litigation or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could have a Material Adverse Effect or which in any manner draws into question the legality, validity or enforceability of any Financing Document, and there shall have been no change in the status of, or in the financial effect on the Borrower or its Subsidiaries from the actions, suits, investigations, litigations or proceedings set forth in the Disclosed Matters that could reasonably be expected to have a Material Adverse Effect.

Section 4.07 Compliance with ERISA.

Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the currently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has (a) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan; (b) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (c) incurred any liability in excess of $100,000 under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA.

Section 4.08 Environmental Matters.

(a) In the ordinary course of its business, each of the Borrower and its Subsidiaries conducts an ongoing review of the effect of Environmental Laws on the business, operations and properties of the Borrower or such Subsidiary, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required for investigation, to achieve or maintain compliance with environmental protection standards imposed by Environmental Laws or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat, any costs or liabilities in connection with off-site disposal of wastes or Hazardous Substances by the Borrower or its Subsidiaries, and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of this review, the Borrower has reasonably concluded that such associated liabilities and costs, including the costs of compliance with Environmental Laws, are unlikely to have a Material Adverse Effect.

(b) There are no facts, circumstances or conditions that are reasonably likely to result in liabilities arising under Environmental Laws that could have a material adverse

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effect on the business, financial conditions, results of operations or prospects of the Borrower and its Consolidated Subsidiaries, considered as a whole.

Section 4.09 Taxes.

United States Federal income tax returns of the Borrower and its Subsidiaries and any other material tax returns filed by them have been examined and closed (other than for the limited purposes of net operating loss carry-forwards) through the fiscal year ended December 31, 1999 there are no ongoing or pending tax audits or examinations, and no deficiencies or other claims for unpaid taxes are proposed in respect of any taxes due from the Borrower, its Subsidiaries or any Material AES Entity that could have a Material Adverse Effect. The Borrower, its Subsidiaries and all Material AES Entities have filed all United States Federal income tax returns and the Borrower, its Subsidiaries and all Material AES Entities have filed all other material tax returns which are required to be filed by them, all such United States Federal income tax returns and all such other material returns are true, correct and complete in all material respects and all taxes due as indicated on such returns or pursuant to any assessment received by the Borrower or any Subsidiary or any Material AES Entity have been paid, other than any such taxes that are being diligently contested in good faith through appropriate proceedings and for which adequate reserves have been established in accordance with generally accepted accounting principals. The charges, accruals and reserves on the books of the Borrower, its Subsidiaries and all Material AES Entities in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate.

Section 4.10 Material AES Entities.

Each Material AES Entity is a corporation (or limited liability company, as applicable) duly incorporated (or formed, as applicable), validly existing and (other than any Material AES Entity that is not incorporated under the laws of the United States or any political subdivision thereof) in good standing under the laws of its jurisdiction of incorporation (or jurisdiction of formation, as applicable). Each Material AES Entity has all corporate or other organizational powers and all material governmental licenses, authorization, consents and approvals required to carry on its business as proposed to be conducted and has all governmental licenses, authorizations, consents and approvals required to have been obtained prior to the date hereof and which are material to the operation of its business as proposed to be conducted, except to the extent that the failure to obtain any such license, authorization, consent or approval, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

Section 4.11 Not an Investment Company.

None of the Obligors is an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

Section 4.12 Public Utility Holding Company Act.

Neither the Borrower nor any of its Subsidiaries is subject to regulation as a “holding company” or a “aubsidiary company” of a holding company or an “affiliate” of a subsidiary or holding company or a “public utility company” under Section 2(a) of the Public

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Utility Holding Company Act of 1935, as amended (“PUHCA”), except that the Borrower and certain of its Subsidiaries are exempt holding companies under Section 3(a) of PUHCA by order of the Securities and Exchange Commission.

Section 4.13 Full Disclosure.

All information heretofore furnished by the Borrower to the Agent or any Bank Party for purposes of or in connection with any Financing Document or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by the Borrower to the Agent or any Bank Party will be, true and accurate in all material respects on the date as of which such information is stated or certified in the light of the circumstances under which such information was provided (as modified or supplemented by other information so furnished, when taken together as a whole and with the Disclosed Matters); provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based on assumptions believed to be reasonable at the time, it being recognized by the Bank Parties that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. The Borrower has disclosed to the Bank Parties, in the Disclosed Matters or otherwise in writing, any and all facts specific to the Borrower and its Subsidiaries and known as of the date hereof to a responsible officer of the Borrower that could reasonably be expected to result in a Material Adverse Effect, which materially and adversely affect or may affect (to the extent the Borrower can now reasonably foresee), the business, operations or financial condition of the Borrower and its Consolidated Subsidiaries, taken as a whole, or the ability of any Obligor to perform its obligations under the Financing Documents.

Section 4.14 Collateral Documents and Collateral.

(a) (i) The execution, delivery, recordation, filing or performance by the Borrower and AES BVI II of the Collateral Documents; (ii) the grant by the Borrower and AES BVI II of the Liens granted by each of them pursuant to the Collateral Documents; (iii) the perfection or maintenance of the Liens created under the Collateral Documents (including the first priority nature thereof) and (iv) the exercise by the Collateral Trustees of its remedies in respect of the Collateral pursuant to the Collateral Documents, does not require any consent, approval, authorization or other order of, or any notice to or filing with, any court, regulatory body, administrative agency or other governmental body (other than such filings required in order to perfect any security interest granted by the Collateral Documents and other than any consent, approval, authorization, order, notice or filing the failure of which to make or obtain could not reasonably be expected to have a Material Adverse Effect), and does not conflict with or constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws of the Borrower, AES BVI II, or any of the other Pledged Subsidiaries or any agreement, indenture or other instrument to which the Borrower, AES BVI II or any of the other Pledged Subsidiaries is a party or by which the Borrower, AES BVI II or any of the other Pledged Subsidiaries or the Borrower’s, AES BVI II’s or the other Pledged Subsidiaries respective property is bound, or violate or conflict with any laws, administrative regulations or rulings or court decrees applicable to the Borrower, AES BVI II, any of the other Pledged Subsidiaries or the Borrower’s, AES BVI II’s or the other Pledged Subsidiaries respective property except for any violation, breach, conflict or

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default that could not reasonably be expected to have a Material Adverse Effect and except that in each of the foregoing cases any foreclosure or other exercise of remedies by the Collateral Trustees will require additional approvals and consents that have not been obtained from foreign and domestic regulators and from lenders to, and suppliers, customers or other contractual counterparties of, one or more Subsidiaries and failure to obtain such approval or consent could result in a default under, or a breach of, agreements or other legal obligations of such Subsidiaries.

(b) Each of the representations and warranties of the Borrower and AES BVI II contained in the Collateral Documents is true and correct.

(c) Set forth on Schedule I hereto is a complete and accurate list of all Pledged Subsidiaries as of the end of the most recently ended quarter for which financial statements have been delivered pursuant to Section 5.01(a) or (b) showing as of such date (as to each such Pledged Subsidiary) its legal name, its jurisdiction of incorporation, the type and number of shares of each class of its Equity Interests authorized, and the type and number outstanding, on such date and the percentage of each such class of its Equity Interests owned (directly or indirectly) by the Borrower and the certificate number corresponding to each such Equity Interest. All of the outstanding Equity Interests pledged to the Collateral Trustees for the benefit of the Secured Holders pursuant to the Security Agreement and the BVI Cayman Pledge Agreement in each Pledged Subsidiary have been validly issued, are fully paid and non-assessable and are owned by the Borrower or AES BVI II, as applicable, free and clear of all Liens, except those created under the Financing Documents.

(d) Set forth on Schedule II hereto is a complete and accurate list of all assigned agreements of the Borrower and its Subsidiaries (the “Assigned Agreements”), showing as of the Effective Date the parties, subject matter and term thereof. Each such Assigned Agreement has been duly authorized, executed and delivered by all parties thereto, has not been amended or otherwise modified (except as otherwise permitted pursuant to the Security Agreement), is in full force and effect (except as otherwise permitted pursuant to the Security Agreement) and is valid and binding upon and enforceable against all parties thereto, 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 and, as of the Closing Date, there exists no default under any Assigned Agreement by any party thereto.

Section 4.15 Existing Letters of Credit.

Appendix III hereto identifies each Existing Letter of Credit outstanding as of the Effective Date.

Section 4.16 Solvency.

Each of AES BVI II, AES New York, AES Oklahoma, AES Hawaii and AES Warrior Run is, individually, and together with its Subsidiaries, taken as a whole, Solvent as of the date hereof.

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Section 4.17 Pledged Subsidiaries.

Other than the Non- Pledged Subsidiaries, the Pledged Subsidiaries listed on Schedule I hereto most recently delivered to the Bank Parties in accordance with Section 5.01(l), are, as of the date set forth on such Schedule, all of the direct Subsidiaries of the Borrower and all of the direct Subsidiaries of AES BVI II.

Section 4.18 Qualified Holding Companies Debt.

None of the Qualified Holding Companies is an obligor or a contingent obligor on any of the Debt permitted by Section 5.07(b)(iii) or a contingent obligor on any of the Debt permitted by Section 5.07(a)(ii), other than Debt permitted by the definition of “Qualified Holding Company”.

ARTICLE V

COVENANTS

The Borrower agrees that, so long as any Loan or any other Obligation of any Loan Party under any Financing Document shall remain unpaid or any Revolving Credit Loan Bank has any Revolving Credit Loan Commitment hereunder or any amount payable under any Note remains unpaid or any Revolving Letter of Credit or any Reimbursement Obligation remains outstanding:

Section 5.01 Information.

The Borrower will deliver to each of the Bank Parties (it being understood that, (x) with respect to clause (c) below, such information shall only be delivered to the Bank Parties that on or prior to the date of delivery have previously requested such information and (y) delivery to the Agent and the posting by the Agent of each of the following items on an electronic website, in accordance with Section 7.11, shall constitute delivery to each of the Bank Parties, and the Agent hereby agrees to post on an electronic website or otherwise distribute to the Bank Parties (subject to clause (x) above) any such item delivered by the Borrower to the Agent):

(a) as soon as available and in any event (i) within 120 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower as of the end of such fiscal year, an unconsolidated balance sheet of the Borrower as of the end of such fiscal year, the related consolidated and unconsolidated (as applicable) statements of operations for such fiscal year and the related consolidated and unconsolidated statements of cash flows for such fiscal year, and a statement of cash flow distributions to the Borrower by project for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year and (ii) within 180 days after the end of the fiscal year of the Borrower, a consolidated balance sheet of each Subsidiary Guarantor as of the end of such fiscal year and the related consolidated statements of operations for such fiscal year and the related consolidated statements of cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year and said consolidated financial statements, in each case with respect to clauses (i) and (ii), to

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be reported on, in a manner acceptable to the Securities and Exchange Commission, by Ernst & Young or other independent public accountants of nationally recognized standing and such unconsolidated financial statements to be certified as to fairness of presentation, generally accepted accounting principles (other than failure to consolidate) and consistency by the chief executive officer, president, chief financial officer or chief accounting officer of the Borrower;

(b) as soon as available and in any event (i) within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower as of the end of such quarter and an unconsolidated balance sheet of the Borrower as of the end of such fiscal quarter and the related consolidated and unconsolidated statements of operations for such quarter and for the portion of the Borrower’s fiscal year ended at the end of such quarter and the related consolidated and unconsolidated (as applicable) statements of cash flows for the portion of the Borrower’s fiscal year ended at the end of such quarter, and a statement of cash flow distributions to the Borrower by project for such fiscal quarter and for the period of the Borrower’s fiscal year ended at the end of such quarter, setting forth in the case of such consolidated statements of operations and cash flows, in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower’s previous fiscal year and (ii) within 90 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of each Subsidiary Guarantor as of the end of such quarter and the related consolidated statements of operations for such quarter and for the portion of such Subsidiary Guarantor’s fiscal year ended at the end of such quarter and the related consolidated statements of cash flows for the portion of each Subsidiary Guarantor’s fiscal year ended at the end of such quarter, setting forth in the case of such consolidated statements of operations and cash flows, in comparative form the figures for the corresponding quarter and the corresponding portion of each Subsidiary Guarantor’s previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the chief executive officer, president, chief financial officer or chief accounting officer of the Borrower;

(c) upon request by any such Bank Party made at least 30 days prior to the date that the relevant financial statements are required to be delivered pursuant to clause (a) or (b) above (it being understood that upon the first such request, subsequent requests shall automatically be deemed to have been made for as long as such requesting Bank Party continues to be a Bank Party hereunder), (1) as soon as available and in any event no later than the date on which financial statements are required to be delivered pursuant to clause (a) above, forecasts prepared by management of the Borrower, in form satisfactory to the Agent, of cash flow statements on a monthly basis for the fiscal year following such fiscal year and on an annual basis for each fiscal year thereafter until the Termination Date and (2) as soon as available and in any event no later than the date financial statements are required to be delivered pursuant to clause (a) and (b) above, a statement of the monthly cash flows to the Borrower of each Subsidiary of the Borrower for each of the twelve months ending prior to the date of such financial statements;

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(d) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief executive officer, president, chief financial officer or chief accounting officer of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.07, 5.09, 5.10(p), 5.11, 5.13, 5.14 and 5.16 on the date of such financial statements; (ii) stating to the knowledge of the Borrower whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto and (iii) accompanied by a schedule setting forth in reasonable detail a description, including, where applicable, the expected and maximum dollar amounts thereof, of all material contingent liabilities not disclosed in such financial statements;

(e) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements whether anything has come to their attention as a result of their audit (which was not directed primarily toward obtaining knowledge of noncompliance) to cause them to believe that the Borrower has failed to comply with the terms, covenants, provisions or conditions as they relate to accounting of financial matters addressed in Sections 5.07 to 5.17, inclusive;

(f) within five days after any officer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief executive officer, president, executive vice-president or chief financial officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto;

(g) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed;

(h) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission;

(i) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any “reportable event” (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue

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Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief executive officer, president, chief financial officer or chief accounting officer of the Borrower setting forth details as to such occurrence and the action, if any, which the Borrower or the applicable member of the ERISA Group is required or proposes to take;

(j) by 12:00 Noon (New York City time) on the third Business Day after receipt by the Borrower or any Subsidiary of the Borrower of Net Cash Proceeds from any Asset Sale, any issuance of Bridge Debt or any issuance of Debt by any Subsidiary of the Borrower permitted pursuant to Section 5.07(b)(ii) (but only to the extent applicable pursuant to the proviso thereof) and Section 5.07(b)(vi) (but only to the extent the Debt was incurred by IPALCO or a Subsidiary Guarantor), a certificate of the chief executive officer, president, chief financial officer or chief accounting officer of the Borrower setting forth (i) a description of the transaction giving rise to such Net Cash Proceeds, (ii) the amount of Net Cash Proceeds anticipated to be received on such date or each of such dates (together with a schedule detailing the calculations necessary to determine the amount of Net Cash Proceeds), (iii) the amount of such Net Cash Proceeds that is anticipated to prepay the Term Loans and (iv) in the case of the receipt by a Subsidiary of any such Net Cash Proceeds, in the event that such Subsidiary is unable to transfer such Net Cash Proceeds to the Borrower or a Qualified Holding Company whose Equity Interests have been pledged to the Secured Holders pursuant to the Collateral Documents, such certificate shall also set forth a reasonably detailed explanation of the circumstances preventing such Subsidiary from transferring such Net Cash Proceeds to the Borrower or a Qualified Holding Company whose Equity Interests have been pledged to the Secured Holders pursuant to the Collateral Documents;

(k) promptly after receipt by the Borrower or any Subsidiary of the Borrower, a copy of: each complaint, order, citation, initial notice or other material written communication from any Person with respect to the existence or alleged existence of a material violation of any applicable Environmental Law or the incurrence of any material liability, obligation, loss, damage, cost, expense, fine, penalty or sanction or the requirement to commence any material remedial action resulting from or in connection with any material air emission, water discharge, noise emission, Hazardous Substance or any other material environmental, health or safety matter at, upon, under or within any of the properties now or previously owned, leased or operated by the Borrower, any of its Subsidiaries or any Material AES Entity, or due to the operations or activities of the Borrower, any Subsidiary of the Borrower, any Material AES Entity or any other Person on or in connection with any such property or any part thereof;

(l) simultaneously with the delivery of each set of financial statements referred to in clause (a) and (b) above, (1) a revised Schedule I showing as of the last day of such quarter all of the direct Subsidiaries of the Borrower and AES BVI II (other than

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Non- Pledged Subsidiaries) and (2) a revised Schedule IV showing as of the last day of such quarter all the Subsidiaries of the Borrower whose assets consist only of any of the Excluded AES Business and direct or indirect Investments therein;

(m) promptly upon request thereof, deliver to the Agent and the Collateral Trustees (A) a list setting forth, for each Secured Agreement, (i) the aggregate principal amount outstanding thereunder, (ii) the accrued and unpaid interest thereunder, (iii) the accrued and unpaid fees (if any) thereunder, (iv) the names of the Representatives (as defined in the Collateral Trust Agreement) and of the Secured Holders (to the extent known to the Borrower) thereunder, and all other unpaid amounts thereunder known to the Borrower, owing to each such Representative, for its own account and on behalf of such Secured Holders and (v) such other information regarding the Representatives, such Secured Holders and the Secured Agreements as the Agent may reasonably request and (B) the Payment Information (as defined in the Collateral Trust Agreement); and

(n) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Agent, at the request of any Bank Party, may reasonably request.

Section 5.02 Payment of Obligations.

The Borrower will pay and discharge all its material obligations and liabilities and will cause each Subsidiary Guarantor (other than AES Warrior Run) and IPALCO (in each case, for so long as each Person is a Subsidiary of the Borrower) to pay and discharge all its Material Obligations, in each case, including, without limitation, tax liabilities, except where the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Subsidiary of the Borrower to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same.

Section 5.03 Maintenance of Property; Insurance.

(a) The Borrower will keep, and will cause each of its Subsidiaries to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted.

(b) The Borrower will, and will cause each of its Subsidiaries to, maintain (either in the name of the Borrower or in such Subsidiary’s own name) with financially sound and responsible insurance companies, insurance of such types, in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against in similar circumstances in the same general area by companies of established repute engaged in the same or a similar business; and will furnish to each Bank Party upon request information presented in reasonable detail as to the insurance so carried.

Section 5.04 Conduct of Business and Maintenance of Existence.

The Borrower (a) will continue, and will cause each of AES BVI II, the Material AES Entities and the Pledged Subsidiaries to continue, to engage in a Permitted Business; (b) will continue, and will cause AES BVI II, each Material AES Entity and each Pledged

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Subsidiary to continue, to operate their respective businesses on a basis substantially consistent with the policies and standards of the Borrower, AES BVI II or such Material AES Entity or such Pledged Subsidiary as in effect on the date hereof and (c) will preserve, renew and keep in full force and effect, and will cause AES BVI II, each Material AES Entity and each Pledged Subsidiary to preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.04 shall prohibit (i) the merger of a Subsidiary into the Borrower or the merger or consolidation of a Subsidiary with or into another Person if the Person surviving such consolidation or merger is a Subsidiary and if, in each case, after giving effect thereto (x) no Default shall have occurred and be continuing, (y) neither the Borrower or any Subsidiary Guarantor shall be liable for any Debt of such Subsidiary except to the extent it was liable for such Debt prior to giving effect to such merger and (z) the transaction is otherwise permitted by Section 5.11, (ii) any asset disposition by the Borrower or any of its Subsidiaries permitted by Section 5.18 and (iii) the termination of the corporate existence of any Subsidiary (other than a Subsidiary Guarantor) if the Borrower in good faith determines that such termination is in the best interest of the Borrower and is not materially disadvantageous to the Bank Parties.

Section 5.05 Compliance with Laws.

The Borrower will comply, and cause each of its Subsidiaries to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder) (a) except for such non-compliance as would result solely in the payment of monetary compensation by the Borrower or such Subsidiary in an amount not to exceed $15,000,000 in the aggregate and (b) except where the necessity of compliance therewith is contested in good faith by appropriate proceedings (and the pendency of such proceedings themselves shall not have a material adverse effect on the Borrower and its Subsidiaries, taken as a whole).

Section 5.06 Inspection of Property, Books and Records.

The Borrower will keep, and will cause each of its Subsidiaries to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Significant AES Entity to permit, representatives of any Bank Party at such Bank Party’s expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired.

Section 5.07 Limitation on Debt.

The Borrower shall not, and shall not permit any Subsidiary of the Borrower to, incur, assume, create or suffer to exist any Debt, except for:

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(a) in the case of the Borrower:

(i) Debt under the Financing Documents;

(ii) Debt existing on the Effective Date and set forth on Schedule VI;

(iii) Debt representing a refinancing, replacement or refunding of Debt permitted by Section 5.07(a)(i), (ii), (iii), (vii) and (ix); provided that:

(A) (x) the aggregate principal amount of such Debt outstanding or available will not exceed the principal amount outstanding or available at the time of such refinancing, replacement or refunding (plus fees and expenses, including any premium and defeasance costs relating to such refinancing, replacement or refunding), (y) the final maturity of such Debt is later than the Initial Term Loan Termination Date (other than Debt that can be settled in the Borrower’s Capital Stock (other than Redeemable Stock); provided that such Debt may only be settled in cash prior to the Initial Term Loan Termination Date up to an aggregate principal amount not to exceed $400,000,000 and not before July 29, 2006; provided further that the Debt being refinanced, replaced or refunded has a final maturity date on or prior to the Initial Term Loan Termination Date) (z) (1) such Debt shall not contain any Payment Restriction more restrictive than the Payment Restrictions contained in the Debt being refinanced, replaced or refunded or (2) in the opinion of the Borrower, such Payment Restrictions are consistent with customary market terms for a financing of its nature and do not adversely affect the ability of the Borrower to meet its payment Obligations under the Financing Documents; and

(B) no obligor shall be liable for any such Debt except to the extent that it was liable for the Debt so refinanced, replaced or refunded, unless such liability in respect of such Debt would otherwise be permitted by Section 5.07(b);

(iv) Debt owing by the Borrower to a Consolidated Subsidiary of the Borrower so long as such Debt is subordinated on terms reasonably satisfactory to the Agent to the Debt of the Borrower under the Financing Documents;

(v) any Lien permitted by Section 5.10 that constitutes Debt not otherwise permitted by this Section;

(vi) Letters of credit, surety bonds, Guarantees and performance bonds supporting obligations of Subsidiaries so long as, after giving effect to such letters of credit, surety bonds, Guarantees and performance bonds (and the Investments represented thereby), the Borrower would be in compliance with Section 5.16;

(vii) other Debt so long as (x) immediately before and after giving effect to the incurrence and application of the proceeds thereof no Default shall have occurred and be continuing, (y) if such Debt is secured by a Lien on the

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Creditor Group Collateral on a first-lien basis, the final scheduled maturity of such Debt shall in no event be on or prior to the Initial Term Loan Termination Date and (z) if such Debt is secured by a Lien on the Creditor Group Collateral on a first-lien basis, such Debt shall not have any scheduled amortization on or prior to the Initial Term Loan Termination Date in an aggregate amount in excess of 10% of the initial amount of such Debt;

(viii) Debt incurred as a bridge financing for a proposed sale, transfer or other disposition of assets pursuant to Section 5.18(iv) with respect to assets acquired after June 23, 2005; provided that (w) the only direct or contingent obligor in respect of such Debt is the holder of the assets that are the subject of such sale, transfer or other disposition, (x) the interest rate applicable to such Debt does not exceed the then applicable market interest rate, (y) such Debt is repaid with the proceeds of such sale, transfer or other disposition upon consummation thereof and (z) such Debt was incurred in connection with the acquisition by the Borrower of the assets that are the subject of such sale, transfer or other disposition;

(ix) Debt incurred to refinance, replace or refund any of the obligations arising in respect of the Existing Trust Preferred Securities, provided that (x) the only direct or contingent obligor in respect of such Debt is the Borrower and (y) the final scheduled maturity of such Debt shall be later than the Initial Term Loan Termination Date; and

(x) Debt in an aggregate principal amount not to exceed $500,000,000 at any one time outstanding, so long as immediately before and after giving effect to the incurrence and application of the proceeds thereof no Default shall have occurred and be continuing; and

(b) in the case of the Borrower’s Subsidiaries:

(i) Guarantees of Debt of the Borrower under the Financing Documents, the Senior Secured Exchange Notes and Debt permitted by clause (a)(iii) or (a)(vii) above, the proceeds of which are applied to permanently reduce Total Bank Exposure or prepay the Senior Secured Exchange Notes (it being understood that if, after the Effective Date, any Subsidiary Guarantees the Debt of the Borrower under the Financing Documents, such Subsidiary may also Guarantee the Senior Secured Exchange Notes and the Debt permitted by clause (a)(iii) or (a)(vii) above, the proceeds of which are applied to permanently reduce Total Bank Exposure or prepay the Senior Secured Exchange Notes);

(ii) Debt incurred by a Subsidiary:

(x) (1) to finance the acquisition, development, construction, operation, maintenance (including modifications and upgrades to comply with applicable laws and regulations) or working capital requirements (including letters of credit or guarantees to fund debt service reserve

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accounts or similar accounts or for the benefit of power purchase agreements or commodity hedging counterparties) of a Power Supply Business or other business owned, operated or managed (including on a joint basis with others), directly or indirectly, by the Borrower (an “AES Business”) or (2) to finance the acquisition of “greenfields” and the construction, operation, maintenance or working capital requirements (including modifications and upgrades to comply with applicable laws and regulations) or working capital requirements (including letters of credit or guarantees to fund debt service reserve accounts or similar accounts or for the benefit of power purchase agreements or commodity hedging counterparties) necessary to develop and construct such “greenfields” and to operate them as an AES Business or (3) that constitutes Acquired Debt; and

(y) that is not also the Debt of any other Subsidiary with an interest in any other AES Business (except for (1) Debt incurred or assumed by Intermediate Holding Companies which, at the time such Debt was incurred or assumed, in the aggregate, contributed less than 50% of the Parent Operating Cash Flow for the immediately preceding four fiscal quarters, (2) Debt incurred or assumed by Subsidiaries of the Borrower (other than Intermediate Holding Companies), which, at the time such Debt was incurred or assumed, in the aggregate, contributed less than 15% of the Parent Operating Cash Flow for the immediately preceding four fiscal quarters and are projected by the Borrower at the time such Debt is incurred or assumed to contribute less than 15% of the Parent Operating Cash Flow for the immediately succeeding four fiscal quarters and (3) in the case of any Cameroon Business or any Subsidiary of the Borrower (other than any Subsidiary Guarantor) that has a direct or indirect interest in any Cameroon Business, Debt of any other Cameroon Business or any Subsidiary of the Borrower (other than any Subsidiary Guarantor) that has a direct or indirect interest in any Cameroon Business); provided that Excluded AES Entities can guarantee, or be co-obligors with respect to, Debt of other Excluded AES Entities;

provided, however, that to the extent that the Debt incurred pursuant to this Section 5.07(b)(ii) is not used for the purposes set forth in clauses (x)(1), (x)(2) or (x)(3) above, unless such Debt is permitted by another provision hereunder, the portion of Net Cash Proceeds of such Debt not used for such purposes shall be received by the Borrower or a Qualified Holding Company whose Equity Interests have been pledged to the Secured Holders pursuant to the Collateral Documents and such Net Cash Proceeds shall be applied to prepay the Debt hereunder pursuant to and in the amounts and order of priority set forth in Section 2.10(b);

(iii) Debt existing on the Effective Date;

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(iv) Debt incurred by a Subsidiary as a bridge financing for a proposed sale, transfer or other disposition of assets pursuant to Section 5.18(iv); provided that (w) the only direct or contingent obligor in respect of such Debt is the holder of the assets that are the subject of such sale, transfer or other disposition, (x) the interest rate applicable to such Debt does not exceed the then applicable market interest rate, (y) such Debt is repaid with the proceeds of such sale, transfer or other disposition upon consummation thereof and (z) in the case of a bridge financing for a proposed Asset Sale, the Net Cash Proceeds from the incurrence of such Debt shall be applied as set forth in Section 2.10(b);

(v) Debt owing to the Borrower or a Consolidated Subsidiary of the Borrower; provided that Debt owed to the Borrower shall constitute Pledged Debt (to the extent such Debtor is required to pledge such Debt pursuant to the Collateral Documents) and delivered to the Collateral Trustees pursuant to the terms of the Security Agreement; provided further that any such Debt is permitted under Section 5.16;

(vi) Debt incurred by a Subsidiary, the Net Cash Proceeds of which are received by the Borrower or a Qualified Holding Company whose Equity Interests have been pledged to the Secured Holders pursuant to the Collateral Documents and, in the case of Debt incurred by IPALCO or any Subsidiary Guarantor, an amount equal to the Banks’ Ratable Share of 100% of such Net Cash Proceeds (other than $200,000,000 of additional Debt of IPALCO and the Subsidiary Guarantors incurred after the Effective Date), shall be applied to prepay the Debt hereunder pursuant to and in the amount and order of priority set forth in Section 2.10(b);

(vii) Debt representing a refinancing, replacement or refunding of Debt permitted by clauses (b)(ii), (b)(iii), (b)(iv), (b)(vi) and (b)(vii); provided that:

(A) (x) the aggregate principal amount of such Debt outstanding or available will not exceed the principal amount outstanding or available at the time of such refinancing, replacement or refunding (plus fees and expenses, including any premium and defeasance costs) relating to such refinancing, replacement or refunding and (y) the Payment Restrictions in such Debt (1) shall be no more restrictive than the Payment Restrictions contained in the Debt being refinanced, replaced or refunded or (2) in the opinion of the Borrower, are consistent with customary market terms for a financing of its nature and do not adversely affect the ability of the Borrower to meet its payment Obligations under the Financing Documents;

(B) after giving effect to the issuance of such Debt, no Default shall have occurred and be continuing under Section 5.16(b); and

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(C) if any Debt being refinanced, replaced or refunded is subordinated to the Debt of any Subsidiary Guarantor, such Debt shall be subordinated at least to the same extent;

(viii) any Lien permitted by Section 5.10 that constitutes Debt not otherwise permitted by this Section 5.07;

(ix) Guarantees by Excluded AES Entities of Debt and other Obligations of other Excluded AES Entities; and

(x) Guarantees by any Subsidiary of the Borrower existing on the date that such Subsidiary ceased to be an “Excluded AES Entity” hereunder that were permitted pursuant to Section 5.07(b)(ix) when such Subsidiary was an “Excluded AES Entity”.

Notwithstanding any of the foregoing in this Section 5.07(b), in no event shall Qualified Holding Companies incur any Debt other than Debt permitted by the definition of “Qualified Holding Company”.

Section 5.08 Use of Proceeds.

The proceeds of the Loans made, the Revolving Letters of Credit issued (or deemed issued) under this Agreement will be used by the Borrower for working capital and other general corporate purposes. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any “margin stock” within the meaning of Regulation U.

Section 5.09 Restricted Payments.

(a) The Borrower will not declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Interests or Qualified Equity-Linked or Hybrid Securities now or hereafter outstanding, return any capital to its stockholders as such, make any distribution of assets, Equity Interests, obligations or securities to its stockholders, or permit any of its Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any Equity Interests or Qualified Equity-Linked or Hybrid Securities in the Borrower (each, a “Restricted Payment”), except:

(i) the Borrower may declare and pay regularly-scheduled cash dividends to the holders of (x) the Existing Trust Preferred Securities and (y) the Borrower’s preferred stock;

(ii) the Borrower may redeem, repurchase, refinance, replace or refund any of the Obligations arising (x) in respect of the Existing Trust Preferred Securities at any time, (y) in respect of any other preferred stock, Hybrid Securities and convertible securities (including Qualified Equity-Linked or Hybrid Securities) of the Borrower at any time with the proceeds of any contemporaneous issuance and sale by the Borrower of its Capital Stock (other than Redeemable Stock) or (z) in respect of any Qualified Equity-

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Linked or Hybrid Securities, within 180 days of the final maturity date or mandatory redemption date of any such other Qualified Equity-Linked or Hybrid Securities;

(iii) the Borrower may declare and make Restricted Payments if, after giving effect thereto, the aggregate of all Restricted Payments declared or made subsequent to June 30, 2008 (pursuant to this Section 5.09(a)(iii)) does not exceed 20% (or, if such amount is a loss, minus 100%) of an amount equal to Adjusted Parent Operating Cash Flow less Corporate Charges for the period from July 1, 2008 through the last day of the fiscal quarter of the Borrower then most recently ended for which financial statements were required to be delivered to the Agent pursuant to Section 5.01(a) or (b) (treated for this purpose as a single accounting period); provided that if after giving effect to such Restricted Payment, the amount of all Restricted Payments made pursuant to this clause (iii) since the first day of the most recently ended four fiscal quarter period for which financial statements were required to be delivered to the Agent pursuant to Section 5.01(a) or (b) through the date of such Restricted Payment is greater than the greater of (1) 20% of an amount equal to Adjusted Parent Operating Cash Flow less Corporate Charges for such four fiscal quarter period and (2) $250,000,000, the Borrower shall only be permitted to make a Restricted Payment in excess of such greater amount for such four fiscal quarter period to the extent that before and after giving effect to such Restricted Payment, the Borrower and its Subsidiaries shall have a combination of Unrestricted Cash and unused commitments under the Revolving Credit Loan Facility equal to or greater than the amount of the Revolving Credit Loan Facility in effect at that time;

(iv) the Borrower may declare and make Restricted Payments not otherwise permitted under this Section 5.09 in an aggregate amount not to exceed $500,000,000 from and after the Amended and Restatement Effective Date, provided, that before and after giving effect to each Restricted Payment under this Section 5.09(a)(iv), the Borrower and its Subsidiaries shall have any combination of Unrestricted Cash and unused commitments under the Revolving Credit Loan Facility equal to or greater than aggregate amount of the Revolving Credit Loan Facility in effect at that time;

(v) (A) any Subsidiary of the Borrower (other than a Subsidiary Guarantor) may purchase, redeem, retire, defease or otherwise acquire for value any Equity Interests in the Borrower using funds that are not able to be paid to the Borrower or a Subsidiary Guarantor as a dividend due to legal or contractual restrictions affecting such Subsidiary or, from and after January 1, 2010, due to incremental tax liability, (B) any Special Purpose Financing Subsidiary may purchase, redeem, retire, defease or otherwise acquire for value any Equity Interests in the Borrower using proceeds of financing that does not constitute Recourse Debt and as to which neither the Borrower nor any of its other Subsidiaries (a) provides credit support of any kind, (b) is directly or indirectly liable as a guarantor or otherwise or (c) constitutes the lender and (C) any Subsidiary may purchase, redeem, retire, defease or otherwise acquire for value any Equity Interests in the Borrower to the extent that the Borrower would have been permitted to do so under clause (iii) or (iv) of this Section 5.09(a); provided that, in the case of clause (A) only to the extent of any Restricted Payments made by a Qualified Holding Company, clause (B) only to the extent of such Restricted Payments funded with proceeds received from the Borrower, any Qualified Holding Company or any Subsidiary Guarantor and clause (C),

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such Restricted Payment shall be deemed to be a Restricted Payment made by the Borrower under clause (iii) or (iv) of this Section 5.09(a) (and the making of such Restricted Payment shall reduce the availability thereunder) and shall only be permitted to the extent there would have been availability for the Borrower to make such Restricted Payment under clause (iii) or (iv) of this Section 5.09(a); and

(vi) The Borrower and its Subsidiaries may make regularly-scheduled interest payments and pay dividends on Qualified Equity-Linked or Hybrid Securities.

provided that nothing in this Section shall prohibit the payment of any dividend or distribution within 45 days after the declaration thereof if such declaration was not prohibited by this Section.

(b) Notwithstanding Section 5.09(a) above, so long as any Revolving Credit Loan or Term Loan remains outstanding, no Subsidiary Guarantor will, without the prior written consent of the Required Banks, if, and for so long as, an Actionable Default shall have occurred and be continuing, (i) declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of capital stock of such Subsidiary Guarantor (other than stock splits and dividends payable solely in equity securities of such Subsidiary Guarantor), or purchase, redeem or otherwise acquire for value (or permit any of its Subsidiaries to do so), any shares of any class of capital stock of such Subsidiary Guarantor or any warrants, rights or options to acquire any such shares, now or hereafter outstanding or (ii) make any Investment in or otherwise advance any funds to the Borrower, or, any Subsidiary of the Borrower; and

Section 5.10 Negative Pledge.

Neither the Borrower nor any Subsidiary of the Borrower will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except:

(a) Liens created under the Financing Documents;

(b) Liens existing on the Effective Date securing Debt outstanding on the Effective Date;

(c) any Lien existing on any asset of any Person at the time such Person becomes a Subsidiary of the Borrower and not created in contemplation of such event;

(d) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset; provided that such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof;

(e) any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into the Borrower or a Subsidiary of the Borrower and not created in contemplation of such event; provided that such Lien shall not attach to any asset held by the Borrower or any Subsidiary of the Borrower immediately prior to such merger or consolidation;

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(f) any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Subsidiary of the Borrower and not created in contemplation of such acquisition;

(g) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses or clause (o) of this Section; provided that such Debt is not increased and is not secured by any additional assets (other than, in the case of Debt permitted under Section 5.07(b)(vii), Liens on assets of any Subsidiary permitted under such Section 5.07(b)(vii) and Section 5.16(b) to be obligated on such Debt);

(h) Liens arising in the ordinary course of its business which do not secure obligations in an aggregate amount in excess of $25,000,000 and do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business;

(i) Liens in connection with worker’s compensation, social security obligations, taxes, assessments, statutory obligations or other similar charges, good faith deposits in connection with tenders, contracts or leases to which the Borrower or any of its Subsidiaries is a party or other deposits required to be made in the ordinary course of business and not in connection with borrowing money or obtaining advances or credit; provided in each case that the obligation or liability arises in the ordinary course of business and if overdue is being contested in good faith by appropriate proceedings;

(j) inchoate materialmen’s, mechanics’, workmen’s, repairmen’s, employees’, carriers’, warehousemen’s, or other like Liens arising in the ordinary course of business of the Borrower or its Subsidiaries;

(k) with respect to real property, easements, rights of way, reservations and other minor defects or irregularities in title which do not materially impair the use thereof for the purposes for which it is held by the Borrower or its Subsidiaries;

(l) Liens securing any future interest or dividends payable in respect of any Debt permitted to be issued under Section 5.07 for one six month period with respect to such Debt on cash or Temporary Cash Investments which constituted a portion of the cash proceeds to the Borrower or a Subsidiary of the Borrower from the issuance of such Debt;

(m) Liens on cash and Temporary Cash Investments securing Derivatives Obligations of the Subsidiaries;

(n) Liens on cash and Temporary Cash Investments that secure contingent obligations to reimburse any bank or other Person for amounts paid under Guarantees, surety or performance bond or similar instrument that supports obligations to make Investments in Subsidiaries permitted to be made under Section 5.16;

(o) Liens constituting or securing Debt of Subsidiaries (other than Subsidiary Guarantors) permitted by Section 5.07(b)(ii), (vi), (vii) or (viii) or utility obligations or

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other customer, supplier or contractor obligations associated with AES Businesses that are limited to the assets and revenues of the related AES Businesses and the Capital Stock or other assets (including contract rights) of Subsidiaries of the Borrower having a direct or indirect interest in such AES Businesses and, in the case of any Cameroon Business, the assets and revenues of any other Cameroon Business and the Capital Stock (other than Capital Stock that has been pledged to the Secured Holders pursuant to the Collateral Documents) or other assets (including contract rights) of Subsidiaries of the Borrower (other than Subsidiary Guarantors) having a direct or indirect interest in any Cameroon Business;

(p) Liens on the Creditor Group Collateral securing the Debt of the Borrower or obligations of the Borrower under Hedge Agreements; provided that Liens on the Creditor Group Collateral securing First Priority Secured Debt of the Borrower shall only secure First Priority Secured Debt up to an aggregate principal amount not to exceed $1,750,000,000 (less the aggregate amount of mandatory prepayments of Term Loans and mandatory reductions of Revolving Credit Loan Commitments resulting from the application of Net Cash Proceeds from IPALCO Asset Sales);

(q) Liens securing Debt permitted by Section 5.07(a)(viii) or Section 5.07(b)(iv), provided that such Debt is secured solely by the asset that is the subject of the proposed sale, transfer or other disposition related to such Debt;

(r) Liens on the assets of, or Investments in, any Excluded AES Entity securing Debt or other obligations of any Excluded AES Entity permitted to be incurred hereunder;

(s) Liens on cash set aside at the time of the issuance of Debt permitted to be incurred pursuant to Section 5.07 or Temporary Cash Investments purchased with such cash, in either case to the extent that such cash or Temporary Cash Investments pre-fund the repayment or redemption of such Debt and are held in a third party escrow account with an escrow agent on terms and conditions reasonably satisfactory to the Agent to be applied for such purpose;

(t)(i) Liens on cash and Temporary Cash Investments that secure letters of credit up to an aggregate principal amount not to exceed $300,000,000 and (ii) Liens on rights under agreements relating to the sale of Equity Interests of the Borrower (and any ancillary agreements) that secure letters of credit; provided that at the time such Lien is created, no Default or Event of Default has occurred or is continuing; and

(u) Liens existing on any asset of any Subsidiary of the Borrower at the time such Subsidiary ceased to be an “Excluded AES Entity” hereunder that were permitted pursuant to Section 5.10(r) when such Subsidiary was an “Excluded AES Entity”.

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Section 5.11 Consolidations and Mergers.

The Borrower will not merge into or consolidate with any Person or permit any Person to merge into it, or permit any of its Subsidiaries to do so, except that:

(a) any Subsidiary of the Borrower may merge into or consolidate with any other Subsidiary, provided that, in the case of any such merger or consolidation, the Person formed by such merger or consolidation shall be a wholly owned Subsidiary of the Borrower and any third-party consents or waivers necessary for such merger or consolidation shall have been obtained, provided further that, (A), in the case of any such merger or consolidation to which a Pledged Subsidiary is a party, the Person formed by such merger or consolidation shall be a “Pledged Subsidiary” and (B) in the case of any such merger or consolidation to which a Subsidiary Guarantor is a party, the Person formed by such merger or consolidation shall be a Subsidiary Guarantor;

(b) in connection with any sale or other disposition permitted under Section 5.18 (other than clause (ii) thereof), any Subsidiary of the Borrower may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it; and

(c) the Borrower may merge with another Person;

provided, however, that in each case, such merger or consolidation is otherwise in compliance with this Agreement and immediately before and after giving effect thereto, no Default shall have occurred and be continuing and, in the case of any merger to which the Borrower is a party, the Borrower is the Person surviving such merger.

Notwithstanding any of the foregoing in clauses (a) and (b) of this Section 5.11, the Borrower will not permit any Subsidiary of the Borrower with any direct or indirect interest in (x) a Power Supply Business to consolidate or merge with, any other Person with a direct or indirect interest in any other Power Supply Business or any unrelated business or (y) any unrelated business to consolidate or merge with, any other Person with a direct or indirect interest in any Power Supply Business, subject to the proviso set forth in Section 5.16(b) so that any transaction permitted by such proviso shall also be permitted by this Section 5.11 (except for consolidations and mergers by any Subsidiary of the Borrower which, after giving pro forma effect to such consolidation or merger, contributed less than 15% of the Parent Operating Cash Flow for the immediately preceding four fiscal quarters and is projected by the Borrower at the time of such consolidation or merger to contribute less than 15% of the Parent Operating Cash Flow for the immediately succeeding four fiscal quarters).

Section 5.12 [Intentionally omitted.]

Section 5.13 Cash Flow Coverage.

The Borrower will maintain at the end of each fiscal quarter of the Borrower, a Cash Flow Coverage Ratio of not less than the ratio set forth below for each period set forth below:

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Four Fiscal Quarters Ending	Minimum Cash Flow Coverage Ratio
December 31, 2003	1.20
March 31, 2004	1.20
June 30, 2004	1.20
September 30, 2004	1.25
December 31, 2004	1.25
March 31, 2005	1.30
June 30, 2005	1.35
September 30, 2005	1.35
December 31, 2005	1.40
March 31, 2006	1.40
June 30, 2006	1.40
September 30, 2006	1.40
December 31, 2006	1.40
March 31, 2007	1.40
June 30, 2007	1.45
September 30, 2007	1.45
December 31, 2007	1.50
March 31, 2008	1.50
June 30, 2008 and thereafter	1.30

Section 5.14 Recourse Debt to Cash Flow Ratio.

The Borrower will maintain at the end of each fiscal quarter of the Borrower, a Recourse Debt to Cash Flow Ratio of not more than the ratio set forth below for each period set forth below:

Four Fiscal Quarter Ending	Maximum Recourse Debt to Cash Flow Ratio
June 30, 2005	7.50
September 30, 2005	7.50
December 31, 2005	7.50
March 31, 2006	7.50
June 30, 2006	7.50
September 30, 2006	7.50
December 31, 2006	7.00
March 31, 2007	7.00
June 30, 2007	7.00
September 30, 2007	7.00
December 31, 2007	7.00
March 31, 2008	6.50
June 30, 2008	6.50
September 30, 2008	8.00
December 31, 2008	8.00

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Four Fiscal Quarter Ending	Maximum Recourse Debt to Cash Flow Ratio
March 31, 2009	8.50
June 30, 2009	8.50
September 30, 2009	8.50
December 31, 2009	8.50
March 31, 2010	7.25
June 30, 2010	7.25
September 30, 2010	7.25
December 31, 2010	7.25
March 31, 2011	7.25
June 30, 2011 and thereafter	7.25

Section 5.15 Transaction with Affiliates.

Except pursuant to agreements existing on the Effective Date and listed on Schedule II attached hereto, the Borrower will not, and will not permit any Subsidiary of the Borrower to, directly or indirectly, in any transaction involving aggregate consideration in excess of $1,000,000, pay any funds to or for the account of, make any investment (whether by acquisition of stock or indebtedness, by loan, advance, transfer of property, guarantee or other agreement to pay, purchase or service, directly or indirectly, any Debt, or otherwise) in, lease, sell, transfer or otherwise dispose of any assets, tangible or intangible, to, or participate in, or effect any transaction in connection with any joint enterprise or other joint arrangement with, any Affiliate; provided, however, that the foregoing provisions of this Section shall not prohibit (a) the Borrower or any Subsidiary of the Borrower from making sales to or purchases from any Affiliate and, in connection therewith, extending credit or making payments, or from making payments for services rendered by any Affiliate, if such sales or purchases are made or such services are rendered in the ordinary course of business and on terms and conditions at least as favorable to the Borrower or such Subsidiary as the terms and conditions which would apply in a similar transaction with a Person not an Affiliate; (b) the Borrower or any Subsidiary of the Borrower from making payments of principal, interest and premium on any Debt of the Borrower or such Subsidiary held by an Affiliate if the terms of such Debt are substantially as favorable to the Borrower or such Subsidiary as the terms which could have been obtained at the time of the creation of such Debt from a lender which was not an Affiliate and (c) the Borrower or any Subsidiary of the Borrower from participating in, or effecting any transaction in connection with, any joint enterprise or other joint arrangement with any Affiliate if the Borrower or such Subsidiary participates in the ordinary course of its business and on a basis no less advantageous than the basis on which such Affiliate participates. The provisions of this Section 5.15 shall not apply to (x) transactions between the Borrower or any of its Subsidiaries, on the one hand, and any officer, director or employee of the Borrower or any of its Subsidiaries, on the other hand, that are approved by the Board of Directors of the Borrower or any committee of the Board of Directors consisting of the Borrower’s independent directors and (y) the payment of reasonable and customary regular fees to directors of the Borrower or a Subsidiary of the Borrower.

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Section 5.16 Investments in Other Persons.

(a) The Borrower shall not make or hold, or permit any of its Subsidiaries to make or hold, any Investment in any Person, except:

(i) (A) Investments by the Borrower and its Subsidiaries in their Subsidiaries outstanding on the Effective Date, (B) additional equity Investments in Obligors and (C) additional Investments in Obligors consisting of intercompany Debt provided that any Debt owing to the Borrower shall (x) constitute Pledged Debt and be delivered to the Collateral Trustees pursuant to the terms of the Security Agreement and (y) be subordinated in all respects to the Obligations of the Obligors under the Financing Documents;

(ii) loans and advances by the Borrower or any of its Subsidiaries to its employees in the ordinary course of the business of the Borrower and its Subsidiaries as presently conducted, which in the case of loans and advances to employees of the Borrower, the Subsidiary Guarantors and the Qualified Holding Companies shall not exceed an aggregate principal amount of $10,000,000 at any time outstanding;

(iii) Investments by the Borrower and its Subsidiaries in Temporary Cash Investments;

(iv) Investments existing on the Effective Date and Investments in Subsidiaries resulting from drawings under, or renewals or extensions of, letters of credit, surety bonds, Guarantees or performance bonds supporting obligations of Subsidiaries issued and outstanding on the Effective Date (including renewals and extensions thereof) and Investments in Subsidiaries to cash collateralize obligations supported by such letters of credit, bonds or Guarantees if they expire or are cancelled undrawn;

(v) Investments by the Borrower and its Subsidiaries in any non-cash proceeds received by the Borrower or such Subsidiary in connection with any transaction permitted by the provisions of Section 5.18;

(vi) Investments by the Borrower and its Subsidiaries in any of their Debt in the form of any payments, redemption or repurchase of such Debt not prohibited by this Agreement;

(vii) Investments by an Excluded AES Entity in another Excluded AES Entity or in another Person, the assets of which shall not consist of Debt or Equity Interests of the Borrower or any of its Subsidiaries, other than Debt of the Borrower or any of its Subsidiaries with a fair market value (together with the fair market value of Debt of the Borrower or any of its Subsidiaries received by the Borrower or any Subsidiary as non-cash proceeds in any transaction permitted by the provisions of Section 5.18) not in excess of $15,000,000 in the aggregate;

(viii) Investments by the Borrower and its Subsidiaries in their Subsidiaries or in Excluded AES Entities resulting from the creation, dissolution, restructuring or reorganization of the holdings of the Borrower, any Subsidiary or Excluded AES Entity

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permitted by Section 5.16(b) that does not result in the net increase in the amount invested by the Borrower and its Subsidiaries in their Subsidiaries or in Excluded AES Entities and does not result in a Default;

(ix) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, or as a result of a default by, customers or suppliers to, or co-investors in, an AES Business;

(x) Investments by the Borrower and its Subsidiaries not otherwise permitted under this Section 5.16; provided that, with respect to each Investment made pursuant to this clause (x):

(A) Investments by the Borrower in Excluded AES Entities after June 23, 2005 shall not exceed $250,000,000; provided that at any time that the Recourse Debt to Cash Flow Ratio is less than 4.00 to 1.00 there shall be no limitation on Investments in Excluded AES Entities;

(B) such Investment shall be in property and assets, or in the Equity Interests of a Person owning property and assets, which are part of a Permitted Business; and

(C) (1) immediately before and immediately after giving pro forma effect to any such purchase or other acquisition, no Event of Default shall have occurred and be continuing and (2) immediately after giving effect to such purchase or other acquisition, the Borrower and its Subsidiaries shall be in pro forma compliance with all of the covenants set forth in Sections 5.13 and 5.14, such compliance to be determined on the basis of the financial information most recently delivered to the Agent and the Bank Parties as though such Investment had been consummated as of the first day of the fiscal period covered thereby;

(xi) (A) Investments by any Subsidiary with funds or other property received by such Subsidiary from the Borrower or a Subsidiary as a result of an Investment otherwise permitted hereby and (B) Investments by any Subsidiary (other than a Qualified Holding Company) with funds or other property generated by its operations (including by way of financings permitted hereby) or by the operations (including by way of financings permitted hereby) of its Subsidiaries in any other Subsidiary which either is a direct or indirect Subsidiary of such investing Subsidiary or a direct or indirect parent company of such investing Subsidiary and the proceeds of such Investment shall be applied by the Subsidiary receiving such Investment solely for funding the operation, maintenance (including modifications and upgrades to comply with applicable laws and regulations), on-going construction or working capital requirements which are necessary for the operation of the business of such Subsidiary or for such Subsidiary to satisfy its contractual and legal obligations;

(xii) Investments by any Subsidiary of the Borrower consisting of loans made to any Person which directly or indirectly holds the Equity Interests of such Subsidiary;

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(xiii) Investments in Subsidiaries resulting from drawings under, or renewals or extensions of, Guarantees supporting obligations of Subsidiaries under any Secured Treasury Management Service Agreement (including renewals and extensions thereof) and Investments in Subsidiaries to cash collateralize obligations supported by such Guarantees if they expire or are cancelled undrawn;

(xiv) Investments in marketable securities as part of the Borrower’s management of its long-term and deferred compensation obligations in the ordinary course of business;

(xv) Investments in any Subsidiary of the Borrower existing on the date that such Subsidiary ceased to be an “Excluded AES Entity” hereunder that were permitted to be made pursuant to this Section 5.16 when such Subsidiary was an “Excluded AES Entity”.

(b) Notwithstanding any of the foregoing in clause (a) above, the Borrower will not permit any Subsidiary of the Borrower with any direct or indirect interest in (i) a Power Supply Business to make any Investment in, or consolidate or merge with, any other Person with a direct or indirect interest in any other Power Supply Business or any unrelated business or (ii) any unrelated business to make any Investment in, or to consolidate or merge with, any other Person with a direct or indirect interest in any Power Supply Business; provided that (x) Investments permitted by Section 5.16(a)(ii), (iii), (v), (vi), (vii), (viii), (ix), (xii), (xiii) and (xiv) shall be permitted notwithstanding the foregoing and (y) a Subsidiary of the Borrower (each, an “Intermediate Holding Company”) may serve as a holding company for any or all of the Borrower’s direct and indirect interests in a Power Supply Business or an unrelated business, so long as:

(1) each such Intermediate Holding Company’s direct and indirect interest in any Power Supply Business or unrelated business shall be limited to the ownership of Capital Stock or Debt obligations of a Person with a direct or indirect interest in such Power Supply Business or unrelated business;

(2) no Lien shall exist upon any asset of any Intermediate Holding Company (other than Liens on the Capital Stock of, or loan to, the Borrower or a Subsidiary of an Intermediate Holding Company securing Debt of such Intermediate Holding Company or such Subsidiary and Liens securing Debt permitted by Sections 5.07(b)(i), (b)(ii), (b)(iii), (b)(iv), (b)(vi), (b)(vii) and (b)(viii)); and

(3) no Intermediate Holding Company shall incur, assume, create or suffer to exist any Debt (including any Guarantee of Debt) other than Debt owing to the Borrower, any Qualified Holding Company or any Subsidiary of such Intermediate Holding Company and Debt permitted by Sections 5.07(b)(i), (ii), (iii), (iv), (vi), (vii) or (viii).

Notwithstanding anything to the contrary in this Section 5.16(b), (A) any Subsidiary of the Borrower with any direct or indirect interest in (i) a Power Supply Business may make an Investment in any other Person with a direct or indirect interest in any other Power Supply Business or any unrelated business or (ii) any unrelated business may make an

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Investment in any other Person with a direct or indirect interest in any Power Supply Business, so long as, in each case, after giving pro forma effect to such Investment, such Subsidiary and such Person in the aggregate contributed less than 15% of the Parent Operating Cash Flow for the immediately preceding four fiscal quarters and are projected by the Borrower at the time of such Investment to contribute less than 15% of the Parent Operating Cash Flow for the immediately succeeding four fiscal quarters and (B) any Cameroon Business may make an Investment in any other Cameroon Business.

Section 5.17 Upstreaming of Net Cash Proceeds by Subsidiaries.

The Borrower shall cause any of its Subsidiaries who have received Net Cash Proceeds from (i) any Asset Sale or (ii) the incurrence or sale of any Debt permitted by Section 5.07(b)(vi) to transfer such Net Cash Proceeds to the Borrower; provided that such transfer shall not be required to be made if such transfer would violate any applicable contracts or would violate applicable law or if applicable law would require minority shareholder approval (it being understood that the Borrower shall use reasonable efforts to obtain such minority shareholder approval), a valuation or a discretionary order or would, in the Borrower’s good faith determination or the good faith determination of a majority of the board of directors of such Subsidiary, involve a reasonable likelihood of there being a breach of fiduciary duties by the directors of such Subsidiary. In connection with managing transfers of Net Cash Proceeds pursuant to this Section 5.17, (a) the Borrower may cause Net Cash Proceeds to be transferred to Qualified Holding Companies whose Equity Interests have been pledged to the Secured Holders pursuant to the Collateral Documents if the Borrower nonetheless makes the related mandatory prepayment that would otherwise be required by Section 2.10(b) using funds not otherwise required to be made the basis of any mandatory prepayment and (b) if the Net Cash Proceeds are less than $10,000,000, the Borrower shall not be required to cause such Net Cash Proceeds effectively to be transferred directly or indirectly to the Borrower and applied pursuant to Section 2.10(b) until the aggregate Net Cash Proceeds not so applied equal or exceed $10,000,000. In connection with managing transfers of Net Cash Proceeds pursuant to this Section 5.17 and making loans, investments and other advances to Subsidiaries, the Borrower may cause Net Cash Proceeds to be transferred among Subsidiaries as permitted by Section 5.16, rather than transferred to the Borrower, in lieu of loans, investments or other advances the Borrower would otherwise be permitted to make as permitted by Section 5.16 and would make; provided that amounts that otherwise would be paid to the Borrower or a Qualified Holding Company whose Equity Interests have been pledged to the Secured Holders pursuant to the Collateral Documents shall be treated as an Investment and such Investment must be permitted by Section 5.16.

Section 5.18 Sales, Etc., of Assets.

The Borrower will not sell, lease, transfer or otherwise dispose of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, or grant any option or other right to purchase, lease or otherwise acquire any assets, except:

(i) sales of assets in the ordinary course of its business and the granting of any option or other right to purchase, lease or otherwise acquire assets in the ordinary course of its business;

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(ii) in a transaction permitted by Section 5.11;

(iii) sales, transfers or other dispositions of assets among the Borrower and its Subsidiaries; provided, however, that (a) in respect of sales, transfers or other dispositions by the Borrower to its Subsidiaries, the Borrower shall not sell, lease, transfer or otherwise dispose of any assets (other than Excluded AES Entities) to any Excluded AES Entity, and (b) in respect of sales, transfers or other dispositions by Subsidiaries to other Subsidiaries, (1) with respect to Excluded AES Entities, only Excluded AES Entities may sell, transfer or otherwise dispose of assets to another Excluded AES Entity and (2) with respect to other Subsidiaries, such sales, transfers or other dispositions are either permitted by Section 5.16 or the transferring Subsidiary has received fair value for such sales, transfers or dispositions; provided, further, however, that for the avoidance of doubt, the transfer of AES GEH Holdings, LLC’s ownership interest in Global Energy Holdings CV to AES GEH, Inc. and the subsequent dissolution of AES GEH Holdings, LLC is permitted hereunder; and

(iv) sales, transfers or other dispositions of assets so long as (i) the consideration received by the Borrower and its Subsidiaries for such asset shall have been determined on the basis of arms-length negotiations with a non-Affiliate, (ii) in the case of sales of assets or Equity Interests of, or other Investments in, IPALCO or any of its Subsidiaries or any Subsidiary Guarantor or Subsidiary thereof, no less than 75% of the purchase price for such asset shall be paid to the Borrower and its Subsidiaries solely in cash or securities or other obligations that can be readily converted to cash so long as such securities or other obligations are converted to cash on or within 30 days after the closing date of such sale, transfer or other disposition and (iii) any non-cash proceeds received by the Borrower or AES BVI II from the sale of such assets shall not consist of Debt or Equity Interests of the Borrower or any of its Subsidiaries (other than Debt of the Borrower or any of its Subsidiaries with a fair market value (together with the fair market value of the Debt of the Borrower or any of its Subsidiaries comprising the assets of any Person in which an Excluded AES Entity has made an Investment pursuant to Section 5.16(a)(vii) not in excess of $15,000,000 in the aggregate) and shall be pledged to the Collateral Trustees as Security Agreement Collateral under the Security Agreement;

(v) Liens permitted by the Financing Documents;

(vi) the sale of Equity Interests in a project in development or under construction the proceeds from which shall be used to fund the cost of development or construction of such project and the sales of Equity Interests by a Subsidiary the proceeds of which are used to fund the working capital and other needs of such Subsidiary and its Subsidiaries in the ordinary course of business, including reasonably anticipated needs for repaying Debt and other obligations and making Investments in its business;

(vii) (1) a disposition resulting from the bona fide exercise by governmental authority of its claimed or actual power of eminent domain; (2) any cash payments otherwise permitted under this Agreement; (3) any sale, transfer, conveyance, lease or other disposition of an asset in the ordinary course of business and consistent with past

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practice pursuant to the terms of any power sales agreement or steam sales agreement or other agreement or contract related to the output or product of, or services rendered by, a Power Supply Business as to which a Subsidiary is the supplying party; (4) any disposition of any Equity Interest in a Power Supply Business pursuant to the terms of a joint venture agreement, shareholders agreement or similar arrangement existing as of the Effective Date that requires one shareholder to transfer its interest to another upon terms and in circumstances customary for the industry (provided that, in the case of a disposition of Equity Interests in IPALCO or any of its Subsidiaries or any Subsidiary Guarantor or Subsidiary thereof, any cash received in connection with such disposition shall be treated as Net Cash Proceeds from a Asset Sale); or (5) any disposition of assets subject to a Lien permitted hereby that is transferred to the lienholder or its designee in satisfaction or settlement of the lienholder’s claim or a realization upon a security interest permitted under this Agreement;

(viii) any disposition in connection with directors’ qualifying shares or investments by foreign nationals mandated by applicable law;

(ix) any sale of shares of Redeemable Stock of a Subsidiary to the extent such shares constitute Debt permitted by Section 5.07;

(x) a sale-leaseback transaction involving substantially all of the assets of a Power Supply Business where a Subsidiary sells the Power Supply Business to a Person in exchange for the assumption by that Person of the Debt financing the Power Supply Business and the Subsidiary leases the Power Supply Business from such Person; provided that such sale, assumption and lease are consummated in each case on a no less than fair market value basis;

(xi) dispositions of contract rights, development rights and resource data made in connection with the initial development of an AES Business and prior to the commencement of commercial operation of such AES Business for reasonably equivalent value; and

(xii) transactions made in order to enhance the repatriation of cash from a Subsidiary where such Subsidiary is organized under the laws of any jurisdiction other than the United States or any state thereof to the extent that such cash is received or held by a Person subject in respect of such cash to the tax laws of a jurisdiction other than the United States or any state thereof or in order to increase the after-tax amounts thereof available for immediate distribution (provided that if any asset that is the subject of such transaction is subject to a Lien in favor of the Secured Holders immediately prior to such transaction then such asset shall be subject to a Lien in favor of the Secured Holders immediately after such transaction).

provided that in the case of sales of assets or Equity Interests of, or other Investments in, IPALCO or any of its Subsidiaries or any Subsidiary Guarantor or Subsidiary thereof pursuant to clause (iv) above, the Borrower shall apply the Net Cash Proceeds from such sale to offer to prepay the Term Loans pursuant to Section 2.10(b), as specified therein.

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Notwithstanding the foregoing, the Borrower will not, and will not permit any of its Subsidiaries to, in one transaction or a series of related transactions, sell, lease, transfer or otherwise dispose of all or substantially all of the assets of the Borrower and its Subsidiaries on a consolidated basis.

Section 5.19 Derivative Obligations. The Borrower shall not (and shall not permit any Qualified Holding Company, any Subsidiary Guarantor or any operating Subsidiary of any Subsidiary Guarantor to) enter into any Hedge Agreement, except for (i) Hedge Agreements entered into to hedge against fluctuations in interest rates, foreign exchange rates, commodity prices and pension and other long-term or deferred compensation obligations consistent with prudent business practice, (ii) Permitted Credit Derivative Transactions and (iii) other Hedge Agreements not entered into for speculative purposes (as determined by the Borrower or such Subsidiary at the time of entering into the Hedge Agreements acting in good faith).

Section 5.20 Covenant to Give Security.

(a) Upon (x) the formation or acquisition of any new direct Subsidiary by the Borrower or AES BVI II having a fair market value in excess of $3,000,000 or (y) the Investment by the Borrower and its Subsidiaries in any direct Subsidiary of the Borrower or AES BVI II that was not a “Pledged Subsidiary” on the Closing Date such that aggregate assets of such Subsidiary have a fair market value in excess of $3,000,000, then in each case at the Borrower’s expense:

(i) within 10 days after (A) such formation or acquisition and (B) such Investment, furnish to the Agent a description of such Subsidiary, in each case in detail satisfactory to the Agent,

(ii) within 15 days after such formation or acquisition of any new Subsidiary or such Investment in any direct Subsidiary of the Borrower or AES BVI II that was not a “Pledged Subsidiary” on the Closing Date, duly execute and deliver security agreement supplements (if necessary) as specified by, and in form and substance satisfactory to the Agent, securing payment of all of the Obligations of the Borrower under the Financing Documents; provided that if such new Subsidiary is a CFC, only 65% of such Equity Interests shall be pledged in favor of the Secured Holders,

(iii) within 30 days after such formation or acquisition, take, and cause each Loan Party to take, whatever action (including, without limitation, the recording of mortgages, the filing of Uniform Commercial Code financing statements, the giving of notices and the endorsement of notices on title documents) may be necessary or advisable in the opinion of the Agent to vest in the Collateral Trustees (or in any representative of the Collateral Trustees designated by it) valid and subsisting Liens on the properties purported to be subject to the pledges, security agreement supplements, and security agreements delivered pursuant to this Section 5.20, enforceable against all third parties in accordance with their terms, and

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(iv) at any time and from time to time, promptly execute and deliver any and all further instruments and documents and take all such other action as the Agent may deem necessary or desirable in obtaining the full benefits of, or in perfecting and preserving the Liens of, such pledges, assignments, security agreement supplements and security agreements;

provided, however, that Section 5.20(a)(y) shall not be applicable to Subsidiaries for which a grant or perfection of a Lien on such Subsidiary’s stock would require approvals and consents from foreign and domestic regulations and from lenders to, and suppliers, customers or other contractual counterparties of, such Subsidiary.

(b) Other than with respect to the Non- Pledged Subsidiaries, the Secured Holders shall have valid, perfected first priority Lien on (i) 65% of the Equity Interests of each direct Subsidiary of the Borrower that is (A) organized under the laws of a jurisdiction other than the United States or any state thereof, or (B) a limited liability company organized under the laws of the United States or any state thereof the direct or indirect Subsidiary of which is organized under the laws of a jurisdiction other than the United States or any state thereof, (ii) 100% of the Equity Interests of each direct Subsidiary of the Borrower that is organized under the laws of the United States or any state thereof other than those Subsidiaries described by clause (i)(B) above and (iii) 65% of the Equity Interests of each direct Subsidiary of AES BVI II.

Section 5.21 Further Assurances.

(a) Promptly upon request by the Agent, or any Bank Party through the Agent, correct, and cause each of the other Loan Parties promptly to correct, any material defect or error that may be discovered in any Financing Document or in the execution, acknowledgment, filing or recordation thereof that affect the validity or enforceability thereof, and

(b) Promptly upon request by the Agent, or any Bank Party through the Agent, do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, pledge agreements, assignments, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as the Agent, or any Bank Party through the Agent, may reasonably require from time to time in order to (A) carry out more effectively the purposes of the Financing Documents, (B) to the fullest extent permitted by applicable law, subject to the Borrower’s properties, assets, rights or interests to the Liens now or hereafter intended to be covered by any of the Collateral Documents, (C) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder and (D) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Secured Holders the rights granted or now or hereafter intended to be granted to the Secured Holders under any Financing Document or under any other instrument executed in connection with any Financing Document to which any Loan Party is or is to be a party.

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ARTICLE VI

DEFAULTS

Section 6.01 Events of Default.

If one or more of the following events (“Events of Default”) shall have occurred and be continuing:

(a) any Loan Party shall fail to pay when due any principal of any Loan or any Reimbursement Obligation, or shall fail to pay within three days of the date when due any interest, fees or other amounts payable under any Financing Document;

(b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.07 to 5.18, inclusive, or except in accordance with the terms hereof, the Subsidiary Guaranty in Article 9 shall cease to be in full force and effect;

(c) any Loan Party shall fail to observe or perform any covenant or agreement contained in any Financing Document (other than those covered by clause (a) or (b) above) for 20 days after written notice thereof has been given to the Borrower by the Agent at the request of any Bank Party;

(d) any representation, warranty, certification or statement made by any Loan Party in any Financing Document or in any certificate, financial statement or other document delivered pursuant to any Financing Document shall prove to have been incorrect in any material respect when made (or deemed made);

(e) the Borrower shall fail to make any payment in respect of any Material Debt or Material Hedge Agreement when due or within any applicable grace period;

(f) any event or condition shall occur which (i) results in the acceleration of the maturity of any Material Debt of the Borrower or the early termination of a Material Hedge Agreement of the Borrower by the Borrower’s counterparty or the acceleration of any Material Debt or the early termination by the counterparty of such Subsidiary or Subsidiaries of any Material Hedge Agreement of any (x) Subsidiary of the Borrower that contributed 15% or more to Parent Operating Cash Flow for the four most recently completed fiscal quarters of the Borrower or (y) Subsidiaries of the Borrower that in the aggregate contributed 15% or more to Parent Operating Cash Flow for the four most recently completed fiscal quarters of the Borrower (in the case of clauses (x) and (y) above, together with any Person in which such Subsidiary or Subsidiaries have a direct or indirect equity Investment); (ii) results in the termination of any commitment to provide financing in an amount in excess of $50,000,000 to the Borrower or any Material AES Entity or (iii) in the case of the Borrower, enables the holder of any Material Debt of the Borrower or counterparty to any Material Hedge Agreement of the Borrower or any Person acting on such holder’s or counterparty’s behalf to, in the case of any Material Debt, accelerate the maturity thereof, or, in the case of any Material Hedge Agreement, to terminate such Material Hedge Agreement, in each case under this clause (iii) only if the required default notice, if any, from such holder, counterparty or other Person has been

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given and such holder, counterparty or other Person would be entitled to accelerate or terminate, as the case may be, such Material Debt or Material Hedge Agreement within 45 days from the date of determination; provided that the ability of any Person to demand or receive payment under a Guarantee by the Borrower of Material Debt or a Material Hedge Agreement of any Subsidiary shall not constitute an Event of Default under this clause (f) unless either (x) the demand for payment arises as a result of a default by the Borrower under such Guarantee or (y) such Person has demanded payment from the Borrower and the Borrower has not made such payment within 15 Business Days following such demand (or such longer grace period as is allowed under such Guarantee);

(g) the Borrower or any Significant AES Entity shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing;

(h) an involuntary case or other proceeding shall be commenced against the Borrower or any Significant AES Entity seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Significant AES Entity under the federal bankruptcy laws as now or hereafter in effect;

(i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $15,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $15,000,000;

(j) a judgment or order for the payment of money in excess of $25,000,000 shall be rendered against the Borrower or (x) any Subsidiary of the Borrower that contributed 10% or more to Parent Operating Cash Flow for the four most recently completed fiscal quarters of the Borrower or (y) more than one Subsidiary of the

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Borrower and such Subsidiaries in the aggregate contributed 15% or more to Parent Operating Cash Flow for the four most recently completed fiscal quarters of the Borrower (in the case of clauses (x) and (y) above, together with any Person in which such Subsidiary or Subsidiaries have a direct or indirect equity Investment), and such judgment or order shall continue unsatisfied and unstayed for a period of 10 days;

(k) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) other than a member of the AES Management Group shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 32.5% or more of the outstanding shares of common stock of the Borrower; during any period of twelve consecutive calendar months, individuals who were directors of the Borrower on the first day of such period (or who were appointed or nominated for election as directors of the Borrower by at least a majority of the individuals who were directors on the first day of such period) shall cease to constitute a majority of the board of directors of the Borrower; or

(l) any Collateral Document after delivery thereof pursuant to Section 3.01 shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority lien on and security interest in a material portion of the Collateral purported to be covered thereby,

then, and in every such event, the Agent shall (i) if requested by the Required Banks, by notice to the Borrower terminate the Revolving Credit Loan Commitments and they shall thereupon terminate and (ii) if requested by the Required Banks, by notice to the Borrower declare the Notes, all interest thereon, and all other amounts payable under this Agreement and the other Financing Documents to be, and the Notes, all such interest thereon and all such other amounts shall thereupon become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any Automatic Acceleration Event, without any notice to the Borrower or any other act by the Agent or the Banks, the Revolving Credit Loan Commitments shall thereupon terminate and the Notes, all interest thereon, and all other amounts payable under this Agreement and the other Financing Documents shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

Section 6.02 Notice of Default.

The Agent shall give notice to the Borrower under Section 6.01(c) promptly upon being requested to do so by any Bank Party and shall thereupon notify all the Banks thereof.

Section 6.03 Cash Collateral.

If any Automatic Acceleration Event shall occur or the Loans of the Bank Parties shall have otherwise been accelerated or the Revolving Credit Loan Commitments have been terminated pursuant to Section 6.01, then without any request or the taking of any other action by the Agent or any of the Bank Parties, the Borrower shall be obligated forthwith to pay to the Collateral Agent an amount in immediately available funds equal to the then aggregate amount

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available for Revolving L/C Drawings (regardless of whether any conditions to any such Revolving L/C Drawings can then be met) under all Revolving Letters of Credit at the time outstanding, to be held by the Collateral Agent as cash collateral as provided in Section 2.14 and Section 2.15, in the case of all Revolving Letters of Credit.

ARTICLE VII

THE AGENT

Section 7.01 Appointment and Authorization.

Each Bank Party (on behalf of itself and its Affiliates as potential Hedge Banks) irrevocably appoints and authorizes the Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Financing Documents as are delegated to the Agent or the Collateral Agent, as the case may be, by the terms hereof and thereof, together with all such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Financing Documents (including, without limitation, enforcement or collection of the Notes), neither the Agent nor the Collateral Agent shall be required to exercise any discretion or to take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Banks, and such instructions shall be binding upon all Bank Parties and all the holders of Notes; provided, however, that neither the Agent nor the Collateral Agent shall be required to take any action that exposes such agent to personal liability or that is contrary to this Agreement or applicable law. Without limiting any of the foregoing in this Section 7.01, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6. Each of the Collateral Agent and the Agent agrees to give each Bank Party prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement.

Section 7.02 Agent and Affiliates.

Citicorp USA, Inc. and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire Equity Interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Loan Parties and their respective Affiliates as though Citicorp USA, Inc. were not the Agent hereunder and without notice to or consent of the Bank Parties. The Bank Parties acknowledge that, pursuant to such activities, Citicorp USA, Inc. or its Affiliates may receive information regarding any Loan Party or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such Affiliate) and acknowledge that the Agent shall not be under any obligation to provide such information to them. With respect to its Loans or any Revolving Letters of Credit, Citicorp USA, Inc. shall have the same rights and powers under this Agreement or any other Financing Document as any other Bank Party and may exercise such rights and powers as though it were not the Agent, and the terms “Bank” and “Banks” include Citicorp USA, Inc. in its individual capacity.

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Section 7.03 Consultation with Experts.

The Agent and the Collateral Agent may execute any of their respective duties under this Agreement or any other Financing Document (including for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents or of exercising any rights and remedies thereunder) by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel, independent public accountants and other consultants or experts concerning all matters pertaining to such duties. Neither the Agent nor the Collateral Agent shall be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.

Section 7.04 Liability of Agent and Collateral Agent.

Neither the Agent, the Collateral Agent nor any of their Affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection with this Agreement or any other Financing Document (a) with the consent or at the request of the Required Banks or (b) in the absence of its own gross negligence or willful misconduct. Neither the Agent, the Collateral Agent nor any of their Affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made by any Loan Party in connection with the Financing Documents or any Extension of Credit hereunder, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent or the Collateral Agent under or in connection with this Agreement or any other Financing Document; (ii) the performance or observance of any of the covenants or agreements of any Loan Party; (iii) the perfection or priority of any Lien or security interest created or purported to be created under the Collateral Documents; (iv) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Agent or (v) the validity, effectiveness, genuineness, enforceability or sufficiency of the Financing Documents or any other instrument or writing furnished in connection therewith. Neither the Agent nor the Collateral Agent shall incur any liability by acting in reliance upon any notice, consent, certificate, statement or other writing (which may be a bank wire, telex, facsimile transmission or similar writing) believed by it to be genuine or to be signed by the proper party or parties.

Section 7.05 Indemnification.

Each Bank Party shall, ratably (determined as provided below) indemnify the Agent, the Collateral Agent, each Revolving Fronting Bank, each of their respective Affiliates and the respective directors, officers, agents and employees of any of them (to the extent not reimbursed by the Obligors) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees’ gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with the Financing Documents or any action taken or omitted by such indemnitees thereunder. For purposes of this Section 7.05, the Bank Party’s ratable share of any amount shall be determined, at any time, according to the sum of (a) the aggregate principal amount of Loans outstanding at such time and owing to the respective Bank Party; (b) the aggregate Revolving

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Letter of Credit Liabilities outstanding at such time and owing to the respective Bank Party and (c) their respective Unused Revolving Credit Loan Commitments outstanding at such time.

Section 7.06 Credit Decision.

Each Bank Party acknowledges that it has, independently and without reliance upon the Agent, the Collateral Agent, any Revolving Fronting Bank, or any other Bank or any Arranger Party, and based on the financial statements referred to in Section 4.05 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank Party also acknowledges that it will, independently and without reliance upon the Agent, the Collateral Agent, or any other Bank Party, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement.

Section 7.07 Successor Agent or Collateral Agent.

The Agent or the Collateral Agent may resign at any time by giving notice thereof to the Bank Parties and the Borrower. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent or a successor Collateral Agent. If no successor Agent or successor Collateral Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent or Collateral Agent gives notice of resignation, then the retiring Agent or Collateral Agent (as the case may be), on behalf of the Bank Parties, shall appoint a successor Agent or a successor Collateral Agent (as applicable), which shall be a commercial bank organized or licensed under the laws of the United States and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of its appointment as Agent or Collateral Agent (as the case may be) hereunder by a successor Agent or a successor Collateral Agent, upon the execution and filing or recording of such financing statements, or amendment, thereto, and such other instruments or notices, as may be necessary or desirable, or as the Required Banks may request with respect to the Security Agreement and the BVI Cayman Pledge Agreement in order to continue the perfection of the Liens granted or purported to be granted by the Collateral Documents, such successor Agent or Collateral Agent (as applicable) shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent or Collateral Agent (as the case may be), and the retiring Agent or Collateral Agent shall be discharged from its duties and obligations hereunder. If within 45 days after written notice is given of the retiring Agent’s or Collateral Agent’s (as the case may be) resignation under this Section 7.07 no successor Agent or Collateral Agent (as the case may be) shall have been appointed and shall have accepted such appointment, then on such 45^th day (i) the retiring Agent’s or Collateral Agent’s (as the case may be) resignation shall become effective, (ii) the retiring Agent or Collateral Agent (as the case may be) shall thereupon be discharged from its duties and obligations under the Financing Documents and (iii) the Required Banks shall thereafter perform all duties of the retiring Agent or Collateral Agent (as the case may be) until such time, if any, as the Required Banks appoint a successor Agent or a successor Collateral Agent as provided above. After any retiring Agent’s or Collateral Agent’s (as the case may be) resignation hereunder as Agent or Collateral Agent (as the case may be) the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent or Collateral Agent (as the case may be).

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Section 7.08 Administrative Agent May File Proofs of Claim.

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Obligor, the Agent (irrespective of whether the principal of any Loan or Revolving Letter of Credit Liabilities shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, the Revolving Letter of Credit Liabilities and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Bank Parties and the Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Bank Parties and the Agent and their respective agents and counsel and all other amounts due the Bank Parties and the Agent and the Collateral Agent under this Agreement) allowed in such judicial proceeding;

(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and

(c) any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Bank Party to make such payments to the Agent and, in the event that the Agent shall consent to the making of such payments directly to the Bank Parties, to pay to the Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agent, the Collateral Agent and their respective agents and counsel, and any other amounts due the Agent under this Agreement.

Nothing contained herein shall be deemed to authorize the Agent to authorize or consent to or accept or adopt on behalf of any Bank Party any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Bank Party or to authorize the Agent to vote in respect of the claim of any Bank Party in any such proceeding.

Section 7.09 Agents’ Fee.

The Borrower shall pay to the Agent and the Collateral Agent for their own account fees in the amounts and at the times previously agreed upon between the Borrower, the Agent and the Collateral Agent.

Section 7.10 [Intentionally Omitted].

Section 7.11 Delivery of Information.

(a) The Borrower hereby agrees that it will provide to the Agent all information, documents and other materials that it is obligated to furnish to the Agent pursuant to this Agreement, including, without limitation, all notices, requests, financial

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statements, financial and other reports, certificates and other information materials, but excluding any such communication that (i) relates to a request for a new, or a conversion of an existing, Borrowing or other Extension of Credit (including any election of an interest rate or Interest Period relating thereto), (ii) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (iii) provides notice of any default or Event of Default under this Agreement or (iv) is required to be delivered pursuant to Sections 3.01 or 3.02 to satisfy any condition precedent to the effectiveness of this Agreement and/or any Borrowing or other Extension of Credit hereunder (all such non-excluded communications being referred to herein collectively as “Communications”), by transmitting the Communications in an electronic/soft medium in a format acceptable to the Agent to oploanswebadmin@citigroup.com. In addition, the Borrower agrees to continue to provide the Communications to the Agent in the manner specified in this Agreement but only to the extent requested by the Agent.

(b) The Borrower further agrees that the Agent may make the Communications available to the other Bank Parties by posting the Communications on Intralinks or a substantially similar electronic transmission systems. (the “Platform”).

THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”. THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE AGENT PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN NO EVENT SHALL THE AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (COLLECTIVELY, “AGENT PARTIES”) HAVE ANY LIABILITY TO THE BORROWER, ANY BANK PARTY OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF THE BORROWER’S OR THE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH AGENT PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

(c) The Agent agrees that the receipt of the Communications by the Agent at its e-mail address set forth in clause (a) above shall constitute effective delivery of the Communications to the Agent for purposes of the Financing Documents. Each Bank Party agrees that notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform shall constitute effective delivery of the Communications to

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such Bank Party for purposes of the Financing Documents. Each Bank Party agrees to notify the Agent in writing (including by electronic communication) from time to time of such Bank Party’s e-mail address to which the foregoing notice may be sent by electronic transmission and that the foregoing notice may be sent to such e-mail address. Nothing herein shall prejudice the right of the Agent or any Bank Party to give any notice or other communication pursuant to any Financing Document in any other manner specified in such Financing Document.

ARTICLE VIII

CHANGE IN CIRCUMSTANCES

Section 8.01 Basis for Determining Interest Rate Inadequate or Unfair.

If on or prior to the first day of any Interest Period for any Euro-Dollar Borrowing:

(a) the Agent is advised by the Reference Banks that deposits in Dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or

(b) the Required Banks advise the Agent that the Adjusted London Interbank Offered Rate as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, the Agent shall forthwith give notice thereof to the Borrower and the Bank Parties, whereupon until the Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Bank Parties to make Euro-Dollar Loans, or to continue or convert outstanding Loans as or into Euro-Dollar Loans, shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Agent at least two Domestic Business Days before the date of any Euro-Dollar Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Base Rate Borrowing.

Section 8.02 Illegality.

If, on or after the Effective Date, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank Party (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank Party (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans to the Borrower and such Bank Party shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Bank Parties and the Borrower, whereupon

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until such Bank Party notifies the Borrower and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank Party to make Euro-Dollar Loans to the Borrower, or to convert outstanding Loans into Euro-Dollar Loans or continue outstanding Loans as Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent pursuant to this Section 8.02, such Bank Party shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank Party, be otherwise disadvantageous to such Bank Party. If such notice is given, each Euro-Dollar Loan of such Bank Party then outstanding shall be converted to a Base Rate Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank Party may lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan to such day or (b) immediately if such Bank Party shall determine that it may not lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan to such day. Interest and principal on any such Base Rate Loan shall be payable on the same dates as, and on a pro rata basis with, the interest and principal payable on the related Euro-Dollar Loans of the other Bank Parties.

Section 8.03 Increased Cost and Reduced Return.

(a) If on or after the Effective Date, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) or any Revolving Fronting Bank (any Bank (or its Applicable Lending Office) and any Revolving Fronting Bank being referred to in this Section 8.03 as a “Credit Party”) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Credit Party or shall impose on any Credit Party or on the London interbank market any other condition affecting its Euro-Dollar Loans, its Note or Notes, the Revolving Letters of Credit, or its obligation to make Euro-Dollar Loans or to issue Revolving Letters of Credit or to participate therein and the result of any of the foregoing is to increase the cost to such Credit Party of making or maintaining any Euro-Dollar Loan or issuing any Revolving Letter of Credit or participating therein, or to reduce the amount of any sum received or receivable by such Credit Party under this Agreement or under its Note or Notes with respect thereto, by an amount deemed by such Credit Party to be material, then, within 15 days after demand by such Credit Party (with a copy to the Agent), the Borrower shall pay to such Credit Party such additional amount or amounts as will compensate such Credit Party for such increased cost or reduction.

(b) If any Credit Party shall have determined that, after the Effective Date, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the

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interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Credit Party (or its Parent) as a consequence of such Credit Party’s obligations hereunder to a level below that which such Credit Party (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Credit Party to be material, then from time to time, within 15 days after demand by such Credit Party (with a copy to the Agent), the Borrower shall pay to such Credit Party such additional amount or amounts as will compensate such Credit Party (or its Parent) for such reduction.

(c) Each Credit Party will promptly notify the Borrower and the Agent of any event of which it has knowledge, occurring after the Effective Date, which will entitle such Credit Party to compensation pursuant to this Section 8.03(c) and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Credit Party, be otherwise disadvantageous to such Credit Party. A certificate of any Credit Party claiming compensation under this Section 8.03(c) and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank Party may use any reasonable averaging and attribution methods.

Section 8.04 Taxes.

(a) Any and all payments by the Borrower and any other Loan Party to or for the account of any Bank Party (which for purposes of this Section 8.04, shall include a Third Party Fronting Bank and its Assignees), the Agent or the Collateral Agent hereunder or under any other Financing Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank Party, the Agent and the Collateral Agent, taxes imposed on its income (including branch profit taxes), franchise and similar taxes and other taxes imposed on it that, in any such case, would not have been imposed but for a material connection between such Bank Party, the Agent or the Collateral Agent (as the case may be) and the jurisdiction imposing such taxes (other than a material connection arising by reason of this Agreement or any other Financing Document or the receipt of payments made hereunder or thereunder or the exercise of any rights by a Bank Party, the Agent or the Collateral Agent (as the case may be) hereunder or thereunder)(all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”). If the Borrower or any other Loan Party shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any other Financing Document to any Bank Party, the Agent or the Collateral Agent (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank Party, the Agent or the Collateral Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made; (ii) the Borrower shall make such deductions; (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Agent, at its address referred to in

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Section 10.01, the original or a certified copy of a receipt or other satisfactory documentation evidencing payment thereof.

(b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, or charges or similar levies which arise from any payment made by it hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any other Financing Document (hereinafter referred to as “Other Taxes”).

(c) The Borrower agrees to indemnify each Bank Party, the Agent and the Collateral Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank Party, the Agent or the Collateral Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 15 days from the date such Bank Party, the Agent or the Collateral Agent (as the case may be) makes demand therefor.

(d) Each Bank Party that is organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement in the case of a Bank Party listed on the signature pages hereof or on or prior to the date on which it becomes a Bank Party in the case of each other Bank Party and in the case any Bank Party changes jurisdiction of its Applicable Lending Office and from time to time thereafter as requested in writing by the Borrower (but only so long thereafter as such Bank Party remains lawfully able to do so), shall deliver to the Borrower and the Agent such certificates, documents or other evidence, as required by the Code or Treasury Regulations issued pursuant thereto, including Internal Revenue Service Form W-8BEN, Form W-8 IMY or Form W-8ECI and any other certificate or statement of exemption specified by the Borrower and required by Treasury Regulation Section 1.1441-4(a) or Section 1.1441-6(c) or any subsequent version thereof, properly completed and duly executed by such Bank Party establishing that any payment under this Agreement or any other Financing Documents is (i) not subject to withholding under the Code because such payment is effectively connected with the conduct by such Bank Party of a trade or business in the United States, or (ii) fully or partially exempt from United States tax under a provision of an applicable tax treaty, or (iii) not subject to withholding under the portfolio interest exception under Section 881(c) of the Code (and, if such Bank Party delivers a Form W-8BEN claiming the benefits of exemption from United States withholding tax under Section 881(c), a certificate representing that such Bank Party is not a “bank” for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Code). Unless the Borrower and the Agent have received forms or other documents reasonably satisfactory to them indicating that payments hereunder are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Borrower or the Agent shall withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Bank Party organized under the laws of a jurisdiction outside the United States. If a Bank Party is unable to deliver one of these forms or if the forms provided by a Bank Party at the time such Bank Party first becomes a party to this Agreement or at the time a Bank Party changes its

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Applicable Lending Office (other than at the request of the Borrower) or designates a Conduit Lender that indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Bank Party provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such appropriate forms; provided, however, that (i) that should a Bank Party, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank Party shall reasonably request to assist such Bank Party to recover such Taxes and (ii) if at the effective date of a transfer pursuant to which a Bank Party becomes a party to this Agreement, the Bank Party assignor was entitled to payments under Section 8.04(a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Bank Party assignee on such date.

(e) If the Borrower is required to pay additional amounts to or for the account of any Bank Party pursuant to this Section 8.04, then such Bank Party shall use reasonable effort (consistent with internal policy and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Bank Party, is not otherwise disadvantageous to such Bank Party.

(f) Each Bank Party, the Agent and the Collateral Agent agrees that it will promptly (within 30 days) after receiving notice thereof from any taxing authority, notify the Borrower of the assertion of any liability by such taxing authority with respect to Taxes or Other Taxes; provided that the failure to give such notice shall not relieve the Borrower of its obligations under this Section 8.04 except to the extent that the Borrower has been prejudiced by such failure and except that the Borrower shall not be liable for penalties, interest or expenses accruing after such 30 day period until such time as it receives the notice contemplated above, after which time it shall be liable for interest, penalties and expenses accruing after such receipt.

(g) If any Bank Party, the Agent or the Collateral Agent shall receive a credit or refund from a taxing authority (as a result of any error in the imposition of Taxes or Other Taxes by such taxing authority) with respect to and actually resulting from an amount of such Taxes or Other Taxes paid by the Borrower pursuant to subsection (a) or (c) above, such Bank Party, the Agent or the Collateral Agent shall promptly pay to the Borrower the amount so received (without interest thereon, whether or not received).

(h) Without prejudice to the survival of any other agreement contained herein, the agreements, covenants and obligations contained in this Section 8.04 shall survive the payment in full of the principal of and interest on all Loans, Notes and other advances made hereunder.

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Section 8.05 Base Rate Loans Substituted for Affected Euro-Dollar Loans.

If (a) the obligation of any Bank Party to make, or to continue or to convert outstanding Loans as or to, Euro-Dollar Loans to the Borrower has been suspended pursuant to Section 8.02 or (b) any Bank Party has demanded compensation under Section 8.03 or 8.04 with respect to its Euro-Dollar Loans to the Borrower shall, by at least five Euro-Dollar Business Days’ prior notice to such Bank Party through the Agent, have elected that the provisions of this Section 8.05 shall apply to such Bank Party, then, unless and until such Bank Party notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, all Loans to the Borrower which would otherwise be made by such Bank Party as (or continued or converted to) Euro-Dollar Loans shall be made instead as Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Bank Parties). If such Bank Party notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, the principal amount of each such Base Rate Loan shall be converted into a Euro-Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Bank Parties.

ARTICLE IX

SUBSIDIARY GUARANTY

Section 9.01 The Subsidiary Guaranty.

Subject in each case to the provisions of Section 9.08, each of the Subsidiary Guarantors hereby, jointly and severally, unconditionally guarantees as primary obligor and not merely as surety, the full and punctual payment as and when the same shall become due and payable (whether at stated maturity, upon acceleration or otherwise) of the principal and interest on each Revolving Credit Loan Note and Term Loan Note issued by the Borrower under this Agreement, the full and punctual payment of each Reimbursement Obligation in respect of the Revolving Letters of Credit under this Agreement and the full and punctual payment of all amounts payable by the Borrower under this Agreement in respect of the Revolving Credit Loan Facility and the Term Loans (the “Revolving Credit Loan/Term Loan Obligations”) (the guaranty referred to above is referred to as the “Subsidiary Guaranty”). Upon failure by the Borrower to pay punctually any such amount, the Subsidiary Guarantors shall forthwith on demand pay the amount not so paid at the place and in the manner specified in the Agreement. The Revolving Credit Loan/Term Loan Obligations of the Borrower guaranteed by the Subsidiary Guarantors are referred to as the “Guaranteed Obligations”. Without limiting the generality of the foregoing, each Subsidiary Guarantor’s liability hereunder shall extend to all amounts which constitute part of the obligations guaranteed by it hereunder and would be owed by the Borrower hereunder but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower.

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Section 9.02 Guaranty Absolute.

Each Subsidiary Guarantor, jointly and severally guarantees that, subject to Section 9.08, the Guaranteed Obligations will be paid strictly in accordance with the terms of this Agreement, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Banks and the Agent with respect thereto. The respective obligations of each of the Subsidiary Guarantora under the Subsidiary Guaranty are independent of the Revolving Credit Loan/Term Loan Obligations. The obligations of each Subsidiary Guarantor hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by:

(i) any extension, renewal, settlement, compromise, waiver or release in respect of any Obligation of any other Loan Party under any Financing Document, by operation of law or otherwise;

(ii) any lack of validity or enforceability of any Financing Document or any other agreement or instrument relating thereto;

(iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other obligations of the Borrower under the Financing Documents, or any other amendment or waiver of or any consent to departure from any Financing Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Borrower or otherwise;

(iv) any taking, exchange, release, impairment, invalidity or nonperfection of any Collateral;

(v) any manner of application of the Collateral or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any Collateral for all or any of the Guaranteed Obligations or any other Obligations of the Loan Parties under the Financing Documents, or any other property or assets of the Loan Parties or any of their Subsidiaries;

(vi) any failure by the Agent, the Collateral Agent or any other Lender Party to disclose to any Loan Party any information relating to the financial condition, operations, properties or prospects of any other Loan Party now or hereafter known to the Agent, the Collateral Agent or such Lender Party, as the case may be (such Subsidiary Guarantor waiving any duty on the part of the Agent, the Collateral Agent or the Lender Parties to disclose such information);

(vii) any change in the corporate existence, structure or ownership of any Loan Party, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any other Loan Party or its assets or any resulting release or discharge of any obligation of any other Loan Party contained in any Financing Document;

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(viii) the existence of any claim, set-off or other rights which such Subsidiary Guarantor may have at any time against any other Loan Party, the Agent, the Collateral Agent, any Bank Party or any other Person, whether in connection herewith or with any unrelated transactions; provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim;

(ix) any invalidity or unenforceability relating to or against any other Loan Party for any reason of any Financing Document, or any provision of applicable law or regulation purporting to prohibit the payment by any other Obligor of the principal of or interest on any Note or any other amount payable by it under any Financing Document; or

(x) any other act or omission to act or delay of any kind by any Obligor, the Agent, the Collateral Agent, any Bank Party or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of or defense to a Subsidiary Guarantor’s obligations hereunder.

Section 9.03 Discharge Only Upon Payment in Full, Reinstatement in Certain Circumstances.

Each Subsidiary Guarantor’s obligations hereunder shall remain in full force and effect until the Revolving Credit Loan/Term Loan Obligations have been paid in full and the Revolving Credit Loan Commitments have been terminated. If at any time the payment of principal of or interest on any Note or any other amount payable by the Borrower, in respect of the Revolving Credit Loan Facility and the Term Loans under any Financing Document is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the applicable Subsidiary Guarantor’s obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time.

Section 9.04 Revolving L/C Cash Collateral Account.

(a) Each Subsidiary Guarantor further agrees that if the Borrower shall fail to deposit in the Revolving L/C Cash Collateral Account any amount required to be deposited therein pursuant to this Agreement, the Subsidiary Guarantors shall deposit such amount in a subaccount of the Revolving L/C Cash Collateral Account as collateral security for each Subsidiary Guarantor’s potential obligations hereunder. If the Subsidiary Guarantors shall fail to furnish such funds, the Agent shall be authorized to debit any accounts the Subsidiary Guarantors maintain with the Agent in such amount. Cash deposited in such subaccount of the Revolving L/C Cash Collateral Account pursuant to this Section 9.04 shall be returned to the Subsidiary Guarantors depositing the same to the extent that funds deposited by the Borrower in the Revolving L/C Cash Collateral Account would have been required to be returned to the Borrower.

(b) Each Subsidiary Guarantor hereby pledges and grants to the Agent, for the benefit of the Banks and the Agent, a continuing lien on and security interest in all right, title

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and interest of such Subsidiary Guarantor with respect to any funds held in the Revolving L/C Cash Collateral Account from time to time, and all proceeds thereof, as security for the payment of the Guaranteed Obligations.

(c) The Agent may, at any time or from time to time after the funds are deposited in the Revolving L/C Cash Collateral Account, apply funds then held in the Revolving L/C Cash Collateral Account to the payment of any of the Guaranteed Obligations.

(d) Neither the Subsidiary Guarantors nor any person or entity claiming on behalf of or through the Subsidiary Guarantors shall have any right to withdraw any of the funds held in the Revolving L/C Cash Collateral Account.

(e) Each Subsidiary Guarantor agrees that it will not (i) sell or otherwise dispose of any interest in the Revolving L/C Cash Collateral Account or any funds held therein or (ii) create or permit to exist any lien, security interest or other charge or encumbrance upon or with respect to the Revolving L/C Cash Collateral Account or any funds held therein, except as contemplated by the terms of this Section 9.04.

Section 9.05 Waiver by the Subsidiary Guarantors.

Each Subsidiary Guarantor irrevocably waives promptness, diligence, notice of acceptance, presentment, protest and any other notice with respect to any of its Guaranteed Obligations and this Subsidiary Guaranty and waives any requirement that the Agent, the Collateral Agent or any Bank Party protect, secure, perfect or insure any security interest or Lien on the Collateral or exhaust any action against the Borrower or any other Person or entity or any Collateral.

Section 9.06 Subrogation.

Upon making any payment with respect to the Borrower under this Article 9, the applicable Subsidiary Guarantor shall be subrogated to the rights of the payee against the Borrower with respect to such payment; provided that no Subsidiary Guarantor shall enforce any payment by way of subrogation until all amounts of principal of and interest on the Notes and all other amounts payable by the Borrower under any Financing Document shall have been paid in full.

Section 9.07 Stay of Acceleration.

In the event that acceleration of the time for payment of any amount payable by the Borrower under any Financing Document is stayed upon insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the applicable Subsidiary Guarantor hereunder forthwith on demand by the Agent made at the request of the requisite proportion of the Bank Parties specified in Article 6 of this Agreement.

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Section 9.08 Limitation of Liability.

The obligations of each Subsidiary Guarantor under this Article 9 shall be limited to an aggregate amount equal to the largest amount that would not render its obligations under this Article 9 subject to avoidance under Section 548 of the Bankruptcy Code or any comparable provisions of any applicable state law (including, without limitation, the provisions of the Uniform Fraudulent Transfer Act and the Uniform Fraudulent Conveyance Act, to the extent incorporated in applicable state law).

Section 9.09 Release of Subsidiary Guarantors.

Upon any Asset Sale of all of the Capital Stock of a Subsidiary Guarantor in accordance with the terms of the Financing Documents and the application of the Net Cash Proceeds from such Asset Sale to prepay the Debt hereunder pursuant to and in the amount and order of priority set forth in Section 2.10(b), such Subsidiary Guarantor shall be released from all of its Obligations under this Article 9 and shall not be a “Subsidiary Guarantor” for any purpose under the Financing Documents.

Section 9.10 Representations and Warranties.

Each Subsidiary Guarantor, as to itself, hereby makes the representations and warranties set forth in Section 4.01, 4.02(a) and 4.04.

Section 9.11 Covenants.

Each Subsidiary Guarantor hereby agrees to comply with the covenant set forth in Section 5.09(b).

ARTICLE X

MISCELLANEOUS

Section 10.01 Notices.

All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (a) in the case of the Borrower, any Revolving Fronting Bank, the Agent or the Collateral Agent, at its address or telex or facsimile transmission number set forth on the signature pages hereof; (b) in the case of any Bank, at its address or telex or facsimile transmission number set forth in its Administrative Questionnaire or (c) in the case of any other party, at such other address or telex or facsimile transmission number as such party may hereafter specify for the purpose by notice to the Agent, the Collateral Agent, the Revolving Fronting Banks and the Borrower. Each such notice, request or other communication shall be effective (x) if given by telex, when such telex is transmitted to the telex number specified in or pursuant to this Section 10.01 and the appropriate answerback is received; (y) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (z) if given by any other means, when delivered at the address specified

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in or pursuant to this Section 10.01; provided that notices to the Agent, the Collateral Agent or a Revolving Fronting Bank under Article 2 or Article 8 shall not be effective until received.

Section 10.02 No Waivers.

No failure or delay by the Agent, the Collateral Agent or any Bank Party in exercising any right, power or privilege hereunder or under any other Financing Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 10.03 Expenses; Indemnification.

(a) The Borrower shall pay (i) all out-of-pocket expenses of the Agent and the Collateral Agent, including, without limitation, (A) reasonable fees and disbursements of outside counsel for the Agent and the Collateral Agent in connection with the preparation and administration of this Agreement and the other Financing Documents, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder, (B) the reasonable fees and disbursements of the Collateral Trustees and their outside counsel and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agent, the Collateral Agent, each Revolving Fronting Bank and each Bank, including (without duplication) the fees and disbursements of outside counsel and the allocated cost of inside counsel, in connection with such Event of Default and collection, bankruptcy, insolvency, workout, restructuring and other enforcement proceedings resulting therefrom.

(b) The Borrower agrees to indemnify the Agent, the Collateral Agent and each Bank Party, their respective Affiliates and the respective directors, officers, agents and employees of the foregoing (each, an “Indemnitee”) and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of the Financing Documents or any actual or proposed use of proceeds of Loans or the issuance or deemed issuance of any Revolving Letter of Credit hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee’s own gross negligence or willful misconduct as determined by a court of competent jurisdiction.

Section 10.04 Sharing of Set-offs.

Each Bank Party agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise (including, without limitation, through the application of any proceeds of the Creditor Group Collateral and the Excess Revolving L/C Collateral, receive payment of a proportion of the aggregate amount due and payable to such Bank Party hereunder which is greater than the proportion received by any other Bank Party (A) on account of Obligations due and payable to such Bank Party hereunder and under the Notes at such time in excess of its

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ratable share (according to the proportion of (i) the amount of such Obligations due and payable to such Bank Party at such time to (ii) the aggregate amount of Obligations due and payable to all Bank Parties hereunder and under the Notes at such time) of payments on account of the Obligations due and payable to all the Bank Parties hereunder and under the Notes at such time obtained by all the Bank Parties at such time or (B) on account of Obligations owing (but not due and payable) to such Bank Party hereunder and under the Notes at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations owing (but not due and payable) to such Bank Party at such time to (ii) the aggregate amount of Obligations owing (but not due and payable) to all Bank Parties hereunder and under the Notes at such time) of payments on account of the Obligations owing (but not due and payable) to all Bank Parties hereunder and under the Notes at such time obtained by all of the Bank Parties at such time, such Bank Party shall forthwith purchase from the other Bank Parties such participations in the Obligations due and payable or owing to them, as the case may be, as shall be necessary to cause such purchasing Bank Party to share the excess payment ratably with each of them; provided that nothing in this Section 10.04 shall impair the right of any Bank Party to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower owing to it. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note or in any Revolving Letter of Credit Liability, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation.

Section 10.05 Amendments and Waivers.

Any provision of this Agreement or any other Financing Document may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Agent or the Collateral Agent are affected thereby, by the Agent or the Collateral Agent); provided that (a) no such amendment or waiver shall, unless signed by all the Bank Parties, (i) waive any of the conditions specified in Section 3.01 or 3.02 (with respect to the Extensions of Credit made or deemed to be made on the Closing Date); (ii) change the number of Bank Parties or the percentage of (x) the Unused Revolving Credit Loan Commitments, (y) the aggregate unpaid principal amount of the Loans or (z) the aggregate Revolving Letter of Credit Liabilities that, in each case, shall be required for the Bank Parties or any of them to take any action hereunder; (iii) release all or substantially all of the Collateral in any transaction or series of related transactions; or (iv) amend Section 10.04 or this Section 10.05, (b) no such amendment or waiver shall, unless signed by the Required Banks and each Bank Party if such Bank Party is directly adversely affected by such amendment or waiver, (i) in the case of any Revolving Credit Loan Bank, increase the Revolving Credit Loan Commitment of such Revolving Credit Loan Bank; (ii) reduce the principal of, or interest on, the Notes held by such Bank Party or Loans outstanding to such Bank Party or any fees or other amounts payable to such Bank Party; (iii) reduce or limit the Obligations of any Subsidiary Guarantor under Article 9 or release any Subsidiary Guarantor (other than in connection with a sale or disposition permitted hereunder) or otherwise limit such Subsidiary Guarantor’s liability with respect to the Obligations owing to the Agent, the Collateral Agent and the Bank Parties, (iv) reduce the principal of or rate of interest on any Loan or Reimbursement Obligation or any fees hereunder, (v) change (x) the order of application in

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the prepayment of Loans among the Facilities or any reduction in the Revolving Credit Loan Commitments from the application thereof set forth in the applicable provisions of Sections 2.09 and 2.10 in any manner that materially affects the Bank Parties under such Facilities or (y) the right of any Bank Party to pro rata sharing of payments pursuant to the terms hereof (except as otherwise specifically provided in clause (d)(i) below), (vi) postpone the date fixed for any payment of principal of or interest on any Loan or Reimbursement Obligation or any fees hereunder or (vii) postpone the final maturity of the Loans, (c) no such amendment or waiver shall, unless signed by the Required Revolving Credit Loan Banks, amend, waive or delete the provisions of Section 3.02(d) or Section 3.02(e) and (d) no such amendment or waiver shall, unless signed by the Supermajority Banks (i) change the pro rata application of Net Cash Proceeds from Asset Sales among the Bank Parties, on the one hand, and the other Financing Parties, on the other hand, set forth in Section 2.10(b)(i) by amending the definition of “Banks’ Ratable Share” or otherwise or (ii) amend the definition of “Secured Holders” or “Secured Obligations” in the Collateral Trust Agreement or amend Sections 5.01, 8.01, 8.02 or 9.01 of the Collateral Trust Agreement; provided further that no such amendment or waiver shall, unless signed by the Revolving Fronting Banks affect the rights and obligations of the Revolving Fronting Banks under this Agreement and provided further that no such amendment or waiver shall (x) release all or substantially all of the Creditor Group Collateral or (y) change the pro rata application of Net Cash Proceeds from Asset Sales among the Financing Parties set forth in Section 2.10(b)(i) by amending the definition of “Banks’ Ratable Share” or otherwise unless the Agent shall have received evidence satisfactory to it from the trustee under the Senior Secured Exchange Note Indenture that it has received the consent of those Exchange Note Holders holding a majority of the principal outstanding amount of the Senior Secured Exchange Notes.

Notwithstanding anything of the foregoing, no amendment or waiver shall be required to release any Subsidiary Guarantor which is sold pursuant to the terms and conditions of the Financing Documents so long as the Borrower shall, on the date of receipt by the Borrower of the Net Cash Proceeds from such sale, prepay the Loans pursuant to, and in the order of priority set forth in Section 2.10(b), as specified therein.

Section 10.06 Successors and Assigns.

(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except neither the Borrower nor any Subsidiary Guarantor may assign or otherwise transfer any of its rights and obligations under this Agreement without the prior written consent of all of the Bank Parties (other than in the case of Subsidiary Guarantors in connection with any transaction permitted by the Financing Documents).

(b) Any Bank other than a Conduit Lender may, without notice to or consent of the Borrower and Agent, at any time grant to one or more banks or other institutions (each, a “Participant”) participating interests in its Unused Revolving Credit Loan Commitment or any or all of its Loans or participating interests in its Revolving Letter of Credit Liabilities. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower, the Revolving Fronting Banks and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower, the Revolving Fronting Banks and the Agent shall continue to deal solely and directly with

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such Bank in connection with such Bank’s rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement or any other Financing Document; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clauses (a) (i), (iv) through (vi) and clause (b) of Section 10.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b).

(c) Any Bank Party other than a Conduit Lender may at any time assign to one or more banks or other institutions (each, an “Assignee”) all, or a proportionate part of all, in each case in an amount not less than $1,000,000 (or such lesser amount as may be agreed to by the Borrower and the Agent) (except in the case of an assignment which will result in a group of Banks which are managed by the same Bank Party holding a Revolving Credit Loan Commitment or Term Loan Commitment (as the case may be) of not less than $1,000,000), of its rights and obligations under this Agreement and the other Financing Documents, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption in substantially the form of Exhibit C-1 or Exhibit C-2 hereto, as the case may be, executed by such Assignee and such transferor Bank Party, with (and subject to) the subscribed consent of the Agent, the Borrower (which shall not be unreasonably withheld or delayed but which shall not be required if (1) an Event of Default shall have occurred and is continuing, (2) in the case of assignments with respect to any Term Loan Facility, (3) in the case of assignments by a Bank Party to a Related Fund of such Bank Party and (4) in the case of assignments with respect to the Revolving Credit Loan Facility, if the proposed Assignee has a senior unsecured debt rating of “BBB” or higher by Standard & Poor’s Rating Services or “Baa2” or higher by Moody’s Investor Service, Inc.), and, in the case of assignments with respect to the Revolving Credit Loan Facility, each Revolving Fronting Bank (such consent not to be unreasonably withheld or delayed); provided that if an Assignee is an Affiliate of such transferor Bank Party, no such consents shall be required; and provided, further that under no circumstances may the Borrower or any of its Affiliates be an “Assignee” hereunder. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank Party of an amount equal to the purchase price agreed between such transferor Bank Party and such Assignee, such Assignee shall be a Bank Party party to this Agreement and shall have all the rights and obligations of a Bank Party as set forth in such instrument of assumption, and the transferor Bank Party shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank Party, the Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee. In connection with any such assignment, the transferor Bank Party or Assignee shall pay to the Agent an administrative fee for processing such assignment in the amount of $3,500. If the Assignee is not incorporated under the laws of the United States of America or

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a state thereof, it shall deliver to the Borrower and the Agent certification as to exemption from, or reduction in, deduction or withholding of any United States federal income taxes as required by Section 8.04. Notwithstanding the foregoing, any Conduit Lender may assign at any time to its designating Bank hereunder without the consent of the Borrower or the Agent any or all of the Loans it may have funded hereunder and pursuant to its designation agreement and without regard to the limitations set forth in the first sentence of this Section 10.06(c).

(d) Any Bank Party may at any time assign all or any portion of its rights under this Agreement and the other Financing Documents to a Federal Reserve Bank. No such assignment shall release the transferor Bank Party from its obligations hereunder. In the case of any Bank Party that is a fund that invests in bank loans, such Bank Party may, without the consent of the Borrower or the Agent, assign or pledge all or any portion of its rights under this Agreement, including the Loans and Notes or any other instrument evidencing its rights as a Bank Party under this Agreement, to any holder of, trustee for, or any other representative of holders of, obligations owed or securities issued, by such fund, as security for such obligations or securities; provided that unless and until such holder, trustee or representative actually becomes a Bank Party in compliance with the other provisions of this Section 10.06, (i) no such pledge shall release the pledging Bank Party from any of its obligations under the Financing Documents and (ii) such holder, trustee or representative shall not be entitled to exercise any of the rights of a Bank Party under the Financing Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.

(e) Each of the Borrower, the Agent and each Bank hereby confirms that it will not institute against a Conduit Lender or join any other Person in instituting against a Conduit Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Conduit Lender; provided, however, that each Bank designating any Conduit Lender hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage or expense arising out of its inability to institute such a proceeding against such Conduit Lender during such period of forbearance.

(f) The Agent shall maintain at its address referred to in Section 10.01, a copy of each Assignment and Assumption delivered to and accepted by it and a register for the recordation of the names and addresses of the Bank Parties, the Revolving Credit Loan Commitments of, the amount of the Revolving Letter of Credit issued by, the principal amount of the Reimbursement Obligations owing to, and the principal amount of the Loans owing to, each Bank Party from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Bank Parties may treat each Person whose name is recorded in the Register as a Bank Party hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Bank Party at any reasonable time and from time to time upon reasonable prior notice.

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(g) Any Third Party Fronting Bank may at any time assign to one or more banks or other institutions (each, an “Assignee”) meeting the definition of a “Third Party Fronting Bank” contained herein, all of its rights and obligations under this Agreement and the other Financing Documents, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption in substantially the form of Exhibit C-3 hereto executed by such Assignee and such transferor Third Party Fronting Bank, with (and subject to) the subscribed consent of the Agent and the Borrower (which shall not be unreasonably withheld or delayed); provided that under no circumstances may the Borrower or any of its Affiliates be an “Assignee” hereunder. Upon execution and delivery of such instrument and a Revolving Fronting Bank Agreement and payment by such Assignee to such transferor Third Party Fronting Bank of an amount equal to the purchase price agreed between such transferor Third Party Fronting Bank and such Assignee, such Assignee shall be a Revolving Fronting Bank party to this Agreement and shall have all the rights and obligations of a Revolving Fronting Bank as set forth in such instrument of assumption, and the transferor Third Party Fronting Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. In connection with any such assignment, the transferor Third Party Fronting Bank or Assignee shall pay to the Agent an administrative fee for processing such assignment in the amount of $3,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Agent certification as to exemption from, or reduction in, deduction or withholding of any United States federal income taxes as required by Section 8.04.

Section 10.07 No Margin Stock.

Each of the Bank Parties represents to the Agent and each of the other Bank Parties that it in good faith is not relying upon any “margin stock” (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement.

Section 10.08 Governing Law; Submission to Jurisdiction.

This Agreement and the other Financing Documents shall be governed by and construed in accordance with the laws of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement and the other Financing Documents or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.

Section 10.09 Release of Collateral.

Upon the sale, lease, transfer or other disposition of any item of Collateral of any Obligor (including, without limitation, as result of the sale, in accordance with the terms of the Financing Documents, of any Obligor that owns such Collateral) in accordance with the terms of the Financing Documents, the Agent will, at the Borrower’s expense, execute and deliver to such

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Obligor such documents as such Obligor may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Collateral Documents in accordance with the terms of the Financing Documents.

Section 10.10 Counterparts; Integration; Effectiveness.

This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement and the other Financing Documents constitute the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective upon the Amendment and Restatement Effective Date.

Section 10.11 Confidentiality.

The Agent and each Bank Party agrees to keep confidential all non-public information provided to it by the Borrower pursuant to this Agreement that is designated by the Borrower as confidential; provided that nothing herein shall prevent the Agent or any Bank Party from disclosing any such information (a) to the Agent, any other Bank Party or any affiliate of any Bank Party; (b) to any (i) actual or prospective transferee or (ii) Derivatives Obligations counterparty (or such contractual counterparty’s professional advisor), in each case that agrees to comply with the provisions of this Section 10.11; (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates; (d) upon the request or demand of any governmental authority; (e) in response to any order of any court or other governmental authority or as may otherwise be required pursuant to any requirement of law; (f) if required to do so in connection with any litigation or similar proceeding; (g) that has been publicly disclosed; (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Bank Party’s investment portfolio in connection with ratings issued with respect to such Bank Party; (i) to any direct or indirect contractual counterparty in any swap, hedge or similar agreement (or to any such contractual counterparty’s professional advisor), so long as such contractual counterparty (or such professional advisor) agrees to be bound by the provisions of this Section 10.11; or, in connection with the exercise of any remedy hereunder or under any other Financing Documents. Notwithstanding any other provision in this Agreement, the Borrower, the Agent, each Third Party Fronting Bank and each Bank Party hereby agree that each of the Borrower, the Agent, each Third Party Fronting Bank and each Bank Party (and each of the officers, directors, employees, accountants, attorneys and other advisors of the Agent, each Third Party Fronting Bank and each Bank Party) may disclose to any and all persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of the transaction and all materials of any kind (including opinions and other tax analyses) that are provided to each of them relating to such U.S. tax treatment and U.S. tax structure.

Section 10.12 WAIVER OF JURY TRIAL.

EACH OF THE BORROWER, THE AGENT, THE COLLATERAL AGENT AND THE BANK PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING

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TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

Section 10.13 Severability; Modification to Conform to Law.

It is the intention of the parties that this Agreement be enforceable to the fullest extent permissible under applicable law, but that the unenforceability (or modification to conform to such law) of any provision or provisions hereof shall not render unenforceable, or impair, the remainder hereof. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, this Agreement shall, as to such jurisdiction, be deemed amended to modify or delete, as necessary, the offending provision or provisions and to alter the bounds thereof in order to render it or them valid and enforceable to the maximum extent permitted by applicable law, without in any manner affecting the validity or enforceability of such provision or provisions in any other jurisdiction or the remaining provisions hereof in any jurisdiction.

Section 10.14 Judgment Currency.

If for the purposes of enforcing the obligations of the Borrower hereunder it is necessary to convert a sum due from such Person in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent, the Collateral Agent and the Bank Parties could purchase Dollars with such currency at or about 11:00 A.M. (New York City time) on the Domestic Business Day preceding that on which final judgment is given. The obligations in respect of any sum due to the Agent, the Collateral Agent and the Bank Parties hereunder shall, notwithstanding any adjudication expressed in a currency other than Dollars, be discharged only to the extent that on the Domestic Business Day following receipt by the Agent, the Collateral Agent and the Bank Parties of any sum adjudged to be so due in such other currency the Agent, the Collateral Agent and the Bank Parties may in accordance with normal banking procedures purchase Dollars with such other currency; if the amount of Dollars so purchased is less than the sum originally due to the Agent, the Collateral Agent and the Bank Parties in Dollars, the Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such adjudication, to indemnify the Agent, the Collateral Agent and the Bank Parties against such loss, and if the amount of Dollars so purchased exceeds the sum originally due to the Agent, the Collateral Agent and the Bank Parties, it shall remit such excess to the Borrower.

Section 10.15 Revolving Fronting Banks.

(a) Each (i) Third Party Fronting Bank or (ii) Revolving Credit Loan Bank who after the Effective Date agrees to become a Revolving Fronting Bank hereunder, shall execute and deliver to the Agent a Revolving Fronting Bank Agreement in substantially the form of Exhibit D hereto prior to issuing any letters of credit at the request or for the benefit of the Borrower. Upon execution and delivery by a Third Party Fronting Bank or such Revolving Credit Loan Bank to the Agent of a Revolving Fronting Bank Agreement, such Third Party Fronting Bank or such Revolving Credit Loan Bank, as the case may be, shall become a party to this Agreement and shall have all the rights and obligations of a Revolving

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Fronting Bank as set forth herein. If the Third Party Fronting Bank or such Revolving Credit Loan Bank is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Agent certification as to exemption from, or reduction in, deduction or withholding of any United States federal income taxes as required by Section 8.04.

(b) Any Revolving Fronting Bank (including any Third Party Fronting Bank) may be released from its obligations hereunder as a Revolving Fronting Bank upon (x) the mutual agreement of such Revolving Fronting Bank and the Borrower and (y) notice to the Agent. With respect to any Revolving Fronting Bank who is not a Third Party Fronting Bank, nothing in this Section 10.05(b) shall release such Revolving Fronting Bank from its obligations hereunder as a Revolving Credit Loan Bank.

Section 10.16 Replacement of Banks.

If (i) any Bank or any participant of such Bank requests compensation under Section 8.03, or (ii) if the Borrower is required to pay any additional amount to any Bank or any participant of such Bank or any governmental authority for the account of any Bank or any participant of such Bank pursuant to Section 8.04, or (iii) if such Bank has failed to consent to any amendment, waiver or consent hereunder requiring the consent of all Banks or all Banks directly affected thereby as to which the Required Banks or the majority of Banks directly affected thereby have given their consent (each, a “Non-Consenting Bank”) or if any other circumstance exists hereunder that gives the Borrower the right to replace a Bank as a party hereto, then the Borrower may, at its sole expense and effort, upon notice to such Bank and the Agent, require such Bank to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights and obligations under this Agreement and the related Financing Documents to an assignee that shall assume such obligations (which assignee may be another Bank, if a Bank accepts such assignment), provided that:

(a) the Borrower shall have paid to the Agent the assignment fee specified in Section 10.06(c);

(b) such Bank shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Financing Documents (including any amounts under Section 2.12) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

(c) in the case of any such assignment resulting from a claim for compensation under Section 8.03 or payments required to be made pursuant to Section 8.04, such assignment will result in a reduction in such compensation or payments thereafter; and

(d) such assignment does not conflict with applicable laws or guidelines, directed duties or requests of, or agreements with, any governmental authority (whether or not having the force of law).

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A Bank shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Bank or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. If the Borrower elects to exercise its rights with respect to a Non-Consenting Bank pursuant to clause (iii) above, then it must exercise such rights with respect to all but not less than all such Non-Consenting Banks. Each Bank agrees that, if it becomes a Non-Consenting Bank, it shall execute and deliver to the Agent an Assignment an Assumption to evidence such sale and purchase and shall deliver to the Agent any Note (if the assigning Bank’s Loans are evidenced by Notes) subject to such Assignment and Assumption; provided, however, that the failure of any Non-Consenting Bank to execute an Assignment and Assumption shall not render such sale and purchase (and the corresponding assignment) invalid and such assignment shall be recorded in the Register.

[SIGNATURE PAGES IMMEDIATELY FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

THE AES CORPORATION, as Borrower
By:
Title:
Address:	4300 Wilson Boulevard
	Arlington, VA 222093
Fax:	(703) 528-4510

AES Fourth Amended and Restated Credit Agreement

SUBSIDIARY GUARANTOR:

AES HAWAII MANAGEMENT COMPANY, INC., as Subsidiary Guarantor

By:

Title:

Address:

Fax:

AES NEW YORK FUNDING, L.L.C., as Subsidiary Guarantor

By:

Title:

Address:

Fax:

AES OKLAHOMA HOLDINGS, L.L.C., as Subsidiary guarantor

By:

Title:

Address:

Fax:

AES WARRIOR RUN FUNDING, L.L.C., as Subsidiary Guarantor

By:

Title:

Address:

Fax:

AES Fourth Amended and Restated Credit Agreement

BANKS:

[Please Type or Print Name of Bank]

By

AES Fourth Amended and Restated Credit Agreement

AGENTS:

CITICORP USA, INC., as Agent
By:
Title:
Address:	388 Greenwich Street, 21st Floor
	New York, NY 10013
Fax:	(212) 816-8098
Attention:	Stuart Glen
Email:	oploanswebadmin@citigroup.com
CITIBANK N.A., as Collateral Agent
By:
Title:
Address:	388 Greenwich Street, 21st Floor
	New York, NY 10013
Fax:	(212) 816-8098
Attention:	Stuart Glen

AES Fourth Amended and Restated Credit Agreement

Exhibit 10.1.A

Appendix I

Revolving Credit Loan Facility

Name of Revolving Credit Loan Bank	Revolving Credit Loan Commitment
Bank of America, N.A.	$	60,000,000
Citicorp USA, Inc.		60,000,000
Credit Suisse, Cayman Islands Branch		60,000,000
Deutsche Bank Trust Company Americas		60,000,000
JPMorgan Chase Bank, N.A.		60,000,000
Lehman Commercial Paper Inc.		60,000,000
Union Bank of California, N.A.		40,000,000
UBS AG, Stamford Branch		40,000,000
Barclays Bank PLC		35,000,000
CALYON New York Branch		35,000,000
Morgan Stanley Bank		35,000,000
Société Générale - New York Branch		35,000,000
Goldman Sachs Credit Partners L.P.		30,000,000
ABN Amro Bank N.V.		25,000,000
BNP Paribas		25,000,000
Merrill Lynch Capital Corporation		25,000,000
Australia & New Zealand Banking Group		20,000,000
United Overseas Bank Ltd.		20,000,000
WestLB AG, New York Branch		15,000,000
Commerzbank AG, New York and Grand CA		10,000,000
Total	$	750,000,000

Exhibit 10.1.B

APPENDIX II to the

Third Amended and Restated

Credit and Reimbursement Agreement

TERM LOAN FACILITY

As per the Register maintained by the Agent pursuant to Section 10.06(f) of the Third Amended and Restated Credit and Reimbursement Agreement.

1

Exhibit 10.1.C

Appendix III to the Third Amended and Restated Credit and Reimbursement Agreement

Beneficiary	Letter of Credit Number	Fronting Expiry	Type of Letter of Credit	Name of Issuing Bank	Amount
Eastern (DSR) $36,326,900	Y032406	07/26/04	Financial	UBS AG	36,326,900.00
Kelanitissa	3039084	03/24/04	Financial	B of A, Los Angeles	900,000.00
WAPDA	30034738	02/28/04	Performance	Citibank NY	12,034,365.13
Constellation Power Source Inc.	306S234686	01/01/05	Performance	UBOC, LA	23,200,000.00
PSEG Energy Resources & Trade LLC	306S234688	01/18/05	Performance	UBOC, LA	3,500,000.00
PPL Energy Plus LLC	306S234687	04/30/04	Performance	UBOC, LA	100,000.00
Coral Energy Holding L.P.	306S234734	01/31/05	Performance	UBOC, LA	3,000,000.00
Morgan Stanley Capital Group	306S235411	12/31/05	Performance	UBOC, LA	3,725,000.00
The Potomac Edison Company	30035330	06/15/04	Performance	Citibank NY	577,500.00
Elexon	5134047511	03/15/05	Performance	Citibank NY	2,686,364.94
Total Face Amount of Revolving Letters of Credit Outstanding					86,050,130.07

Exhibit 10.1.D

SCHEDULE I

PLEDGOR: AES CORP.

Legal Name	Jurisdiction of Incorporation	Types of Shares	Authorized Shares	Outstanding Shares	Percentage Owned by AES	Certificate No.	% Pledged
AES Alamitos Development, Inc.	Delaware	Common	10	10	100	1	100
AES Argentina, Inc.	Delaware	Common	10	10	100	3	100
AES Atlantis, Inc.	Delaware	Common	10	10	100	2	100
AES Barka Services, Inc.	Delaware	Common	200	10	100	2	100
AES CAESS Distribution, Inc.	Delaware	Common	10	10	100	1	100
AES California Management Co., Inc.	Delaware	Common	10	10	100	3	100
AES Canal Power Services, Inc.	Delaware	Common	10	10	100	1	100
AES Cemig Holdings, Inc.	Delaware	Common	10	10	100	2	100

1

PLEDGOR: AES CORP.

Legal Name	Jurisdiction of Incorporation	Types of Shares	Authorized Shares	Outstanding Shares	Percentage Owned by AES	Certificate No.	% Pledged
AES Central American Management Services, Inc.	Delaware	Common	10	10	100	1	100
AES Central Valley, L.L.C.	Delaware	Units	1,000	10	100	1	100
AES Chaparron I, Ltd.	Cayman	Ordinary	50,000	1,000	100	2, 3	65
AES Columbia Power, L.L.C.	Delaware	Units	1,000	10	100	1	100
AES Connecticut Management, L.L.C.	Delaware	Units	1,000	10	100	1	100
AES Ecotek Holdings, L.L.C.	Delaware	Units	1,000	10	100	1	100
AES EDC Funding II, L.L.C.	Delaware	Units	1,000	10	100	2	100
AES EEO Distribution, Inc.	Delaware	Common	10	10	100	1	100
AES El Faro Generation, Inc.	Delaware	Common	110	110	100	2	100
AES Engineering, Ltd.	Cayman	Ordinary	50,000	1,000	100	4, 5	65
AES Georgia Gas, L.L.C.	Delaware	Units	1,000	10	100	1	65
AES GEH Holdings,. L.L.C.	Delaware	Units	N/A	10	100	1	65

2

PLEDGOR: AES CORP.

Legal Name	Jurisdiction of Incorporation	Types of Shares	Authorized Shares	Outstanding Shares	Percentage Owned by AES	Certificate No.	% Pledged
AES GEH, Inc.	Delaware	Units	N/A	10	100	1	65
AES Granbury, L.L.C.	Delaware	Units	N/A	10	100	2	100
AES Hawaii Management Company, Inc.	Delaware	Common	10	10	100	4	100
AES International Holdings, Ltd.	British Virgin Islands	Common	50,000	50,000	100	2, 3	65
AES Ironwood, Inc.	Delaware	Common	10	10	100	3	100
AES Kalaeloa Venture, L.L.C.	Delaware	Units	1,000	10	100	1	100
AES Keystone, L.L.C.	Delaware	Units	N/A	100	100	1	100
AES King Harbor, Inc.	Delaware	Common	10	10	100	1	100
AES Londonderry Holdings, L.L.C.	Delaware	Units	N/A	10	100	1	100
AES New York Funding, L.L.C.	Delaware	Units	N/A	10	100	1	100
AES Odyssey, L.L.C.	Delaware	Units	1,000	10	100	1	100
AES Oklahoma Holdings, L.L.C.	Delaware	Units	1,000	10	100	1	100

3

PLEDGOR: AES CORP.

Legal Name	Jurisdiction of Incorporation	Types of Shares	Authorized Shares	Outstanding Shares	Percentage Owned by AES	Certificate No.	% Pledged
AES Red Oak, Inc.	Delaware	Common	10	10	100	1	100
AES Rio Diamante, Inc.	Delaware	Common	10	10	100	1	100
AES Riverside Holdings, L.L.C.	Delaware	Common	1,000	100	100	4	100
AES Sosa, L.L.C.	Delaware	Units	10	10	100	1	65
AES Southland Funding, L.L.C.	Delaware	Units	N/A	10	100	1	100
AES Stonehaven Holding, Inc.	Delaware	Common	10	10	100	3	100
AES Teal Holding, Inc.	Delaware	Common	10	10	100	1	100
AES Texas Funding III, L.L.C.	Delaware	Units	1,000	10	100	3	100
AES Warrior Run Funding, L.L.C.	Delaware	Units	N/A	10	100	1	100
Cavanal Minerals, Inc.	Delaware	Common	10	10	100	2	100
IPALCO Enterprises, Inc.	Indiana	Common	290,000,000	89,685,177	100	AES-1	100
Mountainview Holding Company, L.L.C.	Delaware	Units	1,000	10	100	1	100

4

PLEDGOR: AES CORP.

Legal Name	Jurisdiction of Incorporation	Types of Shares	Authorized Shares	Outstanding Shares	Percentage Owned by AES	Certificate No.	% Pledged
Mountainview Power Development Company L.L.C	Delaware	Units	1,000	10	100	5	100

5

PLEDGOR: AES INTERNATIONAL HOLDINGS II, LTD.

Legal Name	Jurisdiction of Incorporation	Types of Shares	Authorized Shares	Outstanding Shares	Percentage Owned by AES	Certificate No.	% Pledged
AES El Salvador, Ltd.	Cayman	Ordinary	50,000	1,000	100	3, 4	65
AES South American Holdings, Ltd.	Cayman	Nominal	50,000	5,030	100	3, 4	65

6

Exhibit 10.1.E

Schedule II to the

Amended and Restated Credit,

Reimbursement and Exchange Agreement

ASSIGNED AGREEMENTS

Grantor	Assigned Agreement
The AES Corporation	Tax Sharing Agreement dated as of June 23, 1987 (as amended, supplemented or modified through the date hereof) among The AES Corporation (formerly known as Applied Energy Services, Inc.), AES Oklahoma Management Co., Inc., AES Shady Point, Inc., Combustion Engineering, Inc., and Union Bank of California N.A. (formerly known as Union Bank), as successor in interest to Security Pacific National Bank, as agent.
The AES Corporation	Tax Sharing Agreement dated as of March 20, 1990 (as amended, supplemented or modified through the date hereof) among The AES Corporation (formerly known as Applied Energy Services, Inc.), AES Hawaii Management Company, Inc., AES Hawaii, Inc. (formerly known as AES Barbers Point, Inc.), and Union Bank of California N.A. (formerly known as Union Bank), as successor in interest to Security Pacific National Bank, as agent.
The AES Corporation	Tax Sharing Agreement dated as of March 28, 2001 among The AES Corporation, IPALCO Enterprises, Inc., and each corporation or other entity listed therein.

Exhibit 10.1.F

SCHEDULE III

AES CORP.

Non-Pledged Subsidiary	Jurisdiction of Incorporation	Reason for Exclusion
AES (India) Private Limited	India	Pledge prohibited
AES Americas, Inc.	Delaware	< $3 million
AES Andes Energy, Inc.	Delaware	< $3 million
AES Andes, Inc.	Delaware	< $3 million
AES Angel Falls, L.L.C.	Delaware	< $3 million
AES Appalachia, L.L.C.	Delaware	< $3 million
AES Aquila, Inc.	Delaware	< $3 million
AES Atlantic, Inc.	Delaware	< $3 million
AES Aurora, Inc.	Delaware	< $3 million
AES Baja Norte I, Inc.	Delaware	< $3 million
AES Baja Norte II, Inc.	Delaware	< $3 million
AES Big Sky, L.L.C.	Delaware	< $3 million
AES Bolivar, L.L.C.	Delaware	< $3 million
AES Brasil Energia, Inc.	Delaware	< $3 million
AES Brazil, Inc.	Delaware	< $3 million
AES BVI Holdings I, Inc.	Delaware	< $3 million
AES BVI Holdings II, Inc.	Delaware	< $3 million
AES Calgary, Inc.	Delaware	< $3 million
AES Canada, Inc.	Delaware	< $3 million
AES Caribbean Services, Inc.	Delaware	< $3 million
AES Cartagena Holdings BV	Netherlands	Pledge prohibited (New holding company for Cartagena)

1

Non-Pledged Subsidiary	Jurisdiction of Incorporation	Reason for Exclusion
AES Central America Power Ventures, Ltd.	Cayman	< $3 million
AES Chesapeake, Inc.	Delaware	< $3 million
AES Colombia I, Inc.	Delaware	Mamonal bankrupt and Termocandelaria sold
AES Communications Latin America, Inc.	Delaware	< $3 million
AES Coral, Inc.	Delaware	< $3 million
AES Desert Power, L.L.C.	Delaware	< $3 million
AES Development de Argentina S.A.	Argentina	< $3 million
AES Direct, Inc.	Delaware	< $3 million
AES Dominican Holdings, Inc.	Delaware	< $3 million
AES Drax Financing II, Inc.	Delaware	< $3 million
AES Drax Financing, Inc.	Delaware	< $3 million
AES Drax IBC Limited	Guernsey	< $3 million
AES Edelap Funding Corporation, L.L.C.	Delaware	< $3 million
AES El Dorado, Inc.	Delaware	< $3 million
AES Endeavor, Inc.	Delaware	< $3 million
AES Energy Mexico. Inc.	Delaware	< $3 million
AES Enterprise, Inc.	Delaware	< $3 million
AES Finance and Development, Inc.	Delaware	< $3 million
AES Generation Holdings, LLC	Delaware	< $3 million
AES Georgia Gas GP, L.L.C.	Delaware	< $3 million
AES Global Insurance Company	Vermont	Pledge Prohibited
AES Global Power Finance, Inc.	Delaware	< $3 million
AES GPH Holdings, Inc.	Delaware	< S3 million
AES Great Plains, Inc.	Delaware	< $3 million
AES Greystone Holdings, L.L.C.	Delaware	< $3 million
AES Hoytdale, L.L.C.	Delaware	< $3 million
AES Huntington Beach Development, Inc.	Delaware	< $3 million

2

Non-Pledged Subsidiary	Jurisdiction of Incorporation	Reason for Exclusion
AES India, L.L.C.	Delaware	< $3 million
AES Indiana Holdings, L.L.C.	Delaware	< $3 million
AES International Holdings II, Ltd.	British Virgin Islands	Pledge prohibited
AES Intrepid, L.L.C.	Delaware	< $3 million
AES Intricity, Inc.	New Jersey	< $3 million
AES Japan, Inc.	Delaware	< $3 million
AES Korea, Inc.	Delaware	< $3 million
AES Lake Worth Holdings, L.L.C.	Delaware	< $3 million
AES Long Island Holdings, L.L.C.	Delaware	< $3 million
AES Mexico Development, S. de R.L. de C.V.	Mexico	< $3 million
AES Mohave Holdings, L.L.C.	Delaware	< $3 million
AES Mongol Services, Inc.	Delaware	< $3 million
AES Native Hollow, L.L.C.	Delaware	< $3 million
AES New Hampshire Biomass, Inc.	New Hampshire	Pledge prohibited
AES Oasis Energy, Inc.	Delaware	< $3 million
AES Oasis Finco, Inc.	Delaware	Pledge prohibited
AES Oasis Holdco, Inc.	Delaware	Pledge prohibited
AES Oasis Private Ltd.	Singapore	< $3 million
AES Oman Holdings, Ltd	Cayman	Pledge prohibited (New holding company for Barka)
AES Orient, Inc.	Delaware	< $3 million
AES Orissa Distribution Private Limited	India	< $3 million
AES Pacific, Inc.	Delaware	< $3 million
AES Pakistan (Pvt) Ltd.	Pakistan	< $3 million
AES Pakistan Operations, Ltd.	Delaware	< $3 million
AES Parana Generation Holdings, Ltd.	Cayman	< $3 million
AES Parana II Limited Partnership	Cayman	< $3 million
AES Pecan Grove II, L.L.C.	Delaware	< $3 million

3

Non-Pledged Subsidiary	Jurisdiction of Incorporation	Reason for Exclusion
AES Pecan Grove, L.L.C.	Delaware	< $3 million
AES Petty’s Island, L.L.C.	Delaware	< $3 million
AES Phoenix Ltd.	Hungary	< $3 million
AES PJM, Inc.	Delaware	< $3 million
AES Power, Inc.	Delaware	< $3 million
AES Puerto Rico Services, Inc.	Delaware	< $3 million
AES Pumped Storage Arkansas, L.L.C.	Delaware	< $3 million
AES Redfish, Inc.	Delaware	< $3 million
AES Sao Paulo, Inc.	Delaware	< $3 million
AES Services, Inc.	Delaware	< $3 million
AES Silk Road Cayman Ltd.	Cayman	Pledge prohibited (New holding company for Telasi)
AES Silk Road, Inc.	Delaware	< $3 million
AES Songas Holdings, Ltd.	Cayman	Pledge prohibited (New holding company for Songas)
AES South City, L.L.C.	Delaware	< $3 million
AES Telecom Americas, Inc.	Delaware	< $3 million
AES Taiwan, Inc.	Delaware	< $3 million
AES Telecom Development, L.L.C.	Delaware	< $3 million
AES Tiete Holdings, Ltd.	Cayman	Pledge prohibited
AES Transgas, LLC	Delaware	< $3 million
AES Transpower Australia Pty Ltd.	Australia	< $3 million
AES Transpower Private Ltd.	Singapore	< $3 million
AES Transpower, Inc.	Delaware	Pledge prohibited
AES UK Power Holdings Limited	United Kingdom	< $3 million
AES UK Power, L.L.C.	Delaware	< $3 million
AES-Zemplen Ltd.	Hungary	< $3 million
GeoUtilities, Inc.	Delaware	< $3 million

4

Non-Pledged Subsidiary	Jurisdiction of Incorporation	Reason for Exclusion
La Plata II, Inc.	Delaware	Already pledged; no secondary pledges permitted
La Plata III, Inc.	Delaware	Already pledged; no secondary pledges permitted
LW Generation Corporation	Delaware	< $3 million
Star Natural Gas Company	Delaware	< $3 million
AES Ecotek International Holdings, Inc.	Cayman	< $3 million
Thermo Fuels Company, Inc.	California	< $3 million
ThinkAES, Inc.	Delaware	< $3 million
Totem Gas Storage Company, LLC	Colorado	Pledge prohibited
Totem Power, LLC	Colorado	< $3 million
Transmission Management Services, L.L.C.	Delaware	< $3 million
West County Generation, LLC	Delaware	< $3 million

5

AES INTERNATIONAL HOLDINGS II, LTD.

Non-Pledged Subsidiary	Jurisdiction of Incorporation	Reason for Exclusion
AES Argentina Operations, Ltd.	Cayman	Already pledged; no secondary pledge permitted
AES Bandeirante, Ltd.	Cayman	< $3 million
AES Caracoles I	Cayman	< $3 million
AES Caracoles II	Cayman	< $3 million
AES Cayman Guaiba, Ltd.	Cayman	Pledge prohibited
AES Cayman Pampas, Ltd.	Cayman	< $3 million
AES Communications, Ltd.	Cayman	< $3 million
AES Costa Rica Hydroelectrica, Ltd.	Cayman	< $3 million
AES Infoenergy Ltda	Brazil	< $3 million
AES Intercon II, Ltd.	Cayman	< $3 million
AES Intercon, Ltd.	Cayman	< $3 million
AES Interenergy, Ltd.	Cayman	< $3 million
AES Merida Management Services S. de R.L. de C.V.	Mexico	< $3 million
AES Mid East Holdings 3, Ltd.	Cayman	< $3 million
AES Network	Cayman	< $3 million
AES Pak Gen Holdings, Inc.	Mauritius	Pledge prohibited
AES Pak Holdings, Ltd.	British Virgin Islands	< $3 million
AES Pakistan Holdings	Mauritius	Pledge, prohibited
AES Parana IHC, Ltd.	Cayman	< $3 million
AES Pern S.R.L.	Peru	< $3 million
AES Santa Ana, Ltd.	Cayman	< $3 million
AES Santa Branca, Ltd.	Cayman	< $3 million
AES Servicios Electricos Limitada de Capital Variable	El Salvador	< $3 million
AES South Point, Ltd.	Cayman	< $3 million

6

Non-Pledged Subsidiary	Jurisdiction of Incorporation	Reason for Exclusion
AES Telecomunicaciones Salvadorenas Ltda de CV	EI Salvador	< $3 million
AES Transpower, Inc.	Mauritius	Pledge prohibited
AES Yucatan S.R.L. de C.V.	Mexico	< $3 million
CCS Telecarrier	Cayman	< $3 million
Delta Capex Investments	Cayman	< $3 million
Wildwood Funding, Ltd.	Cayman	< $3 million

7

Exhibit 10.1.G

SCHEDULE IV: EXCLUDED AES ENTITIES

BRAZIL

AES South American Holdings, Ltd.

AES Americas Participacoes, Ltda.

AES Bandierante Ltd.

AES Bandierante Empreendimentos, Ltda.

AES Brazilian Holdings, Ltd.

AES Bridge I, Ltd.

AES Bridge II, Ltd.

AES Cayman Guaiba, Ltd.

AES Cayman I

AES Cayman II

AES Cayman Pampas, Ltd.

AES Cemig Empreendimentos II, Ltd.

AES Cemig Empreendimentos, Inc.

AES Communications Rio de Janeiro S.A.

AES Communications Latin America, Inc.

AES Com Sul Ltda.

AES Coral Reef, LLC

AES Edeersa, Ltd.

AES Eletrolight, Ltd.

AES Elpa S.A.

AES Energia, Ltda.

AES Energia I, Ltd.

AES Energia II, Ltd.

AES Florestal Ltda.

AES Forca Ltd.

AES Forca II, Ltd.

AES Forca Empreendimentos Ltda.

AES Guaiba II Empreendimentos Ltda.

AES Holdings Brasil, Ltda.

AES IHB Cayman, Ltd.

AES Infoenergy Ltda.

AES Intercon, Ltd.

AES Intercon II, Ltd.

AES Interenergy, Ltd.

AES International Holdings III, Ltd.

AES Minas PCH Ltda.

AES Network

AES Santa Branca I, Ltd.

AES Santa Branca II, Ltd.

AES Sul, SA

AES Tiete Holdings Ltd.

1 of 4

AES Tiete Holdings II, Ltd.

AES Tiete Empreendimentos S.A.

AES Tiete Participacoes S.A.

AES Trade I, Ltd.

AES Trade II, Ltd.

AES Trading Ltda.

AES Transgas Empreendimentos S.A.

AES Transgas I, Ltd.

AES Transgas II, Ltd.

AES Treasure Cove, Ltd.

AES Uruguaiana Empreedimentos S.A.

AES Uruguaiana, Inc.

Asteroid I, Ltd.

Brasiliana Energia S.A.

Cayman Energy Traders

Companhia de Gas de Minas Gerais, S.A.

Companhia Energetica de Minas Gerais, S.A.

Compania de Geracao de Energia Eletrica Tiete, S.A.

AES Tiete S.A.

Eletroger Ltda.

Eletronet S.A.

Eletropaulo Comercial Exportadora, Ltda.

Eletropaulo Metropolitana Eletricidade de Sao Paulo S.A.

Eletropaulo Telecomunicacoes, Ltda.

Empresa de Infovias, S.A.

Energia Paulista Participacoes, S.A.

ENET Telecomunicacoes Ltda.

Logestic.com S.A.

Metropolitana Overseas II, Ltd.

Pleasantville Participacoes Ltda.

Southern Electric Brazil Participacoes, Ltda.

ARGENTINA

AES Alicura Holdings S.C.A.

AES Andes Energy, Inc.

AES Argentina Investments, Ltd.

AES Argentina Investments II, Ltd.

AES Argentina Operations, Ltd.

AES Argentina, Inc.

AES Asociados S.A.

AES Caracoles I

AES Caracoles II

AES Caracoles III, L.P.

AES Caracoles S.R.L.

2 of 4

AES Chaparron I, Ltd.

AES Chaparron II, Ltd.

AES Development de Argentina S.A.

AES Energy, Ltd.

AES Ocean Springs, Ltd.

AES Operadora S.A.

AES Parana Gas S.A.

AES Parana Holdings, Ltd.

AES Parana I Limited Partnership

AES Parana II Limited Partnership

AES Parana IHC, Ltd.

AES Parana Generation Holdings, Ltd.

AES Parana Operations S.R.L.

AES Parana Propiedades S.A.

AES Parana S.C.A.

AES Rio Diamate, Inc.

AES San Nicolas Holding Espana, S.L.

AES San Nicolas, Inc.

AES South Point, Ltd.

AESEBA S.A.

Asociados de Electricidad, S.A.

B.A. Services.com S.R.L.

Camille, Ltd.

Central Dique, S.A.

Central Termica San Nicolas S.A.

CMS Generation San Nicolas Company

Compania de Inversiones en Eletricidad, S.A.

Empresa Distribuidora de Energia Norte S.A.

Empresa Distribuidora de Energia Sur S.A.

Empresa Distribuidora La Plata, S.A.

Gasoducto GasAndes Argentina S.A.

Gener Argentina S.A.

AES Alicura, S.A.

Hidroelectrica Rio Juramento, S.A.

InterAndes, S.A.

Inversora AES Americas Holding Espana, S.L.

Inverorsa de San Nicolas S.A.

Inversora AES Americas, S.A.

La Plata II, Inc.

La Plata III, Inc.

La Plata Partners L.P.

Luz del Plata S.A.

AES Pampa Energy, S.A.

3 of 4

Shazia S.R.L.

TermoAndes S.A.

Wildwood Funding, Ltd.

Wildwood I, Ltd.

Wildwood II, Ltd.

4 of 4

Exhibit 10.1.H

SCHEDULE 5.15: EXISTING AGREEMENTS WITH AFFILIATES

None.

Exhibit 10.1.I

SCHEDULE V: QUALIFIED HOLDING COMPANIES

AES Alicura Holdings S.C.A.

AES Aramtermelo Holdings BV

AES Baltic Holdings BV

AES Barka Services 1 (Cayman) Ltd.

AES Barka Services 2 (Cayman) Ltd.

AES Bridge I Ltd.

AES Bridge II Ltd.

AES Cemig Empreendimentos, Inc.

AES Central American Mgmt Services, Inc.

AES Chaparron I, Ltd.

AES Chaparron II, Ltd.

AES Chigen Holdings Ltd.

AES Denmark GP Holding I ApS

AES Denmark GP Holding II ApS

AES Development de Argentina, S.A.

AES Electric Ltd.

AES Gas Holdco (Cayman) Ltd.

AES Global Power Holdings BV

AES International Holdings Ltd.

AES Isthmus Energy, S.A.

AES LNG Holding II, Ltd.

AES Medway Electric Ltd.

AES Nigeria Holdings Ltd.

AES Oasis Holdco (Cayman) Ltd.

AES Oman Holdings Ltd.

AES Panama Holding Ltd.

AES Qatar Holdings Ltd.

AES San Nichols Holding Espana S.L.

AES Silk Road Cayman Ltd.

AES Sirocco Holdings BV

AES Songas Holdings Ltd.

AES Summit Generation Ltd.

AES Tisza Holdings BV

AES UK Power Holdings Ltd.

Global Energy Holdings CV

Inversora AES Americas, S.A.

Inversora de San Nicolas S.A.

Inversora AES Americas Holding Espana, S.L.

Mercury Cayman Holdco, Ltd.

Exhibit 10.1.J

Schedule VI - Existing Debt

	Amount
Sr. Secured First Priority Notes due 2005	155,718,000
Sr. Secured Second Priority Notes due 2013	1,200,000,000
Sr. Secured Second Priority Notes due 2015	600,000,000
Senior Notes due June 2008	223,262,000
Senior Notes due June 2009	310,097,040
Senior Notes due June 2009	159,746,960
Senior Notes due September 2010	422,665,000
Senior Notes due January 2011	313,186,000
Senior Notes due February 2011 (£)*	160,809,856
Senior Notes due March 2014	500,000,000
Senior Subordinated Notes due August 2007	169,619,000
Senior Subordinated Notes due November 2007	218,949,000
Senior Subordinated Notes due November 2029	115,258,000
Junior Convertible Debentures due August 2005	142,134,000
Guarantees of Debt	155,503,000
Letters of Credit outside Revolving Credit Facility	18,750,000
Surety Bonds	3,682,870
Total Debt	4,869,380,726

* Exchange Rate of 1.7995 on March 9, 2003

Exhibit 10.1.K

SCHEDULE VII to the

Third Amended and Restated

Credit and Reimbursement Agreement

REVOLVING FRONTING BANKS

Citicorp USA, Inc.

Bank of America, N.A.

Deutsche Bank Trust Company Americas

Lehman Commercial Paper, Inc.

UBS AG, Stamford Branch

Union Bank of California, N.A.

Credit Lyonnais New York Branch

Société Générale – New York Branch

Exhibit 10.1.L

EXHIBIT A-1 to the

Third Amended and Restated Credit

and Reimbursement Agreement

FORM OF REVOLVING CREDIT LOAN NOTE

New York, New York                     , 2004

For value received, The AES Corporation, a Delaware corporation (the “Borrower”), promises to pay to                              (the “Bank”) or its registered assigns, for the account of its Applicable Lending Office (as defined in the Credit and Reimbursement Agreement referred to below), the unpaid principal amount of each Revolving Credit Loan (as defined in the Credit and Reimbursement Agreement referred to below) made by the Bank to the Borrower pursuant to the Credit and Reimbursement Agreement referred to below on the dates and in the amounts specified in the Credit and Reimbursement Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit and Reimbursement Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other same day funds at the place of payment specified in the Credit and Reimbursement Agreement.

All Revolving Credit Loans made by the Bank, the respective types thereof and all repayments of the principal thereof shall be recorded by the Bank and, if the Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make (or any error in making) any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit and Reimbursement Agreement.

This Revolving Credit Loan Note is one of the Notes referred to in the Third Amended and Restated Credit and Reimbursement Agreement dated as of March 17, 2004 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit and Reimbursement Agreement”) among the Borrower, the Subsidiary Guarantors party thereto, the Bank and certain other banks party thereto, Citicorp USA, Inc., as the Agent for the Bank Parties and Citibank, N.A. as the Collateral Agent for the Bank Parties. Terms defined in the Credit and Reimbursement Agreement are used herein with the same meanings. Reference is made to the Credit and Reimbursement Agreement for provisions for the guarantee hereof in certain circumstances, the prepayment hereof and the acceleration of the maturity hereof.

Revolving Credit Loan Note

This Revolving Credit Loan Note is assignable to one or more Persons as provided in the Credit and Reimbursement Agreement and the Borrower agrees to issue from time to time replacement Notes in the form hereof to facilitate such assignments.

The Obligations of the Borrower under this Revolving Credit Loan Note and the other Financing Documents, and the Obligations of the other Loan Parties under the Financing Documents, are secured by the Creditor Group Collateral as provided in the Financing Documents. The Obligations of the Borrower under this Revolving Credit Loan Note are also guaranteed by the Subsidiary Guarantors, as provided in the Subsidiary Guaranty in Article IX of the Credit and Reimbursement Agreement.

This Revolving Credit Loan Note shall be governed by, and construed in accordance with, the laws of the State of New York.

THE AES CORPORATION

By

Name:

Title:

Revolving Credit Loan Note

LOANS AND PAYMENTS OF PRINCIPAL

Date Amount of Loan Type of Loan Amount of Principal Repaid Notation Made By

Revolving Credit Loan Note

Exhibit 10.1.M

EXHIBIT A-2 to the

Third Amended and Restated Credit

and Reimbursement Agreement

FORM OF TERM LOAN NOTE

New York, New York                     , 2004

For value received, The AES Corporation, a Delaware corporation (the “Borrower”), promises to pay to                                  (the “Bank”) or its registered assigns, for the account of its Applicable Lending Office (as defined in the Credit and Reimbursement Agreement referred to below), the unpaid principal amount of the Term Loan (as defined in the Credit and Reimbursement Agreement referred to below) made by the Bank to the Borrower pursuant to the Credit and Reimbursement Agreement referred to below on the dates and in the amounts specified in the Credit and Reimbursement Agreement. The Borrower promises to pay interest on the unpaid principal amount of the Term Loan on the dates and at the rate or rates provided for in the Credit and Reimbursement Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other same day funds at the place of payment specified in the Credit and Reimbursement Agreement.

This Term Loan Note is one of the Notes referred to in the Third Amended and Restated Credit and Reimbursement Agreement dated as of March 17, 2004 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit and Reimbursement Agreement”) among the Borrower, the Subsidiary Guarantors party thereto, the Bank and certain other banks party thereto, Citicorp USA, Inc., as the Agent for the Bank Parties and Citibank, N.A., as the Collateral Agent for the Bank Parties. Terms defined in the Credit and Reimbursement Agreement are used herein with the same meanings. Reference is made to the Credit and Reimbursement Agreement for provisions for the guarantee hereof in certain circumstances, the prepayment hereof and the acceleration of the maturity hereof.

This Term Loan Note is assignable to one or more Persons as provided in the Credit and Reimbursement Agreement and the Borrower agrees to issue from time to time replacement Notes in the form hereof to facilitate such assignments.

The Obligations of the Borrower under this Term Loan Note and the other Financing Documents, and the Obligations of the other Loan Parties under the Financing Documents, are secured by the Creditor Group Collateral as provided in the Financing Documents. The Obligations of the Borrower under this Term Loan Note are guaranteed by the Subsidiary Guarantors, as provided in the Subsidiary Guaranty in Article IX of the Credit and Reimbursement Agreement.

Term Loan Note

This Term Loan Note shall be governed by, and construed in accordance with, the laws of the State of New York.

THE AES CORPORATION

By:

Name:

Title:

Term Loan Note

LOANS AND PAYMENTS OF PRINCIPAL

Date Amount of Loan Type of Loan Amount of Principal Repaid Notation Made By

Term Loan Note

Exhibit 10.1.N

EXHIBIT B-1

	March 17, 2004 To the Banks Listed on Schedule 1 hereto Ladies and Gentlemen:
	I am the Assistant General Counsel of The AES Corporation (the “Company”), a corporation organized and existing under the laws of the State of Delaware, and have acted as counsel for the Company, each of the Subsidiary Guarantors (as defined in the Credit Agreement referred to below) and AES International Holdings II, Ltd. in connection with (i) the Third Amended and Restated Credit and Reimbursement Agreement (the “Credit Agreement”) dated as of March 17, 2004 among AES, the Subsidiary Guarantors party thereto (the “Subsidiary Guarantors”), the banks party thereto (the “Bank Parties”), Citicorp USA, Inc., as Administrative Agent, and Citibank, N.A. as Collateral Agent for the Bank Parties and (ii) Amendment No. 2 to the Collateral Trust Agreement (as defined in the Credit Agreement, and together with the Credit Agreement, the “Documents”). The Company and the Subsidiary Guarantors are sometimes hereinafter referred to as the “Delaware Loan Parties” and each as a “Delaware Loan Party.” Terms in the Credit Agreement are used herein as therein defined. This opinion is being furnished to you pursuant to Section 3.01(c)(i) of the Credit Agreement. In rendering this opinion, I have examined, and relied on, subject to the assumptions and qualifications herein, executed counterparts of each of the Documents and such agreements, instruments and documents and have conducted such investigations of law as I have deemed necessary or appropriate as a basis for the opinions hereafter expressed. As to questions of fact material to this opinion, I have, when relevant facts were not independently established, relied upon certificates of appropriate public officials and officers and representatives of the Company and other appropriate persons, and upon the factual representations or statements made by these persons or in the Documents. In all such examinations, I have assumed, without independent verification the authenticity and completeness of documents purporting to be originals (whether examined in original, facsimile or copy form), the conformity to originals of documents purporting to be photostatic or facsimile copies of originals, and the genuineness of all signatures. I make no observations and give no opinion in relation to any contract, instrument or document other than the Documents (whether or not referred to in the Documents) nor have I made any enquiries concerning any party to the Documents, or other person or entity, other than the Company.
1001 North 19th Street Arlington, Virginia 22209 (703) 522-1315 Telecopier (703) 528-4510

This opinion is strictly limited to the matters stated in it and is not to be read as extending by implication to any other matter or any other contract, instrument or document executed in connection with the Documents or the transactions contemplated by them or otherwise.

On the basis of the foregoing, and having regard for such legal considerations as I deem relevant, I am of the opinion that:

(i) Each Delaware Loan Party is a corporation (or limited liability company, as applicable) duly incorporated (or formed, as applicable), validly existing and in good standing under the laws of Delaware and has all corporate or other organizational powers and, to my knowledge, all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted;

(ii) The execution, delivery and performance by each Delaware Loan Party of the Documents and the Notes to which it is a party are within such Delaware Loan Party’s corporate or other organizational powers, have been duly authorized by all necessary corporate or other organizational action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not (i) contravene, or constitute a default under, any provision of (1) the certificate of incorporation (or certificate of formation, as applicable) or by-laws (or other organizational documents, as applicable) of such Delaware Loan Party or (2) to my knowledge, (A) any law or regulation applicable to any Delaware Loan Party or (B) any judgment, injunction, order or decree binding upon any Delaware Loan Party or (C) any agreement or instrument evidencing or governing any Debt of any Delaware Loan Party in the amount of $25,000,000 or more (“Specified Debt”) or (ii) result in or require the creation or imposition of any lien or any asset of any Delaware Loan Party under any agreement or instrument evidencing or governing any Specified Debt; and

(iii) Except for Disclosed Matters, there is no action, suit, investigation of which the Company has notice, litigation or proceeding pending against, or to my knowledge threatened against, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could have a Material Adverse Effect, or which in any manner draws into question the legality, validity or enforceability of any Document.

I am a member of the Bar of the District of Columbia, however, this opinion relates solely to the General Corporation Law of the State of Delaware and the federal laws of the United States as at the date and time of its issue. I have made no investigation of, and neither express nor imply any opinion with respect to the laws of any state or jurisdiction

2

other than the General Corporation Law of the State of Delaware and the federal laws of the United States.

This opinion may be relied upon solely by each of the addressees hereto, and may not be relied upon by any other person, nor used, circulated, quoted or otherwise referred to for any other purpose, without my prior written consent, except that any Person that becomes a Bank Party in accordance with Section 10.06 of the Credit Agreement may rely upon this opinion as if it were specifically addressed and delivered to such Person on the date hereof.

Very truly yours,

/s/ Vincent W. Mathis

Vincent W. Mathis

Assistant General Counsel

3

Schedule 1

The Banks, Citicorp USA, Inc., as Administrative Agent and

Citibank, N.A., as Collateral Agent

c/o Citicorp USA, Inc., as Administrative Agent

388 Greenwich Street, 21st Floor

New York, NY 10013

Attention: Stuart Glen

Wilmington Trust Company, as Corporate Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

Bruce L. Bisson, as Individual Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

Exhibit 10.1.O

EXHIBIT B-2

	DAVIS POLK & WARDWELL
1300 I STREET, N.W.	450 LEXINGTON AVENUE	MESSETURM
WASHINGTON, D.C. 20005	NEW YORK, N.Y. 10017	60308 FRANKFURT AM MAIN
———	212 450 4000	———
1600 EL CAMINO REAL	FAX 212 450 3800	MARQUÉS DE LA ENSENADA, 2
MENLO PARK, CA 94025		28004 MADRID
———	WRITER’S DIRECT	———
99 GRESHAM STREET LONDON EC2V 7NG		1-6-1 ROPPONGI MINATO-KU, TOKYO 106-6033
———		———
15, AVENUE MATIGNON		3A CHATER ROAD
75008 PARIS		HONG KONG

March 17, 2004

To the Bank Parties

    and the Administrative Agent

    and the Collateral Agent referred to Below

c/o Citicorp USA, Inc. as Administrative Agent

388 Greenwich Street, 21^st Floor

New York, NY 10013

Wilmington Trust Company

    as Corporate Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

attn: Corporate Trust Division

Bruce L. Bisson

    as Individual Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Ladies and Gentlemen:

We have participated in the preparation of the Third Amended and Restated Credit and Reimbursement Agreement dated as of March 17, 2004 (the “Credit Agreement”) among The AES Corporation, a Delaware corporation (“AES”), the Subsidiary Guarantors party thereto (the “Subsidiary Guarantors”), the banks party thereto (the “Bank Parties”) and Citicorp USA, Inc., as Administrative Agent (in such capacity, the “Administrative Agent”), and Citibank, N.A. as Collateral Agent for the Bank Parties (in such capacity, the “Collateral Agent”). We have acted as special New York counsel for AES and its subsidiaries for the purpose of rendering this opinion pursuant to Section

To the Bank Parties     and the Administrative Agent     and the Collateral Agent referred to Below March 17, 2004

We have reviewed executed copies of:

(a) the Credit Agreement;

(b) the Notes issued on the date hereof (the “Notes”); and

(c) Amendment No. 2 dated as of March 17, 2004 to the Collateral Trust Agreement dated as of December 12, 2002 (as amended, the “Collateral Trust Agreement”) among AES, AES International Holdings II, Ltd. (“AES BVI II”), Wilmington Trust Company, as corporate trustee (the “Corporate Trustee”) and Bruce L. Bisson, as individual trustee (together with the Corporate Trustee, the “Collateral Trustees”).

The documents listed in items (a) through (c) above are sometimes hereinafter referred to as the “Credit Documents”. AES, the Subsidiary Guarantors and AES BVI II are sometimes hereinafter referred to collectively as the “Loan Parties” and each individually as a “Loan Party”.

We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records and certificates of public officials and officers of AES and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion.

Based on the foregoing, and subject to the assumptions and qualifications set forth below, we are of the opinion that:

1. The execution, delivery and performance by each Loan Party of each Credit Document to which it is a party require no action by or in respect of, or filing with, any governmental body, agency or official under United States federal or New York State law (other than filings and recordings to perfect security interests granted) and do not contravene, or constitute a default under, any provision of applicable United States federal or New York State law or regulation, in each case that in our experience is normally applicable to general business corporations in relation to transactions of the type contemplated by the Credit Documents.

2. Each Credit Document (other than the Notes) constitutes a valid and binding agreement of each Loan Party thereto and each Note, when duly executed and delivered in accordance with the terms of the Credit Agreement, will constitute a valid and binding obligation of AES, in each case enforceable against such Loan Party or AES in accordance with its terms.

2

To the Bank Parties     and the Administrative Agent     and the Collateral Agent referred to Below March 17, 2004

3. The Security Agreement dated as of December 12, 2002 (as amended, the “Security Agreement”) made by AES to the Collateral Trustees is effective to create, in favor of the Collateral Trustees for the benefit of the Secured Holders, as security for the Secured Obligations, a valid security interest (the “AES Security Interest”) in the right, title and interest of AES in that portion of the Collateral, as defined in the Security Agreement, described therein in which a security interest may be created pursuant to Article 9 of the Uniform Commercial Code as in effect in the State of New York on the date hereof (the “UCC”).

4. Assuming that the certificates evidencing the Pledged Equity and instruments constituting the Pledged Debt, in each case indorsed by an appropriate person in blank or accompanied by instruments of transfer or assignment in blank duly executed by an appropriate person, have been delivered on or prior to the date hereof to the Collateral Trustees, and have been continuously held by the Collateral Trustees since such delivery, in each case in the State of New York, (i) the AES Security Interest in the Pledged Equity and the Pledged Debt is perfected, and (ii) the Collateral Trustees have, for the benefit of the Secured Holders, control (within the meaning of Section 8-106 of the UCC) of such Pledged Equity and such Pledged Debt.

5. None of the Loan Parties is required to register as an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

The foregoing opinions are subject to the following qualifications:

(i) Our opinions in paragraphs 2 through 4 above are subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and equitable principles of general applicability.

(ii) We express no opinion as to the effect of fraudulent conveyance, fraudulent transfer or similar provisions of applicable law on the conclusions expressed above.

(iii) We express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank Party is located which may limit the rate of interest that such Bank Party may charge or collect.

3

To the Bank Parties     and the Administrative Agent     and the Collateral Agent referred to Below March 17, 2004

(iv) We express no opinion as to provisions in the Credit Documents that purport to (1) indemnify any Person for its own gross negligence or willful misconduct or (2) confer upon any Person the right to require specific performance or to receive liquidated damages.

(v) We express no opinion as to provisions in the Credit Documents that purport to create rights of set-off in favor of participants or that provide for set-off to be made otherwise than in accordance with applicable laws.

(vi) We express no opinion as to provisions in the Credit Documents that purport to waive objections to venue, claims that a particular jurisdiction is an inconvenient forum or the like.

(vii) We express no opinion as to whether a United States federal court would have subject-matter or personal jurisdiction over a controversy arising under the Credit Documents.

(viii) We express no opinion as to the right, title or interest of any Loan Party in or to any collateral or the value given therefor.

(ix) Except as expressly set forth in paragraphs 3 and 4 above, we express no opinion as to the creation, attachment, perfection or priority of any security interest.

(x) We note the possible unenforceability in whole or in part of certain remedial provisions of the Security Agreement and the Collateral Trust Agreement (the “Collateral Documents”), although the inclusion of such provisions does not render the Collateral Documents invalid and, subject, to the extent applicable, to Section 9-408(c) of the UCC, each of the Collateral Documents contains, in our judgment, adequate remedial provisions for the practical realization of the rights and benefits afforded thereby. In addition, we note that any foreclosure or other exercise of remedies by the Collateral Trustees or the Collateral Agent will require additional approvals and consents that have not been obtained from foreign and domestic regulators and from lenders to, and suppliers, customers or other contractual parties of one or more Subsidiaries of AES and failure to obtain such approval or consent could result in a default, or a breach of agreement or other legal obligations of such Subsidiaries.

(xi) Any security interest in proceeds is subject to the limitations set forth in Section 9-315 of the UCC.

4

To the Bank Parties     and the Administrative Agent     and the Collateral Agent referred to Below March 17, 2004

(xii) We express no opinion as to provisions in the Credit Documents which subject the Loan Parties to any claim for deficiency resulting from a judgment being rendered in a currency other than the currency called for in the Credit Documents, and we express no opinion as to (i) whether a New York State or United States federal court would render or enforce a judgment in a currency other than U.S. Dollars or (2) the exchange rate that such a court would use in rendering a judgment in U.S. Dollars in respect of an obligation in any other currency.

(xiii) We express no opinion as to any regulatory scheme applicable to, or any license or permit required in connection with, the businesses conducted by AES or its subsidiaries and our opinions expressed in paragraph (A) above relate only to laws, actions and filings, which, in our experience, are normally applicable to general business corporations in relation to transactions of the type contemplated by the Credit Documents and, in particular, we express no opinion as to the Federal Power Act or any other energy or electricity law or any rule or regulation thereunder or any law, rule or regulation applicable to, or any approval given or required to be given by, the Federal Energy Regulatory Commission.

The foregoing opinion is limited to the laws of the State of New York and the federal laws of the United States of America. We have assumed that (i) each of the Loan Parties is validly existing and, to the extent applicable, in good standing under the laws of its jurisdiction of organization, and (ii) the execution, delivery and performance by each Loan Party of each Credit Document to which it is a party are within its corporate powers, have been duly authorized by all necessary corporate action on the part of such Loan Party and do not contravene the articles or certificate of incorporation or bylaws or other constitutive documents of such Loan Party. We have further assumed that each Loan Party has duly executed and delivered each Credit Document to which it is a party.

This opinion is delivered to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent, except that any person that becomes a Bank Party in accordance with the provisions of Section 10.06(c) of the Credit Agreement may rely upon this opinion as if it were specifically addressed and delivered to such person on the date hereof.

Very truly yours,

5

Exhibit 10.1.P

EXHIBIT B-3 

	11 South Meridian Street Indianapolis, Indiana 46204-3535 U.S.A. (317) 236-1313
	Fax (317) 231-7433
	www.btlaw.com
	March 17, 2004

To the Addressees Listed on Schedule A

Dear Sirs:

We have acted as counsel to IPALCO Enterprises, Inc. (the “Company”) and its Subsidiaries in connection with (i) that certain Security Agreement, dated as of December 12, 2002 (the “Security Agreement”), made by the Grantors party thereto to the Wilmington Trust Company, as corporate trustee (the “Existing Corporate Trustee”), and Bruce L. Bisson, as the individual trustee (the “Existing Individual Trustee” and, together with the Corporate Trustee, the “Existing Collateral Trustees”), as amended by that certain Amendment No. 1 to the Security Agreement, dated as of July 29, 2003 (the “Security Agreement Amendment”), which provides security for that certain Third Amended and Restated Credit and Reimbursement Agreement, dated as of March 17, 2004 (the “Credit Agreement”) among The AES Corporation, a Delaware corporation (“AES”), the Subsidiary Guarantors party thereto (the “Subsidiary Guarantors”), the banks party thereto (the “Banks”), Citicorp USA, Inc., as Administrative Agent for the Banks (in such capacity, the “Administrative Agent”) and Citibank, N.A., as Collateral Agent for the Banks (in such capacity, the “Collateral Agent”), and (ii) that certain Second Priority Security Agreement (the “Second Security Agreement”), dated as of May 8, 2003, made by the Grantors party thereto to Wells Fargo Bank Minnesota, National Association, as corporate trustee (the “Second Priority Corporate Trustee”) and Jeffrey T. Rose, as the individual trustee (the “Second Priority Individual Trustee” and, together with the Second Priority Corporate Trustee, the “Second Priority Collateral Trustees”). In the Security Agreement, as amended by the Security Agreement Amendment (as so amended, the “Amended Security Agreement”), AES purports to grant the Existing Collateral Trustees, for the benefit of the Banks, a Lien in certain Collateral (as defined in the Amended Security Agreement) including, but not limited to, (i) all capital stock of the Company owned by AES, and (ii) any intercompany loans or receivables owing by the Company to AES (items (i) and (ii) being sometimes hereinafter referred to collectively as the “Company Collateral”), and in the Second Security Agreement, AES purports to grant the Second Priority Collateral Trustees, for the benefit of the Senior Note Holders, a second-priority Lien in certain Collateral including, but not limited to the Company Collateral. Terms used (but not defined) herein have the meanings assigned to them in the Amended Security Agreement. This opinion is being delivered to you pursuant to Section 3.01(c)(iii) of the Credit Agreement.

We have reviewed documents represented to us to be execution copies of each of the Credit Agreement; and that certain Amendment No. 2 (the “Collateral Trust Agreement Second Amendment”), dated as of March 17, 2004, to the Collateral Trust Agreement, dated as of December 12, 2002 (the “Collateral Trust Agreement”), among the Grantors party thereto, as Grantors to the Existing Collateral Trustees, as amended by that certain Amendment No. 1 to

Indianapolis Fort Wayne South Bend Elkhart Chicago Washington, D.C.

To the Addressees

Listed on Schedule A

March 17, 2004

Page 2

the Collateral Trust Agreement, dated as of July 29, 2003 (the “Collateral Trust Agreement First Amendment”); and an executed copy of each of the Collateral Trust Agreement and the Security Agreement (the Collateral Trust Agreement and the Security Agreement being sometimes hereinafter referred to collectively as the “Original Transaction Documents”); and an executed copy of each of the Second Priority Collateral Trust Agreement, dated as of May 8, 2003 (the “Second Collateral Trust Agreement”), among the Grantors party thereto, as Grantors to the Second Priority Collateral Trustees; and the Second Security Agreement (collectively, the “Second Transaction Documents” and, together with the Credit Agreement, the Collateral Trust Agreement Second Amendment and the Original Transaction Documents, the “Transaction Documents”). We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records and certificates of public officials and officers of the Company and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion.

As to any facts material to this opinion which we did not otherwise establish or verify, we relied upon statements and representations of officers and other representatives of the Company. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies, and the authenticity of the originals of such copies. We have also assumed (i) the valid authorization, execution and delivery of the Transaction Documents by the parties thereto, (ii) with regard to opinion paragraphs 3 and 4 below, that the Transaction Documents have been negotiated and executed, and the obligations created thereby will be performed by the parties thereto in a state or states other than the State of Indiana, (iii) that the Transaction Documents by the terms thereof will be governed by the laws of the State of New York, (iv) that the Transaction Documents create a legal, valid, binding and enforceable obligation with respect to the parties thereto under the laws of the State of New York, (v) that the Existing Collateral Trustees and the Second Priority Collateral Trustees have taken all steps necessary to perfect their Liens in that portion of the Collateral (as defined in the Amended Security Agreement and Second Security Agreement) which represents the Company Collateral under the laws of the State of New York and Delaware, (vi) that the Amended Security Agreement and Second Security Agreement are sufficient to create a valid security interest in the Company Collateral under the laws of the State of New York, (vii) that any loan or advance by AES to the Company has been or will be made in conformance with the Second Amended and Restated Articles of Incorporation of the Company, the Amended and Restated Bylaws of the Company and that certain Separateness Agreement dated November 14, 2001 between AES and the Company, and (viii) that the Credit Agreement and Collateral Trust Agreement Second Amendment, as executed, do not materially differ from the execution copies provided to us for review.

Based on the foregoing, and subject to the assumptions and qualifications set forth below, we are of the opinion that:

To the Addressees

Listed on Schedule A

March 17, 2004

Page 3

1. The Company is a corporation validly existing under the laws of Indiana.

2. The granting of a security interest in all right, title and interest of AES in the Company Collateral pursuant to the Amended Security Agreement and the Second Security Agreement and the exercise of remedies by the Collateral Trustees and the Second Priority Collateral Trustees with respect to the Company Collateral pursuant to the Amended Security Agreement and the Collateral Trust Agreement, as amended by the Collateral Trust Agreement First Amendment and the Collateral Trust Agreement Second Amendment (as so amended, the “Amended Collateral Trust Agreement”) or the Second Security Agreement and the Second Collateral Trust Agreement (a) require no action by or in respect of, or filing with, any governmental body, agency or official in the State of Indiana under Indiana law, except that the approval of the Indiana Utility Regulatory Commission may be required for a foreclosure and sale of the capital stock of the Company included in the Company Collateral if the acquiror thereof is an Indiana public utility, and (b) do not (i) contravene, or constitute a default under, any provision of (A) applicable Indiana law or regulation that, in our experience, is normally applicable in relation to transactions of the type contemplated by the Amended Security Agreement and the Amended Collateral Trust Agreement, or the Second Security Agreement and the Second Collateral Trust Agreement, (B) the articles of incorporation or by-laws or other constitutive documents of the Company or any of its Subsidiaries or (C) any agreement or instrument listed in Schedule B hereto which agreements have been represented to us by the Company to be the material agreements of the Company and its Subsidiaries or (ii) result in or require the creation or imposition of any Lien (as defined in the Credit Agreement) on any asset of the Company or any of its Subsidiaries (as defined in the Credit Agreement) under any agreement or instrument listed in Schedule B hereto.

3. No income, stamp or other taxes or duties with respect to the preparation, execution, delivery or performance of the Transaction Documents as they relate to the Company Collateral or with respect to the enforcement of the Amended Security Agreement and the Amended Collateral Trust Agreement or the Second Security Agreement and the Second Collateral Trust Agreement as they relate to the Company Collateral, or with respect to the creation, perfection, priority or enforcement of the Liens (as defined in the Credit Agreement) created or intended to be created by the Amended Security Agreement or Second Security Agreement in the Company Collateral will be imposed under Indiana law on any party thereto or on any payment pursuant to the Transaction Documents as they relate to the Company Collateral to be made by any party thereto.

4. Under Indiana law, it is not necessary in order to ensure (a) the legality, validity, admissibility in evidence or enforceability of any of the Amended Security Agreement the Second Security Agreement, the Amended Collateral Trust Agreement and the Second Collateral Trust Agreement, as they relate to the Company Collateral, or (b) the legality, validity, perfection, priority, admissibility in evidence or enforceability of the Liens (as defined in the Credit Agreement) created or intended to be created by the

To the Addressees

Listed on Schedule A

March 17, 2004

Page 4

Amended Security Agreement and the Second Security Agreement as they relate to the Company Collateral, that any document be filed, registered, recorded or enrolled with any court or authority in Indiana or that any stamp, registration or similar tax be paid in Indiana on or in relation to the same or that any other similar action be taken in relation thereto in Indiana.

5. Assuming a reasonable relationship exists between the State of New York and the transactions contemplated by the Amended Security Agreement and the Second Security Agreement, in any action or proceeding in a court in the State of Indiana arising out of or relating to the Amended Security Agreement or Second Security Agreement, which by the respective terms thereof are to be construed under and governed by the internal laws of the State of New York, such court would apply the internal laws of the State of New York thereto; provided, however, such court would not apply the internal laws of the State of New York thereto in the case of matters dealing with perfection, the effect of perfection or nonperfection, or priority of a security interest in the Company Collateral which has its legal situs in the State of Indiana or is otherwise governed by Indiana law with respect to issues of perfection or nonperfection, the characterization of the Company Collateral under applicable general property laws (other than the Uniform Commercial Code as in effect in the State of Indiana) or procedural or evidentiary matters or if (a) to do so would violate a fundamental public policy of the State of Indiana or (b) in the case of remedial provisions contained in the Amended Security Agreement or Second Security Agreement, if a particular remedy has no counterpart under the internal law of the State of Indiana.

The opinion set forth above is subject to the following qualifications and limitations:

(a) Whenever we have stated that we have assumed any matter, it is intended to indicate that we have assumed such matter without making any factual, legal or other inquiry or investigation, and without expressing any opinions or conclusions of any kind concerning such matter.

(b) The only opinions intended to be provided herein are those which are expressly stated herein and no opinions by implication are intended or given.

(c) We express no opinion with regard to any future modification, extension or renewal of the Transaction Documents.

(d) We express no opinion with regard to the valid creation, perfection or priority of any Liens (as defined in the Credit Agreement) purported to be granted pursuant to the Amended Security Agreement and the Amended Collateral Trust Agreement or the Second Security Agreement and the Second Collateral Trust Agreement.

To the Addressees

Listed on Schedule A

March 17, 2004

Page 5

(e) The opinions set forth herein may be subject to or limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance or transfer, moratorium or other similar laws and court decisions, now or hereafter in effect, relating to or affecting the rights of creditors generally.

Any certificates obtained by us from officers of the Company with respect to the opinions contained herein have been relied upon by us as to factual matters without independent verification.

This opinion letter addresses only the current internal laws of the State of Indiana (without giving any effect to any conflict of law principles thereof) and we have not considered, and express no opinion on, the laws of any other jurisdiction. This opinion letter is dated and speaks as of the date of delivery. We have no obligation to advise you or any third party of changes in the law or fact that may hereafter occur or become effective, even though the legal analysis or legal conclusions contained in this opinion letter may be affected by such changes. We note in particular that the Indiana General Assembly has recently considered amending the authority of the Indiana Utility Regulatory Commission to review and approve proposed changes in control of holding companies of public utilities. We express no opinion on the likelihood of any such proposal becoming law and we have no obligation to advise you or any third party in the event any such proposal becomes law.

This opinion is solely for the benefit of the addressees identified on Schedule A in connection with the transactions contemplated by the Transaction Documents and may not be used or relied upon by any other person or entity for any purpose whatsoever without in each instance our prior and express written consent, except that any person that becomes a Bank Party in accordance with the provisions of Section 10.06 of the Credit Agreement and any other person that becomes a “Secured Holder” under the Amended Collateral Trust Agreement or “Second Priority Secured Holder” under the Second Collateral Trust Agreement may rely upon this opinion as if it were specifically addressed and delivered to such person on the date hereof.

Very truly yours,

BARNES & THORNBURG LLP

SCHEDULE A

The Banks, Citicorp USA, Inc., as Administrative Agent and

Citibank, N.A., as Collateral Agent

c/o Citicorp USA, Inc., as Administrative Agent

388 Greenwich Street, 21st Floor

New York, NY 10013

Attention: Stuart Glen

Wilmington Trust Company, as Corporate Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

Bruce L. Bisson, as Individual Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

SCHEDULE B

MATERIAL AGREEMENTS OF

IPALCO ENTERPRISES, INC. AND SUBSIDIARIES

1. Agreement and Plan of Share Exchange dated as of July 15, 2000 between The AES Corporation and IPALCO Enterprises, Inc.

2. Placement Agreement dated November 8, 2001 among IPALCO Enterprises, Inc., Lehman Brothers Inc., ABN AMRO Incorporated, CIBC World Markets Corporation, SG Cowen Securities Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and UBS Warburg LLC, as Placement Agents.

3. Indenture dated as of November 14, 2001 between IPALCO Enterprises, Inc., as Issuer, and Bank One, National Association, as Trustee.

4. Pledge Agreement dated November 14, 2001 by IPALCO Enterprises, Inc. in favor of Bank One, National Association, as collateral agent, for the benefit of certain Secured Parties.

5. Amended and Restated Articles of Incorporation of Indianapolis Power & Light Company dated as of October 9, 1997.

6. Second Amended and Restated Articles of Incorporation of IPALCO Enterprises, Inc. dated as of November 13, 2001.

7. Bylaws of Indianapolis Power & Light Company, as amended through September 11, 2002.

8. Amended and Restated Bylaws of IPALCO Enterprises, Inc.

9. Mortgage and Deed of Trust dated May 1, 1940 between Indianapolis Power & Light Company and American National Bank and Trust Company of Chicago, as Trustee.

• Third Supplemental Indenture dated as of April 1, 1949

• Tenth Supplemental Indenture dated as of October 1, 1960

• Eighteenth Supplemental Indenture dated as of February 15, 1974

• Thirty-Fourth Supplemental Indenture dated as of October 15, 1991

• Thirty-Fifth Supplemental Indenture dated as of April 1, 1992

• Thirty-Sixth Supplemental Indenture dated as of April 1, 1993

• Thirty-Seventh Supplemental Indenture dated as of October 1, 1993

• Thirty-Eighth Supplemental Indenture dated as of October 1, 1993

• Thirty-Ninth Supplemental Indenture dated as of February 1, 1994

• Fortieth Supplemental Indenture dated as of February 1, 1994

• Forty-First Supplemental Indenture dated as of January 15, 1995

• Forty-Second Supplemental Indenture dated as of October 1, 1995

• Forty-Third Supplemental Indenture dated as of August 1, 2001

• Forty-Fourth Supplemental Indenture dated as of August 1, 2001

• Forty-Fifth Supplemental Indenture dated as of August 1, 2001

• Forty-Sixth Supplemental Indenture dated as of August 1, 2001

• Forty-Seventh Supplemental Indenture dated as of August 1, 2003

• Forty-Eighth Supplemental Indenture dated as of January 1, 2004

10. Separateness Agreement dated November 14, 2001 between The AES Corporation and IPALCO Enterprises, Inc.

11. Stipulation Agreement relating to the Indiana Utility Regulatory Commission Notice of Withdrawal of Intervention and Protest dated as of February 5, 2001.

12. Amended and Restated Rights Agreement dated as of April 28, 1998 between IPALCO Enterprises, Inc. and First Chicago Trust Company of New York, as Rights Agent.

• Amendment No. 1 dated as of July 15, 2000

13. Interconnection Agreement dated December 30, 1960 between Indianapolis Power & Light Company and Indiana & Michigan Electric Company.

• Modification No. 1, dated November 14, 1963

• Modification No. 2, dated as of August 1, 1967

• Modification No. 3, dated as of February 1, 1971

• Modification No. 4, dated as of September 1, 1972

• Modification No. 6, dated as of May 1, 1974

• Modification No. 7, dated as of April 1, 1976

• Modification No. 8, dated as of March 1, 1977

• Modification No. 10, dated as of March 15, 1977

• Modification No. 11, dated as of January 1, 1979

• Modification No. 13, dated as of January 1, 1980

• Modification No. 14, dated as of April 5, 1982

• Modification No. 15, dated as of September 1, 1985

• Modification No. 16, dated as of September 4, 1991

• Modification No. 17, dated as of January 1, 1995

14. Third Amendment, dated June 30, 1995, to the Interconnection Agreement dated May 1, 1992 among Indianapolis Power & Light Company, PSI Energy, Inc. and Cinergy Services, Inc.

• Fourth Amendment dated June 26, 1996

• Fifth Amendment dated June 10, 1997

• Sixth Amendment dated December 16, 1997

• Seventh Amendment dated June 11, 1998

• Eighth Amendment dated June 18, 1999

• Ninth Amendment (undated)

• Tenth Amendment dated June 26, 2002

15. Interconnection Agreement dated December 2, 1968 between Indianapolis Power & Light Company and Southern Indiana Gas and Electric Company.

• Modification No. 1, dated February 1, 1971

• Modification No. 2, dated as of October 1, 1975

• Modification No. 3, dated as of March 1, 1977

• Modification No. 4, dated as of November 1, 1977

• Modification No. 5, dated as of May 1, 1979

• Modification No. 6, dated June 1, 1980

• Modification No. 7, dated as of June 1, 1982

• Modification No. 8, dated as of September 1, 1989

• Modification No. 9, dated as of January 1, 1995

• Modification No. 10, dated as of December 23, 1996

• Modification No. 11 (undated)

16. Interconnection Agreement dated December 1, 1981 between Indianapolis Power & Light Company and Hoosier Energy Rural Electric Cooperative, Inc.

• Modification No. 1, dated as of June 1, 1982

• Modification No. 2, dated as of October 1, 1983

• Modification No. 3, dated as of September 1, 1989

• Modification No. 4, dated as of January 1, 1995

• Modification No. 5, dated as of March 31, 1999

• Modification No. 6 (undated)

17. Credit Agreement dated as of June 4, 2003 among Indianapolis Power & Light Company, various financial institutions parties thereto, and LaSalle Bank National Association, as agent.

18. Credit Agreement dated as of May 22, 2003 among Indianapolis Power & Light Company, the institutions from time to time parties thereto, as lenders, and The Huntington National Bank, as agent.

19. Receivables Sale Agreement dated as of December 20, 1996 among IPL Funding Corporation, ABN AMRO Bank N.V., as Agent and Enhancer, certain banks from time to time party thereto, as liquidity providers, and Windmill Funding Corporation.

• First Amendment dated as of October 15, 1997

• Second Amendment dated as of October 9, 1998

• Third Amendment dated as of October 4, 1999

• Fourth Amendment dated as of October 2, 2000

• Fifth Amendment dated as of October 1, 2001

• Sixth Amendment dated as of June 28, 2002

• Seventh Amendment dated as of September 30, 2002

• Eighth Amendment and Waiver dated as of October 30, 2002

• Ninth Amendment dated as of December 30, 2002

• Tenth Amendment dated as of October 29, 2003

20. Receivables Purchase Agreement dated as of December 20, 1996 among Indianapolis Power & Light Company and IPL Funding Corporation.

21. Indemnity Agreement, Subordination Agreement and Revolving Subordinated Promissory Note in connection with Receivables Sale Agreement.

22. Remarketing Agreement dated June 15, 2001 between Indianapolis Power & Light Company and J.P. Morgan Securities Inc.

23. IPALCO Enterprises, Inc. 1999 Stock Incentive Plan

24. IPALCO Enterprises, Inc. 1997 Stock Option Plan

25. IPALCO Enterprises, Inc. 1991 Directors’ Stock Option Plan

26. Collateral Assignment Agreement dated as of March 7, 2003 by and between Indianapolis Power & Light Company and Foster Wheeler Power Group, Inc.

27. Engineering, Procurement and Construction Contract dated as of December 10, 2003 between Indianapolis Power & Light Company and Foster Wheeler Power Group, Inc.

28. Guaranty by IPALCO Enterprises, Inc. in favor of Mid-America Capital Resources, Inc. regarding EnerTech Capital obligation.

29. 1994 Allocation Agreement by and among IPALCO Enterprises, Inc., Mid-America Capital Resources, Inc., Indianapolis Power & Light Company, and any subsidiaries of the foregoing corporations.

30. Tax Sharing Agreement and Acknowledgement Agreement of July, 2003

31. 2003 IURC Financing Petition and Order

32. Collective Bargaining Agreement between IPL and International Brotherhood of Electrical Workers, AFL-CIO, dated December 16, 2002

33. Collective Bargaining Agreement between Indianapolis Power & Light Company and Electric Utility Workers Union (Independent) Clerical, Technical & Meter Reading Unit, effective February 26, 2001

34. Interest Rate Swap Agreement dated October 11, 1995 between IPL and AMBAC Financial Services, Limited Partnership

Coal, Gas and Transportation Agreements

1. Coal Supply Agreement dated November 1, 2000 between IPL and Triad Mining, Inc. (Switz City Mine, 2.4 Pounds of SO2 Per MMBTU)

2. Coal Supply Agreement dated July 2, 1996 between IPL and Black Beauty Coal Company, Inc. and Amendments thereafter dated November 2, 1999; April 24, 2000; and January 1, 2002 (Farmersburg)

3. Fuel Supply Agreement dated November 18, 1999 between IPL and Black Beauty Coal Company (Somerville Mine)

4. Fuel Supply Agreement dated November 18, 1999 between IPL and Black Beauty Coal Company (Viking/Corning Mines)

5. Coal Supply Agreement effective April 1, 2002 between IPL and AEI Coal Sales Company, Inc. (Kindill 3 Mine)

6. Coal Supply Agreement effective January 1, 2002 between IPL and Solar Sources, Inc (Cannelburg Mine).

7. Fuel Supply Agreement between IPL and PC Illinois Synthetic Fuel #2, L.L.C. effective January 1, 2002 (Synfuel from Farmersburg)

8. Coal Supply Agreement dated December 19, 2003 between IPL and Triad Mining, Inc. (for the period Jan. 1 2004 through December 31, 2008)

9. Rail Transportation Agreement between IPL and The Indiana Railroad Company dated October 19, 2001

10. Rail Transportation Contract between IPL and Canadian Pacific Railway effective December 21, 2000

11. Gas Transportation Agreement between IPL and Citizens Gas & Coke Utility dated June 17, 2000 and Amendments thereafter dated August 15, 2000 and January 25, 2002 (Harding Street)

12. Facilities Construction, Capacity Reservation, and Gas Transportation Agreement between IPL and Citizens Gas & Coke Utility dated October 29, 1999 (Georgetown)

13. Natural Gas Sales and Management Agreement dated April 1, 2003 by and between ProLiance Energy, LLC and Indianapolis Power & Light Company

DAVIS POLK & WARDWELL
1300 I STREET, N.W. WASHINGTON, D.C. 20005	450 LEXINGTON AVENUE NEW YORK, N.Y. 10017	MESSETURM 60308 FRANKFURT AM MAIN
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1600 EL CAMINO REAL MENLO PARK, CA 94025		MARQUÉS DE LA ENSENADA, 2 28004 MADRID
99 GRESHAM STREET LONDON EC2V 7NG	WRITER’S DIRECT	1-6-1 ROPPONGI MINATO-KU, TOKYO 106-6033
15, AVENUE MATIGNON 75008 PARIS		3A CHATER ROAD HONG KONG

March 17, 2004

To the Addressees listed

on Schedule I attached hereto

Dear Sirs:

We have acted as special New York counsel to IPALCO Enterprises, Inc., an Indiana corporation (the “Company”) in connection with that certain Indenture dated November 14, 2001, and this opinion is being delivered to you at our client’s request pursuant to Section 3.01(c)(iii) of the Third Amended and Restated Credit and Reimbursement Agreement dated as of March 17, 2004 (the “Credit Agreement”) among The AES Corporation (“AES”), the Subsidiary Guarantors party thereto (the “Subsidiary Guarantors”), the banks party thereto (the “Banks”), Citicorp USA, Inc., as Administrative Agent for the Banks (in such capacity, the “Administrative Agent”) and Citibank, N.A., as Collateral Agent for the Banks (in such capacity, the “Collateral Agent”). Except as otherwise expressly provided herein, all capitalized terms used but not defined herein have the respective meanings given to such terms in the Security Agreement (the “Security Agreement”) dated December 12, 2002 made by the Grantors referred to therein to Wilmington Trust Company, as corporate trustee (the “Corporate Trustee”) and Bruce L. Bisson, as individual trustee (together with the Corporate Trustee, the “Collateral Trustees”).

We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records and certificates of officers of the Company and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion.

Based on the foregoing, and subject to the assumptions and qualifications set forth below, we are of the opinion that the granting of a security interest by AES in all right, title and interest of AES in that portion of the Collateral, as defined in the Credit Agreement, which represents the capital stock of the Company and notes and other amounts payable by the Company to AES (the “Company Collateral”), does not (i) contravene, or constitute a default under,

To the Addressees listed on Schedule I attached hereto -2- March 17, 2004

any provision of any agreement listed in Schedule II hereto or (ii) result in or require the creation or imposition of any Lien (as defined in the Credit Agreement) on any asset of the Company or any of its Subsidiaries under any agreement listed in such Schedule II. We express no opinion as to the exercise of any rights under the Company Collateral and we bring to your attention that any exercise by the Collateral Trustees of remedies under the Security Agreement and the Collateral Trust Agreement or by the Second Priority Collateral Trustees (as defined herein) of remedies under the Second Priority Security Agreement (the “Second Priority Security Agreement”) dated May 8, 2003 made by the Grantors referred to therein to Wells Fargo Bank Minnesota, National Association, as corporate trustee (the “Second Priority Corporate Trustee”) and Jeffery T. Rose, as individual trustee (together with the Second Priority Corporate Trustee, the “Second Priority Collateral Trustees”) and the Second Priority Collateral Trust Agreement (the “Second Priority Collateral Trust Agreement”) dated as of May 8, 2003 among the Grantors referred to therein and the Second Priority Collateral Trustees that results in the acceleration of notes and other amounts payable by the Company to AES exceeding an aggregate principal amount of $25 million would, with the passage of time, constitute a default under the agreements listed in Schedule II. We express no opinion as to whether the exercise by the Collateral Trustees of remedies under the Security Agreement or the exercise by the Second Priority Collateral Trustees of remedies under the Second Priority Security Agreement would require consents from domestic regulators or other third parties. As to those matters we refer you to the opinions of each of Skadden, Arps, Slate, Meagher, and Flom, LLP and Barnes and Thornburg being delivered to you pursuant to Section 3.01(c)(iii) of the Credit Agreement.

This opinion is delivered to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent, except that any person that becomes a Bank Party in accordance with the provisions of Section 10.06 of the Credit Agreement and any other person that becomes a “Secured Holder” under the Collateral Trust Agreement or a “Second Priority Secured Holder” under the Second Priority Collateral Trust Agreement may rely upon this opinion as if it were specifically addressed and delivered to such person on the date hereof.

To the Addressees listed on Schedule I attached hereto -3- March 17, 2004

We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York.

Very truly yours,

Schedule I

The Banks, Citicorp USA, Inc., as Administrative Agent and

Citibank, N.A., as Collateral Agent

c/o Citicorp USA, Inc., as Administrative Agent

388 Greenwich Street, 21st Floor

New York, NY 10013

Attention: Stuart Glen

Wilmington Trust Company

as Existing Corporate Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attn: Corporate Trust Division

Bruce L. Bisson

as Existing Individual Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Schedule II

A. Indenture dated November 14, 2001 between IPALCO Enterprises, Inc. and Bank One, National Association.

B. Pledge Agreement dated November 14, 2001 by IPALCO Enterprises, Inc. in favor of Bank One, National Association.

C. Separateness Agreement dated November 14, 2001 between The AES Corporation and IPALCO Enterprises, Inc.

SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
	1440 NEW YORK AVENUE, N.W. WASHINGTON, D.C. 20005-2111		FIRM/AFFILIATE OFFICES
	TEL: (202) 371-7000 FAX: (202) 393-5760 http://www.skadden.com		BOSTON CHICAGO HOUSTON LOS ANGELES NEWARK NEW YORK PALO ALTO RESTON SAN FRANCISCO WILMINGTON
			BEIJING
			BRUSSELS
			FRANKFURT
			HONG KONG
			LONDON
		March 17, 2004	MOSCOW
			PARIS
			SINGAPORE
			SYDNEY
			TOKYO
			TORONTO

The addressees listed on Schedule 1

RE: Secured Borrowing by The AES Corporation

Ladies and Gentlemen:

We have acted as special counsel to The AES Corporation, a Delaware corporation (“AES” or “the Company”), in connection with the execution and delivery by the Company of the Third Amended and Restated Credit and Reimbursement Agreement (the “Credit Agreement”) among AES, the Subsidiary Guarantors party thereto (the “Subsidiary Guarantors”), the banks party thereto (the “Banks”), Citicorp USA, Inc., as Administrative Agent for the Bank (in such capacity, the “Administrative Agent”) and Citibank, N.A., as Collateral Agent for the Bank (in such capacity, the “Collateral Agent”), and certain other agreements, instruments and documents related to the issuance of certain collateral interests pursuant to the First Priority Security Agreement, the First Priority Collateral Trust Agreement, Second Priority Security Agreement, and Second Priority Collateral Trust Agreement (each as defined herein). We are rendering this opinion pursuant to Section 3.01(c)(iii) of the Credit Agreement. Capitalized terms used but not defined herein shall have the respective meanings given to them in the First Priority Security Agreement (as defined herein).

In our examination, we have assumed the genuineness of all signatures including endorsements, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as facsimile, electronic, certified or photostatic copies, and the authenticity of the originals of such copies. As to any facts material to this opinion which we did not independently establish or verify, we have relied upon statements and representations of the Company and its officers and other representatives and of public officials, including the facts and conclusions set forth herein.

March 17, 2004

Page 2

In rendering the opinions set forth herein, we have examined and relied on an original or copies of the following:

(a) an execution copy of the Credit Agreement, dated as of March 17, 2004,

(b) an executed copy of the Security Agreement, dated as of December 12, 2002, made by the Grantors referred to therein, to the Wilmington Trust Company, as Corporate Trustee, and Bruce L. Bisson, as the Individual Trustee, as amended by Amendment No. 1 to the Security Agreement, dated as of July 29, 2003 (the “First Priority Security Agreement”),

(c) an executed copy of the Collateral Trust Agreement, dated as of December 12, 2002, among the Company, the Grantors referred to therein, Wilmington Trust Company, as Corporate Trustee and Bruce L. Bisson, as the Individual Trustee, as amended by Amendment No. 1 to the Collateral Trust Agreement, dated as of July 29, 2003 (the “First Priority Collateral Trust Agreement”),

(d) an execution copy of Amendment No. 2 to the First Priority Collateral Trust Agreement, dated as of March 17, 2004, (the “First Priority Collateral Trust Amendment”),

(e) an executed copy of the Second Priority Security Agreement, dated May 8, 2003, among the Grantors referred to therein, as Grantors to the Wells Fargo Bank Minnesota, National Association, as corporate trustee, and Jeffery T. Rose, as the individual trustee (the “Second Priority Security Agreement”),

(f) an executed copy of the Senior Indenture, dated May 8, 2003, between AES and Wells Fargo Bank Minnesota, National Association, as trustee (the “Second Issuance Senior Note Indenture”),

(g) an executed copy of the Second Priority Collateral Trust Agreement, dated May 8, 2003, among the Company, the Grantors referred to therein, Wells Fargo Bank Minnesota, National Association, as corporate trustee and Jeffery T. Rose, as the individual trustee (the “Second Priority Collateral Trust Agreement”),

(h) an executed copy of the Sponsor Agreement dated as of March 7, 2001 between AES and BankBoston, N.A., Nassau Branch (the “Sponsor Agreement”),

(i) the Certificate of Barry J. Sharp, Executive Vice President and Chief Financial Officer of AES, that AES itself does not own or operate transmission

March 17, 2004

Page 3

facilities and does not sell electric energy at wholesale in interstate commerce, dated as of the date hereof, a copy of which is attached hereto as Exhibit A,

(j) the Certificate of Randy DeWulf, Vice President of AES Oklahoma Holdings, L.L.C., a Delaware limited liability company (“AES Oklahoma”), that (i) AES Oklahoma is a wholly-owned subsidiary of the Company and has no assets other than membership interests in AES Oklahoma Management Co., LLC, a Delaware limited liability company (“AES Oklahoma Management”) and (ii) AES Oklahoma Management is a wholly owned subsidiary of AES Oklahoma and has no assets other than membership interests in AES Shady Point, L.L.C., a Delaware limited liability company (“AES Shady Point”), dated as of the date hereof, a copy of which is attached hereto as Exhibit B,

(k) the Certificate of Randy DeWulf, President of AES Shady Point, that the electric generation facility owned and operated by AES Shady Point is owned and operated consistent with the description in the application for recertification that AES Shady Point submitted to the Federal Energy Regulatory Commission (“FERC”) on March 19, 1987 and in the order issued by FERC on May 13, 1987 in Docket No. QF85-11-003 recertifying the facility as a qualifying facility under the Public Utility Regulatory Policies Act of 1978, dated as of the date hereof, a copy of which is attached hereto as Exhibit C,

(l) the Opinion of the Company’s primary counsel in connection with the Transaction Agreements (as defined below), Davis Polk & Wardwell, dated the date hereof, that, among other things, the Transaction Agreements (as defined below) do not, by their terms, create any obligation or liability on any party other than the Company and other signatories to the Credit Agreement, First Priority Collateral Trust Agreement, First Priority Collateral Trust Amendment, First Priority Security Agreement, Second Priority Collateral Trust Agreement, and Second Priority Security Agreement (with the exception of AES, we have assumed, with your consent and without independent verification, that the entities listed in this sentence are not public utilities), a copy of which is attached hereto as Exhibit D, and

(m) such other documents as we have deemed necessary and appropriate as a basis for the opinions set forth below.

We express no opinion as to the laws of any jurisdiction other than the Applicable Laws of the United States of America. “Applicable Laws” shall mean the Federal Power Act, as amended to date (“FPA”), the Public Utility Holding Company Act of 1935, as amended to date (“PUHCA”), and the Public Utility Regulatory Policies Act of 1978, as amended to date (“PURPA”). The Credit Agreement, First Priority Collateral Trust Agreement, First Priority Collateral Trust Amendment, First Priority Security Agreement, Second Priority Collateral Trust Agreement, and Second Priority Security Agreement shall hereinafter be referred to

March 17, 2004

Page 4

collectively as the “Transaction Agreements.” “Governmental Approval” means any consent, approval, license, authorization or validation of, or filing, recording or registration with, any governmental authority pursuant to the Applicable Laws.

Pursuant to the First Priority Security Agreement and the Credit Agreement, and pursuant to the Second Priority Security Agreement, AES has pledged as collateral a second priority interest in, the capital stock of IPALCO Enterprises, Inc. (“IPALCO”) and AES Oklahoma, along with interests held by AES in the Collateral (as defined in each of the First Priority Security Agreement and the Second Priority Security Agreement), and AES Oklahoma has unconditionally guaranteed the full and punctual payment of the Term Loan Obligations (as defined in the Credit Agreement), as such guarantee is fully set forth in the Credit Agreement (the “Guaranty”). You have asked for our opinion whether such pledge of AES’s interest in the capital stock of IPALCO and AES Oklahoma, or the Guaranty, as contemplated by the Transaction Agreements, will require any consent, approval or authorization under the FPA, PUHCA or PURPA as such transactions relate specifically to IPALCO and AES Oklahoma. FPA Section 204(a), in pertinent part, provides that a “public utility shall not issue any security, or assume any obligation or liability as guarantor, indorser, surety, or otherwise in respect to any security of another person, unless and until, and then only to the extent that, upon application by the public utility the [FERC] by order authorized such issue or assumption of liability.” There is no FERC order on point as to whether the issuance of securities or the assumption of a liability by a holding company, such as AES, in which the holding company pledges as collateral securities of subsidiaries, here IPALCO, that, in turn, owns a public utility, is subject to FERC jurisdiction under FPA Section 204. However, Section 204 applies only to public utilities issuing securities or assuming obligations and liabilities. As for AES Oklahoma, which indirectly owns AES Shady Point, FERC regulations (18 C.F.R. § 292.601(c)) specifically provide that qualifying facilities (“QFs”) such as AES Shady Point are exempt from FPA Section 204.

Based on the foregoing and subject to the limitations, qualifications, exceptions, and assumptions set forth herein, we are of the opinion that:

1. AES is not a public utility subject to the FERC’s jurisdiction under FPA Section 204.

2. AES Shady Point is a qualifying facility exempt from the FERC’s jurisdiction under FPA Section 204.

3. Neither the execution, delivery or performance by AES or AES Oklahoma of the Transaction Agreements, nor the compliance by AES or AES Oklahoma with the terms and provisions thereof, will contravene any provision of any Applicable Law, other than provisions of any Applicable Law which may

March 17, 2004

Page 5

require Governmental Approval to enforce any remedies relating to the Collateral, as such term is defined in each of the First Priority Security Agreement and the Second Priority Security Agreement, or to enforce the Credit Agreement, First Priority Security Agreement, or Second Priority Security Agreement upon any Default or Event of Default, as such terms are defined in the Credit Agreement and the Second Issuance Senior Note Indenture.

4. No Governmental Approval, which has not been obtained or taken and is not in full force and effect, is required to authorize, or is required in connection with, the execution or delivery of any of the Transaction Agreements by AES or AES Oklahoma or the enforceability of any of the Transaction Agreements against AES or AES Oklahoma, except those Governmental Approvals which may be required to enforce any remedies relating to the Collateral, as such term is defined in each of the First Priority Security Agreement and the Second Priority Security Agreement, or to enforce the Credit Agreement, First Priority Security Agreement, or Second Priority Security Agreement upon any Default or Event of Default, as such terms are defined in the Credit Agreement and the Second Issuance Senior Secured Note Indenture.

This opinion is being furnished only to you in connection with the Transaction Agreements and is solely for your benefit and is not to be used, circulated, quoted or otherwise referred to for any other purpose or relied upon by any other person or entity for any purpose without our prior written consent, except that any person that becomes a “Bank Party” in accordance with the provisions of Section 10.06 of the Credit Agreement and any other person that becomes a “Secured Holder” under the First Priority Collateral Trust Agreement or the First Priority Collateral Amendment or a “Second Priority Secured Holder” under the Second Priority Collateral Trust Agreement may rely upon this opinion letter as if it were specifically addressed and delivered to such person on the date hereof.

Very truly yours,

Schedule I

Addressees

The Banks, Citicorp USA, Inc., as Administrative Agent and

  Citibank, N.A., as Collateral Agent

c/o Citicorp USA, Inc., as Administrative Agent

388 Greenwich Street, 21st Floor

New York, NY 10013

Attention: Stuart Glen

Wilmington Trust Company, as Corporate Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

Bruce L. Bisson, as Individual Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

SASMF Regulatory Opinion

March 17, 2004

Attachment A

OFFICER’S CERTIFICATE

THE AES CORPORATION

The undersigned, Barry J. Sharp, the duly authorized Executive Vice President of The AES Corporation, a Delaware corporation (“AES”). I understand that, at the request of the AES, Skadden, Arps, Slate, Meagher & Flom LLP (“SASM&F”) is rendering an opinion in connection with the execution of the Third Amended and Restated Credit and Reimbursement Agreement among AES, the Subsidiary Guarantors party thereto, the banks party thereto, Citicorp USA, Inc., as Administrative Agent for the Bank and Citibank N.A. as Collateral Agent for the Bank, and certain other agreements, instruments and documents related to the First Priority Security Agreement, the First Priority Collateral Trust Agreement, the Second Priority Security Agreement, and the Second Priority Collateral Trust Agreement (as each are defined in the opinion). I further understand that SASM&F is relying on, among other things, this Certificate and the statements made herein in rendering such opinion.

The undersigned hereby certifies as follows:

(1) AES does not own or operate any transmission facilities.

(2) AES does not sell electric energy at wholesale in interstate commerce.

IN WITNESS WHEREOF, I have executed this certificate this 17th day of March, 2004.

THE AES CORPORATION
By:	/s/ Barry J. Sharp
Name:	Barry J. Sharp
Title:	Executive Vice President and Chief Financial Officer

SASMF Regulatory Opinion

March 17, 2004

Attachment B

2

OFFICER’S CERTIFICATE

AES OKLAHOMA HOLDINGS, L.L.C.

The undersigned, Randy DeWulf, is the duly authorized Vice President of AES Oklahoma Holdings, L.L.C, a Delaware limited liability company (“AES Oklahoma”). I understand that, at the request of The AES Corporation, a Delaware corporation (“AES”), Skadden, Arps, Slate, Meagher & Flom LLP (“SASM&F”) is rendering an opinion in connection with the execution of the Third Amended and Restated Credit and Reimbursement Agreement among AES, the Subsidiary Guarantors party thereto, the banks party thereto, Citicorp USA, Inc., as Administrative Agent for the Bank and Citibank N.A. as Collateral Agent for the Bank, and certain other agreements, instruments and documents related to the First Priority Security Agreement, the First Priority Collateral Trust Agreement, the Second Priority Security Agreement, and the Second Priority Collateral Trust Agreement (as each are defined in the opinion). I further understand that SASM&F is relying on, among other things, this Certificate and the statements made herein in rendering such opinion.

The undersigned hereby certifies as follows:

(1) AES Oklahoma is a wholly-owned subsidiary of AES.

(2) AES Oklahoma has no other assets other than membership interests in AES Oklahoma Management Co., LLC, a Delaware limited liability company (“AES Oklahoma Management”)

(3) AES Oklahoma Management is a wholly-owned subsidiary of AES Oklahoma.

(4) AES Oklahoma Management has no assets other than membership interests in AES Shady Point, L.L.C, a Delaware limited liability company.

IN WITNESS WHEREOF, I have executed this certificate this 17th day of March, 2004.

AES Oklahoma Holdings, L.L.C.
By:	/s/ Randy DeWulf
Name:	Randy DeWulf
Title:	Vice President

2

SASMF Regulatory Opinion

March 17, 2004

Attachment C

3

OFFICER’S CERTIFICATE

AES SHADY POINT, LLC

The undersigned, Randy DeWulf, is the duly authorized President of AES Shady Point, LLC, a Delaware limited liability company (“AES Shady Point”). I understand that, at the request of The AES Corporation, a Delaware corporation (“AES”), Skadden, Arps, Slate, Meagher & Flom LLP (“SASM&F”) is rendering an opinion in connection with the execution of the Third Amended and Restated Credit and Reimbursement Agreement among AES, the Subsidiary Guarantors party thereto, the banks party thereto, Citicorp USA, Inc., as Administrative Agent for the Bank and Citibank N.A. as Collateral Agent for the Bank, and certain other agreements, instruments and documents related to the First Priority Security Agreement, the First Priority Collateral Trust Agreement, the Second Priority Security Agreement, and the Second Priority Collateral Trust Agreement (as each are defined in the opinion). I further understand that SASM&F is relying on, among other things, this Certificate and the statements made herein in rendering such opinion.

The undersigned hereby certifies as follows:

(1) On March 19, 1987, AES Shady Point submitted to the Federal Energy Regulatory Commission (“FERC”) an application (“Recertification Application”) requesting that FERC recertify the cogeneration facility owned and operated by AES Shady Point as qualifying facility (“QF”) under the Public Utility Regulatory Policies Act of 1978 (“PURPA”). On May 13, 1987, FERC issued an order in FERC Docket No. QF85-11-003 recertifying the cogeneration facility owned and operated by AES Shady Point as a QF under PURPA (“FERC Order”).

(2) As of the date hereof, the cogeneration facility owed and operated by AES Shady Point is owned and operated consistent with the description in the Recertification Application and the FERC Order.

IN WITNESS WHEREOF, I have executed this certificate this 17th day of March, 2004.

AES Shady Point, L.L.C.
By:	/s/ Randy DeWulf
Name:	Randy DeWulf
Title:	President

3

SASMF Regulatory Opinion

March 17, 2004

Attachment D

4

DAVIS POLK & WARDWELL
1300 I STREET, N.W. WASHINGTON, D.C. 20005	450 LEXINGTON AVENUE NEW YORK, N.Y. 10017	MESSETURM 60308 FRANKFURT AM MAIN
	212 450 4000 FAX 212 450 3800
1600 EL CAMINO REAL MENLO PARK, CA 94025		MARQUÉS DE LA ENSENADA, 2 28004 MADRID
99 GRESHAM STREET LONDON EC2V 7NG	WRITER’S DIRECT	1-6-1 ROPPONGI MINATO-KU, TOKYO 106-6033
15, AVENUE MATIGNON 75008 PARIS		3A CHATER ROAD HONG KONG

March 17, 2004

Skadden, Arps, Slate, Meagher & Flom LLP

1440 New York Avenue, N.W.

Washington, D.C. 20005-2111

Ladies and Gentlemen:

We have acted as special counsel to The AES Corporation, a Delaware corporation (the “Company”), in connection with the Third Amended and Restated Credit and Reimbursement Agreement dated as of March 17, 2004 (the “Credit Agreement”) among the Company, the Subsidiary Guarantors party thereto (the “Subsidiary Guarantors”), the banks party thereto (the “Banks”), Citicorp, USA, Inc., as Administrative Agent for the Banks (in such capacity, the “Administrative Agent”) and Citibank, N.A., as Collateral Agent for the Banks (in such capacity, the “Collateral Agent”). Capitalized terms used but not otherwise defined herein are used as defined in the Security Agreement dated December 12, 2002, as amended by Amendment No. 1 dated as of July 29, 2003, (as amended, the “Security Agreement”) made by the Grantors referred to therein to Wilmington Trust Company, as corporate trustee (the “Corporate Trustee”) and Bruce L. Bisson, as individual trustee (together with the Corporate Trustee, the “Collateral Trustees”).

We have examined originals or copies, certified or otherwise authenticated to our satisfaction, of such documents, corporate and official records and other instruments and made such investigations of law, as we have deemed necessary or appropriate as a basis for our opinion.

Based upon the foregoing, we are of the opinion that (a) the Credit Agreement, (b) the Security Agreement, (c) the Collateral Trust Agreement, (d) Amendment No. 2 to the Collateral Trust Agreement dated as of March 17, 2004, (e) the Second Priority Security Agreement (the “Second Priority Security Agreement”) dated May 8, 2003 made by the Grantors referred to therein to Wells Fargo Bank Minnesota, National Association, as corporate trustee (the “Second Priority Corporate Trustee”) and Jeffery T. Rose, as individual trustee (together with the Second Priority Corporate Trustee, the “Second Priority Collateral Trustees”), (f) the Senior Note Indenture (as defined in the Second

Skadden, Arps, Slate, Meagher & Flom LLP March 17, 2004

Page 2

Priority Security Agreement) and (g) the Second Priority Collateral Trust Agreement (the “Second Priority Collateral Trust Agreement”) dated as of May 8, 2003 among the Grantors referred to therein and the Second Priority Collateral Trustees (collectively, the “Credit Documents”) do not on the date hereof, by their terms, create any obligation or liability on any party other than the Company, the Subsidiary Guarantors, the Wilmington Trust Company, Wells Fargo Bank Minnesota, National Association, Bruce L. Bisson, Jeffery T. Rose, AES BVI II, Citicorp, USA, Inc., Citibank, N.A. and the Banks. We express no opinion, however, upon the implications of any of the Credit Documents under any federal, state or local laws or regulations related to electric utilities or power generation, transmission or distribution (“Energy Laws”).

We are members of the Bar of the State of New York, and the foregoing opinion is limited to the laws of the State of New York and the federal laws of the United States of America (other than Energy Laws).

This opinion is rendered solely to you in connection with the above matter. This matter may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without our prior written consent, except that you may refer to this opinion in your opinion of even date herewith delivered pursuant to the Credit Agreement.

Very truly yours,

THE WARNER 1299 PENNSYLVANIA AVE., NW WASHINGTON, DC 20004-2400 202.639.7700 FAX 202.639.7890 AUSTIN BAKU DALLAS HOUSTON LONDON MOSCOW NEW YORK RIYADH WASHINGTON

March 17, 2004

To Each of the Persons Listed

     on Exhibit A Attached Hereto

Ladies and Gentleman:

We have acted as special New York counsel to AES Hawaii, Inc. (the “Project Company”), in connection with the review of (a) the Third Amended and Restated Credit and Reimbursement Agreement (the “Senior Secured Credit Facility”), dated as of March 17, 2004 among The AES Corporation, a Delaware corporation (“AES”), the Subsidiary Guarantors party thereto and, as defined therein, including AES Hawaii Management Company, Inc. (the “Tier I Company”), the banks party thereto (the “Bank Parties”), Citicorp USA, Inc., as Administrative Agent for the Bank Parties (in such capacity, the “Agent”) and Citibank, N.A., as the Collateral Agent for the Bank Parties (in such capacity, the “Collateral Agent”) and (b) the Indenture (the “Indenture”), dated as of May 8, 2003, between AES and Wells Fargo Bank Minnesota, National Association. Capitalized terms used (but not defined) herein have the meanings assigned to them in the Senior Security Agreement (as defined below). This opinion is being delivered to you pursuant to Section 3.01(c)(iii) of the Senior Secured Credit Facility.

In arriving at the opinions expressed below, we have examined and relied on originals or copies, certified or otherwise identified to our satisfaction, of the following documents: (a) the Senior Secured Credit Facility (including without limitation, the Subsidiary Guaranty set forth in Article IX thereof (the “Guaranty”)), (b) the Indenture, (c) the Collateral Trust Agreement (as amended, by Amendment No. 1 to the Collateral Trust Agreement dated as of July 29, 2003, the “Senior Collateral Trust Agreement”), dated December 12, 2002, by and among the Grantors referred to therein and the Collateral Trustees referred to therein (the “Senior Collateral Trustees”), (d) Amendment No. 2, dated as of March 17, 2004, to the Senior Collateral Trust Agreement, (e) the Security Agreement (as amended by Amendment No. 1 to the Security Agreement, dated as of July 29, 2003, the “Senior Security Agreement”), dated December 12, 2002, made by the Grantors referred to therein to the Senior Collateral Trustees, (f) the Second Priority Collateral Trust Agreement (the “Second Priority Collateral Trust Agreement”; together with the Senior Collateral Trust Agreement, the “Collateral Trust Agreements”), dated as of May 8, 2003, by and among the Grantors referred to therein and the Second Priority Collateral Trustees referred to therein (the “Second Priority Collateral Trustees”), (g) the Second Priority Security Agreement (the “Second Priority Security Agreement”; together with the Senior Security Agreement, the “Security Agreements”), dated as of May 8, 2003, from the Grantors referred to therein to the Second Priority Collateral Trustees, (h) the Officer’s Certificate set forth in Schedule I, (i) the Assistant Secretary’s Certificate set forth in Schedule IA, (j) the permits and approvals set forth in Schedule II, (k) the

March 17, 2004

agreements set forth in Schedule III, and (1) the organizational documents set forth in Schedule IV.

The documents listed in items (a) through (g) of the preceding paragraph are sometimes hereinafter referred to as the “Credit Documents.”

As to questions of fact material to the opinions set forth below, we have relied on the representations and warranties contained in the Credit Documents and in such other documents, instruments and certificates of public officials, and of officers and representatives of AES, the Tier I Company and the Project Company, and we have made such investigations of law, as we have deemed appropriate as a basis for the opinions expressed below. Except for our review of the documents set forth in Schedule IV, we have made no independent investigation of the corporate, partnership or other organizational documents or records of AES, the Tier I Company, the Project Company or their respective Affiliates or Subsidiaries (each as defined in the Senior Secured Credit Facility) or any party to any of the Credit Documents. We have made no independent investigation as to whether the representations and warranties and other statements in the Credit Documents and in such other documents, instruments and certificates are accurate or complete.

In rendering the opinions expressed below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as copies and the authenticity of the originals of such copies. Further, we have assumed that the Project Company and its assets are in compliance with applicable Federal Environmental Laws and Federal Energy Laws as defined below.

Based on the foregoing, and subject to the additional assumptions, qualifications and limitations set forth below, we are of the opinion that:

1. The execution and delivery by the Tier I Company of the Guaranty and the granting of a security interest by AES in all right, title and interest in that portion of the Collateral, as defined in each of the Security Agreements, which represents the capital stock of the Tier I Company and notes and other amounts payable by the Tier I Company and its subsidiaries to AES (the “Tier I Company Collateral”), and the exercise of remedies by the Senior Collateral Trustees pursuant to the Senior Security Agreement and the Senior Collateral Trust Agreement or the Second Priority Collateral Trustees pursuant to the Second Priority Security Agreement and the Second Priority Collateral Trust Agreement with respect to the Tier I Company Collateral (a) does not require any action by or in respect of, or filing with, the Federal Government pursuant to any Federal Environmental Laws and Federal Energy Laws by, or on behalf of, the Project Company and (b) does not violate any Federal Environmental Laws, Federal Energy Laws, or the Federal Permits set forth in Schedule II, provided that, with respect to clauses (a) and (b) of this sentence, the exercise of remedies by either the Senior Collateral Trustees or the Second Priority Collateral Trustees does not result in a change in ownership or

- 2 -

March 17, 2004

control of the Project Company or the identity of the owner or operator of the assets of the Project Company. We note that any such change in ownership or control of the Project Company or the identity of the owner or operator of the assets of the Project Company may require the refiling, reissuance or transfer of the Federal Permits set forth in Schedule II. With respect to the permits and approvals issued pursuant to Federal Energy Laws listed on Schedule II, so long as the Project Company remains a qualifying cogeneration facility as defined under the Federal Energy Laws, neither the Secured Holders (as defined in the Senior Collateral Trust Agreement) nor the Second Priority Secured Holders (as defined in the Second Priority Collateral Trust Agreement) will, solely as a result of ownership or operation of the Project Company due to the exercise of any remedy provided in the Guaranty, the Security Agreements, or the Collateral Trust Agreements become subject to regulation as a “public-utility company,” an “electric utility company,” a “holding company,” an “affiliate” of a “holding company,” or an “affiliate” of a “subsidiary company” of a “holding company,” as each term is defined under the Federal Energy Laws.

2. The execution and delivery by the Tier I Company of the Guaranty and the granting of a security interest by AES in all right, title and interest in the Tier I Company Collateral does not (a) (i) contravene, or constitute a default under, any material provision of any agreement set forth in Schedule III which agreements have been represented to us by the Project Company to be all of the material agreements relating to the Project (as defined in Schedule I) or (ii) contravene any organizational document set forth in Schedule IV which organizational documents have been represented to us by AES to be (x) all the constitutive documents of the Tier I Company and the Project Company and (y) in full force and effect on the date hereof or (b) result in or require the creation or imposition of any Lien (as defined in the Senior Secured Credit Facility) on any asset of the Project Company under any agreement set forth in Schedule III. We bring to your attention that the exercise of remedies by either the Senior Collateral Trustees or the Second Priority Collateral Trustees with respect to the Tier I Company Collateral that results in AES ceasing to own and control, directly or indirectly, the minimum percentage of the ownership interests of the Project Company specified in such agreements would constitute a default under certain of the agreements set forth in Schedule III, and certain other agreements set forth in Schedule III may contain cross-default provisions that would be contravened upon the occurrence of such a default.

As used herein, the term “Federal Government” shall mean the United States of America, or any agency, department, commission, board, bureau, or instrumentality thereof. As used herein, the term “Federal Environmental Laws” shall mean the laws, statutes, rules, and regulations of the Federal Government pertaining to protection of human health or safety with respect to hazardous materials or the protection of the environment from contamination by hazardous materials. As used herein, “Federal Energy Laws” shall mean the Public Utility Holding Company Act of 1935, the Federal Power Act, and the Public Utility Regulatory Policies Act of 1978, and any applicable regulations issued thereunder. As used herein, “Federal Permits” shall mean those material permits and approvals, if any, issued pursuant to Federal

- 3 -

March 17, 2004

Environmental Laws and Federal Energy Laws set forth in Schedule II that have been issued by the Federal Government and are currently maintained by the Project Company for the purpose of ownership or operation of the Project Company’s assets.

Our opinions in paragraph 1 of this letter are based upon a review of the Federal Environmental Laws and the Federal Energy Laws in effect on the date hereof, which in our experience typically apply to business operations similar to those of the Project Company without any investigation concerning any other laws, rules, or regulations. Our opinions in this letter do not address (a) ministerial or immaterial filings or registrations made by the Project Company with the Federal Government pursuant to any Federal Environmental Laws, Federal Energy Laws, or the Federal Permits, (b) any governmental permit or approval required under any law, statute, rule or regulation of any governmental authority other than the Federal Government, and (c) any governmental permit or approval issued by any state, regional, county, municipal, local, or other governmental authority pursuant to authority delegated to any such entity pursuant to any Federal Environmental Laws.

We are members of the Bar of the State of New York and we do not express any opinion herein concerning any law other than the law of the State of New York, the law of the Federal Government, and the General Corporation Law of the State of Delaware. With your permission, we have assumed for purposes of this opinion that, notwithstanding that certain of the agreements set forth in Schedule III hereto may contain governing law clauses which provide for a governing law other than the laws of the State of New York, the law governing the agreements set forth in Schedule III hereto is the internal law of the State of New York. With respect to paragraph 1, we do not herein express any opinions as to any matters governed by any laws other than Federal Environmental Laws and Federal Energy Laws.

This opinion is delivered to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent, except that any person that becomes (a) a Bank Party in accordance with the provisions of Section 10.06 of the Senior Secured Credit Facility, (b) a “Secured Holder” under the Senior Collateral Trust Agreement, and (c) a “Second Priority Secured Holder” under the Second Priority Collateral Trust Agreement may rely upon this opinion as if it were specifically addressed and delivered to such person on the date hereof. This opinion is not to be used, circulated, quoted or otherwise referred to for any other purpose without our prior written consent.

Very truly yours,

MG/SL/WW/MK

Attachments

- 4 -

Exhibit A

The Banks, Citicorp USA, Inc., as Administrative Agent and

Citibank, N.A., as Collateral Agent

c/o Citicorp USA, Inc., as Administrative Agent

388 Greenwich Street, 21st Floor

New York, NY 10013

Attention: Stuart Glen

Wilmington Trust Company, as Corporate Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

Bruce L. Bisson, as Individual Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

SCHEDULE I

OFFICER’S CERTIFICATE

OF

THE PROJECT COMPANY

The undersigned, Patrick G. Murphy, President and General Manager of AES Hawaii, Inc. (the “Project Company”), does hereby certify, on behalf of the Project Company, as follows:

(a) Schedule II contains all of the material permits and approvals currently maintained by the Project Company required pursuant to Federal Environmental Laws and Federal Energy Laws (as such terms are defined in the Baker Botts LLP opinion to which this certificate is attached) for purposes of ownership or operation of the Project Company’s assets including the 180 megawatt power plant located in Honolulu, Hawaii (the “Project”). Further, we certify that true, complete, and correct copies of all such permits and approvals have been provided to Baker Botts LLP for the purposes of rendering an opinion in connection with the Credit Documents (as such term is defined in the Baker Botts LLP opinion to which this certificate is attached).

(b) The Project is owned and operated by the Project Company.

(c) Schedule III contains all of the material agreements relating to the Project.

I understand that Baker Botts LLP will rely on this certificate in giving an opinion in connection with the Credit Documents.

IN WITNESS WHEREOF, I have set my hand to this Officer’s Certificate this 17th day of March, 2004.

By:	/s/ Patrick G. Murphy
	Patrick G. Murphy
	President and General Manager
	AES Hawaii, Inc.

SCHEDULE IA

ASSISTANT SECRETARY’S CERTIFICATE

OF

THE AES CORPORATION

The undersigned, Leith Mann, Assistant Secretary of The AES Corporation (“AES”), does hereby certify, on behalf of AES, as follows:

(a) Schedule IV contains all of the constitutive documents of AES Hawaii Management Company, Inc. and AES Hawaii, Inc.

(b) The constitutive documents set forth in Schedule IV are each in full force and effect on the date hereof.

I understand that Baker Botts LLP will rely on this certificate in giving an opinion in connection with The AES Corporation refinancing.

IN WITNESS WHEREOF, I have set my hand to this Assistant Secretary’s Certificate this 17th day of March, 2004.

THE AES CORPORATION
By:	/s/ Leith Mann
	Leith Mann
	Assistant Secretary

SCHEDULE II

LIST OF FEDERAL PERMITS

A. Permits and Approvals Issued Pursuant to Federal Environmental Laws

None.

B. Permits and Approvals Issued Pursuant to Federal Energy Laws

1. AES Barbers Point, Inc., FERC Order Granting Application for Certification as a Qualifying Cogeneration Facility, 45 FERC § 62,002 (October 3, 1988).

2. AES Barbers Point, Inc., FERC Order Granting Application for Recertification as a Qualifying Cogeneration Facility, 48 FERC § 62,209 (September 20, 1989).

SCHEDULE III

LIST OF MATERIAL AGREEMENTS

1. Note Purchase Agreement, dated as of July 30, 2003, among AES Hawaii, Inc. (“AES-HI”), the Purchasers, Wells Fargo Bank Minnesota, National Association, as Administrative Agent, and Wells Fargo Bank Minnesota, National Association, as Collateral Agent.

2. Debt Service Reserve LOC Reimbursement Agreement, dated as of July 30, 2003, among AES-HI, Union Bank of California, N.A., as letter of credit issuer, Union Bank of California, N.A., as letter of credit agent, and the Banks named therein.

3. Debt Service Reserve Letter of Credit, dated as of July 30, 2003, issued by Union Bank of California, N.A. for the benefit of Wells Fargo Bank Minnesota, National Association, as Collateral Agent, as amended by the Amendment to Debt Service Reserve Letter of Credit, dated as of August 8, 2003.

4. Assignment and Security Agreement, dated as of July 30, 2003, between AES-HI and Wells Fargo Bank Minnesota, National Association, as Collateral Agent.

5. Pledge and Security Agreement, dated as of July 30, 2003, between AES Hawaii Management Company, Inc. (“AES Management”) as pledgor, AES-HI, and Wells Fargo Bank Minnesota, National Association, as Collateral Agent.

6. Collateral Agency and Intercreditor Agreement, dated as of July 30, 2003, by and among AES-HI, Wells Fargo Bank Minnesota, National Association, as Collateral Agent, Wells Fargo Bank Minnesota, National Association, as Administrative Agent, and each of the other Secured Parties.

7. Depositary Agreement, dated as of July 30, 2003, among AES-HI, Wells Fargo Bank Minnesota, National Association, as Collateral Agent, and Wells Fargo Bank Minnesota, National Association, as Depository Bank.

8. Mortgage, Assignment of Rents, Security Agreement and UCC Fixture Filing, dated as of July 30, 2003, by AES-HI, as mortgagor, to Wells Fargo Bank Minnesota, National Association, Collateral Agent, as mortgagee.

9. Consent and Recognition and Non-Disturbance Agreement, dated as of July 30, 2003, among AES-HI, Wells Fargo Bank Minnesota, National Association, as Collateral Agent, and the Hawaiian Electric Company, Inc. (“HECO”).

10. Power Purchase Agreement, between AES-HI (f/k/a AES Barbers Point, Inc.) and HECO, dated as of March 25, 1988, as amended by Amendment No. 1, dated as of August 28, 1989, and Amendment No. 2, dated as of May 8, 2003.

11. Guarantee Agreement, between Applied Energy Services, Inc. and HECO, dated as of March 25, 1988, as amended by Amendment No. 1, dated as of August 28, 1989, Amendment No. 2, dated as of March 20, 1990, and Amendment No. 3, dated as of July 30, 2003.

12. Account Control Agreement, dated as of July 30, 2003, among AES-HI, Wells Fargo Minnesota, National Association, as Collateral Agent, and Bank of Hawaii.

13. Fuel Supply Agreement, dated as of June 11, 2003, among AES-HI, PT Kaltim Prima Coal and Sprague Energy Corp.

14. Bulk Unloading Agreement, dated as of February 17, 1990, between AES-HI (f/k/a AES Barbers Point, Inc.), and AES Kalaeloa Venture, L.L.C. (“AES Kalaeloa”) (as successor to rights and obligations of Hawaii Pacific Industries, Inc.), as amended by First Amendment to Bulk Unloading Agreement, between AES-HI and AES Kalaeloa, dated as of July 30, 2003.

15. Steam Sale Agreement, dated as of December 19, 1989, between Chevron U.S.A., Inc. and AES-HI (f/k/a AES Barbers Point, Inc.).

16. Amended and Restated Assignment and Security Agreement, dated as of July 30, 2003, between AES-HI and HECO.

17. Amended and Restated Pledge and Security Agreement, dated as of July 30, 2003, between AES-HI and HECO.

18. Mortgage, Assignment of Rents, Security Agreement and UCC Fixture Filing, dated as of March 20, 1990, by AES-HI (f/k/a AES Barbers Point, Inc.), as mortgagor, to HECO, as mortgagee, as amended by the First Amendment and Partial Release of Mortgage, Assignment of Rents, Security Agreement and Financing Statement, dated as of October 26, 1990, between AES-HI and HECO, and the Second Amendment and Subordination of Mortgage, Assignment of Rents, Security Agreement and Financing Statement, dated as of July 30, 2003, between AES-HI and HECO.

19. Lease No. 947, dated March 28, 1969, by and between the Trustees Under the Will And Of The Estate Of James Campbell, deceased, as Lessor and Dillingham Corporation, as Lessee, as subsequently amended and as subsequently assigned to AES-HI (f/k/a AES Barbers Point, Inc.) by Assignment of Lease dated March 20, 1990, such lease being more fully described in Schedule I to the Mortgage.

SCHEDULE IV

LIST OF ORGANIZATIONAL DOCUMENTS

1. AES Hawaii Management Company, Inc.

(a) By-Laws of AES Hawaii Management Company, Inc., dated as of April 18, 1995.

(b) Certificate of Incorporation of AES Hawaii Management Company, Inc., filed on January 5, 1990.

2. AES Hawaii, Inc.

(a) By-Laws of AES Hawaii, Inc. (f/k/a AES Barber Point, Inc.), undated, as amended by Certificate of Amendment, duly executed and filed on July 30, 2003.

(b) Restated Certificate of Incorporation of AES Hawaii, Inc. (f/k/a AES Barber Point, Inc.), filed on June 28, 1991, as amended by Certificate of Amendment, duly executed and filed on July 30, 2003.

March 17, 2004

To the addressees listed

on Schedule I attached hereto

Ladies and Gentlemen:

We have acted as special Hawaii counsel to AES Hawaii, Inc. (the “Project Company”), in connection with (a) the Third Amended and Restated Credit and Reimbursement Agreement, dated as of March 17, 2004 (the “Credit Agreement”), among The AES Corporation, a Delaware corporation (“AES”), as Borrower, the Subsidiary Guarantors party thereto (the “Subsidiary Guarantors”), including AES Hawaii Management Company, Inc. (the “Tier I Company”), the banks party thereto (the “Banks”), Citicorp USA, Inc., as Administrative Agent for the Banks (the “Administrative Agent”) and Citibank, N. A., as Collateral Agent for the Banks (the “Collateral Agent”), and (b) Amendment No. 2, dated as of March 17, 2004 (the “Collateral Trust Amendment”), to the Current Collateral Trust Agreement (as defined below). Capitalized terms used (but not defined) herein have the meanings assigned to them in the Security Agreement (as defined below). This opinion is being delivered to you pursuant to Section 3.01(c)(iii) of the Credit Agreement.

In arriving at the opinions expressed below, we have examined and relied on the following documents: (a) the Credit Agreement; (b) the Collateral Trust Amendment; (c) the Collateral Trust Agreement dated as of December 12, 2002, as amended by Amendment No. 1 dated as of July 29, 2003 (the “Current Collateral Trust Agreement” and, as amended by the Collateral Trust Amendment, the “Collateral Trust Agreement”), among the Grantors and Wilmington Trust Company, as Corporate Trustee, and Bruce L. Bisson, as Individual Trustee (the Corporate Trustee, together with the Individual Trustee, the “Collateral Trustees”); (d) the Security Agreement dated as of December 12, 2002, as amended by Amendment No. 1 dated as of July 29, 2003 (the “Security Agreement”), from the Grantors to the Collateral Trustees; (e) the Senior Indenture dated May 8, 2003, between AES, as Borrower, and Wells Fargo Bank Minnesota, National Association; (f) the Second Priority Collateral Trust Agreement dated May 8, 2003, made by the Grantors referred to therein to Wells Fargo Bank Minnesota, National Association, as Second Priority Corporate Trustee, and Jeffery T. Rose, as Second Priority Individual Trustee (the “Second Priority Collateral Trust Agreement”); (g) the Second Priority Security Agreement dated May 8, 2003, made by the Grantors referred to therein to Wells Fargo Bank Minnesota, National Association, as Second Priority Corporate Trustee, and Jeffery T. Rose, as Second Priority Individual Trustee (the “Second Priority Security Agreement”); (h) the Officer’s Certificate set forth in the attached Schedule II; and (i) the list of Hawaii permits and approvals set forth in the attached Schedule III.

C S
	Cades Schutte Building 1000 Bishop Street, Suite 1200 Honolulu, Hawaii 96813 Tel: 808.521-9200 Fax: 808.521-9210 www.cades.com	Kona Office 75-170 Hualalai Road, Suite 303 Kailua Kona, Hawaii 96740 Tel: 808.329-5811 Fax: 808.326-1175

The addressees listed on

Schedule I

March 17, 2004

Page 2

The documents listed in items (a) through (d) above are sometimes hereinafter referred to as the “First Priority Collateral Documents” and the documents listed in items (e), (f) and (g) above are sometimes hereinafter referred to as the “Second Priority Collateral Documents.” Together, the First Priority Collateral Documents and the Second Priority Collateral Documents are sometimes hereinafter collectively referred to as the “Credit Documents.”

As to questions of fact material to the opinions set forth below, we have relied on the representations and warranties contained in the Credit Documents and in such other documents, instruments and certificates of public officials, and of officers and representatives of the relevant parties or their parent corporations, and we have made such investigations of law, as we have deemed appropriate as a basis for the opinions expressed below. We have made no independent investigation of the corporate, partnership or other organizational documents or records of any party to any of the Credit Documents.

In rendering the opinions expressed below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as copies and the authenticity of the originals of such copies. In addition, we have assumed that (a) each Credit Document is the legal, valid and binding obligation of the parties thereto enforceable against such parties in accordance with its terms; (b) each of the parties to the Credit Documents is an entity duly organized or formed, validly existing and in good standing in each relevant jurisdiction; (c) each party has full power and authority to execute, deliver and perform each of the Credit Documents to which it is a party; (d) the execution, delivery and performance by each party to each of the Credit Documents to which it is a party have been duly authorized by all necessary corporate, partnership or other organizational action of such party; (e) each of the Credit Agreement and the Collateral Trust Amendment has been duly executed and delivered by each party thereto in a form substantially identical to, and not materially different from, the draft form that we have reviewed; (f) each of the other Credit Documents has been duly executed and delivered by each party thereto; and (g) the Project Company is not a “public utility” within the meaning of chapter 269 (Public Utilities Commission) of the Hawaii Revised Statutes (“HRS”). Further, we have assumed that the Project Company and its assets, including its wholly-owned project-level subsidiaries and their assets are in compliance with applicable Hawaii laws, including Hawaii Environmental Laws and Hawaii Energy Laws as defined below.

Based on the foregoing, and subject to the assumptions and qualifications set forth below, we are of the opinion that:

1. The execution and delivery by the Tier I Company of the Credit Agreement, including, without limitation, the Subsidiary Guaranty (as defined in the Credit Agreement), the

The addressees listed on

Schedule I

March 17, 2004

Page 3

granting of a security interest by AES in all right, title and interest in that portion of the Collateral, as defined in the Security Agreement and the Second Priority Security Agreement, which represents the notes and other amounts receivable from the Tier I Company and its subsidiaries and the capital stock of the Tier I Company (the “Tier I Company Collateral”), and the exercise of remedies by the Collateral Trustees or the Second Priority Collateral Trustees with respect to the Tier I Company Collateral pursuant to, with respect to the Collateral Trustees, the Security Agreement and the Collateral Trust Agreement, and, with respect to Second Priority Collateral Trustees, the Second Priority Security Agreement and the Second Priority Collateral Trust Agreement, require no action by or in respect of, or filing with, any governmental agency or authority of the State of Hawaii by, or on behalf of, the Project Company, except that to the extent the exercise of remedies by the Collateral Trustees or the Second Priority Collateral Trustees would result in any “Triggering Event” described in Schedule III, such Triggering Event would require the actions with respect to the Hawaii Environmental and Energy Permits as described in Schedule III.

2. The execution and delivery by the Tier I Company of the Credit Agreement, including, without limitation, the Subsidiary Guaranty, the granting of a security interest by AES in all right, title and interest in the Tier I Company Collateral, and the exercise of remedies by the Collateral Trustees or the Second Priority Collateral Trustees with respect to the Tier I Company Collateral pursuant to, with respect to the Collateral Trustees, the Security Agreement and the Collateral Trust Agreement, and, with respect to the Second Priority Collateral Trustees, the Second Priority Security Agreement and the Second Priority Collateral Trust Agreement, do not violate any Hawaii Environmental Laws, Hawaii Energy Laws, or the Hawaii Environmental and Energy Permits set forth in Schedule III, provided that the exercise of remedies by the Collateral Trustees or the Second Priority Collateral Trustees does not result in any “Triggering Event” described in Schedule III. Any such Triggering Event would require the actions with respect to the Hawaii Environmental and Energy Permits as described in Schedule III.

3. The execution and delivery by the Tier I Company of the Credit Agreement, including, without limitation, the Subsidiary Guaranty, and the granting of a security interest by AES in all right, title and interest in the Tier I Company Collateral does not (a) contravene, or constitute a default under, any material provision of (i) the Power Purchase Agreement between AES Barbers Point, Inc. and Hawaiian Electric Company, Inc., dated March 25, 1988, as amended by Amendment No. 1 dated August 28, 1989, and Amendment No. 2 dated as of May 8, 2003 (as amended by Agreement re: Amendment No. 2, Second Agreement re: Amendment No. 2 and Third Agreement re: Amendment No. 2 dated, respectively, June 17, 2003, July 1, 2003, and as of July 25, 2003) thereto (collectively, the “Power Purchase Agreement”), (ii) the Guarantee Agreement between Applied Energy Services, Inc. and Hawaiian Electric Company, Inc., executed by the parties thereto on March 25, 1988, as

The addressees listed on

Schedule I

March 17, 2004

Page 4

amended by Amendment Nos. 1, 2 and 3 thereto dated, respectively, as of August 28, 1989, March 20, 1990, and July 30, 2003 (collectively, the “Guarantee Agreement”), or (iii) the Steam Sale Agreement between Chevron U.S.A. Inc. and AES Barbers Point, Inc., dated as of December 19, 1989 the (“Steam Sale Agreement”), or (b) result in or require the creation or imposition of any Lien on any asset of the Project Company under the aforementioned agreements. We bring to your attention that the exercise of remedies by the Collateral Trustees or the Second Priority Collateral Trustees with respect to the Tier I Company Collateral that results in AES ceasing to own and control, directly or indirectly, the minimum percentage of the ownership interests of the Project Company specified in the Power Purchase Agreement would constitute a default under that agreement.

As used herein, the term “Hawaii Government” shall mean the State of Hawaii and any agency, department, commission, board, bureau, or instrumentality thereof. As used herein, the term “Hawaii Environmental Law” shall mean the laws, statutes, rules, and regulations of the Hawaii Government pertaining to protection of human health or safety with respect to hazardous materials or the protection of the environment from contamination by hazardous materials. As used herein, “Hawaii Energy Laws” shall mean the HRS chapters listed on the attached Schedule IV, and any applicable regulations issued thereunder. As used herein, “Hawaii Environmental and Energy Permits” shall mean the material permits and approvals as set forth in Schedule III that have been issued by the Hawaii Government and are currently maintained by the Project Company or its wholly-owned project-level subsidiaries for the purpose of ownership or operation of the Project Company’s or its subsidiaries’ assets.

Our opinions in paragraph 1 and paragraph 2 of this letter are based upon a review of Hawaii Environmental Laws and Hawaii Energy Laws, which in our experience typically apply to business operations similar to those of the Project Company without any investigation concerning any other laws, rules, or regulations. Our opinions in this letter do not address (a) ministerial or immaterial filings or registrations made by the Project Company with the Hawaii Government pursuant to any Hawaii Environmental Laws, Hawaii Energy Laws, or the Hawaii Environmental and Energy Permits; and (b) any governmental permit or approval required under any law, statute, rule or regulation of any governmental authority other than the Hawaii Government.

Our opinion in paragraph 3 of this letter is based solely upon a review of the Power Purchase Agreement, the Guarantee Agreement and the Steam Sale Agreement. Certain of these agreements contain cross default provisions that make defaults under other documents defaults under certain of these agreements. We have not reviewed those other documents and we therefore express no opinion as to whether the subject transactions create a default under certain of these agreements solely because of the cross default provisions.

The addressees listed on

Schedule I

March 17, 2004

Page 5

This opinion is delivered to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent, except that any person that becomes a Bank Party in accordance with the provisions of Section 10.06 of the Credit Agreement and any other person that becomes a “Secured Party” under the Collateral Trust Agreement or a “Second Priority Secured Holder” under the Second Priority Collateral Trust Agreement may rely upon this opinion as if it were specifically addressed and delivered to such person on the date hereof. This opinion is not to be used, circulated, quoted or otherwise referred to for any other purpose without our prior written consent.

We are members of the Bar of the State of Hawaii and the foregoing opinion is limited to the laws of the State of Hawaii.

Very truly yours,

SCHEDULE I

The Banks, Citicorp USA, Inc., as Administrative Agent and

Citibank, N.A., as Collateral Agent

c/o Citicorp USA, Inc., as Administrative Agent

388 Greenwich Street, 21st Floor

New York, NY 10013

Attention: Stuart Glen

Wilmington Trust Company, as Corporate Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

Bruce L. Bisson, as Individual Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

SCHEDULE II

OFFICER’S CERTIFICATE

OF

THE PROJECT COMPANY

The undersigned, Patrick G. Murphy, President and General Manager of AES Hawaii, Inc., a Delaware corporation (the “Project Company”), does hereby certify, on behalf of the Project Company, as follows:

(a) Schedule III contains all of the material permits and approvals currently maintained by the Project Company or its wholly-owned project-level subsidiaries required pursuant to Hawaii Environmental Laws and Hawaii Energy Laws (as such terms are defined in the opinion letter of Cades Schutte LLP) for purposes of ownership or operation of the Project Company’s assets including the 180 megawatt power plant located in Kapolei, Hawaii and owned and operated by the Project Company.

(b) The Project Company and its assets, including its wholly owned project-level subsidiaries and their assets, are in compliance with all applicable Hawaii Environmental Laws and Hawaii Energy Laws.

(c) Except as indicated herein, there have been no amendments or modifications to (i) the Power Purchase Agreement between AES Barbers Point, Inc. and Hawaiian Electric Company, Inc., dated March 25, 1988, as amended by Amendment No. 1 dated August 28, 1989, and Amendment No. 2 dated as of May 8, 2003 (as amended by Agreement re: Amendment No. 2, Second Agreement re: Amendment No. 2 and Third Agreement re: Amendment No. 2 dated, respectively, June 17, 2003, July 1, 2003, and as of July 25, 2003) thereto, (ii) the Guarantee Agreement between Applied Energy Services, Inc. and Hawaiian Electric Company, Inc., executed by the parties thereto on March 25, 1988, as amended by Amendment Nos. 1, 2 and 3 thereto dated, respectively, as of August 28,1989, March 20, 1990, and July 30, 2003, or (iii) the Steam Sale Agreement between Chevron U.S.A. Inc. and AES Barbers Point, Inc., dated as of December 19, 1989.

I understand that Cades Schutte LLP and Baker Botts L.L.P. will rely on this certificate in giving their opinions in connection with The AES Corporation refinancing.

Dated this 17^th day of March     , 2004.

/s/ Patrick G. Murphy
Name:	Patrick G. Murphy
Tittle:	President and General Manager
AES Hawaii, Inc.

SCHEDULE III

LIST OF HAWAII PERMITS AND APPROVALS,

TRIGGERING EVENTS, AND REQUIRED ACTIONS

Permit	Triggering Event	Required Action To Be Taken
1. Covered Source Permit No. 0087-02-C, dated December 29, 2003, 180 MW Coal-Fired Cogeneration Plant, 91-086 Kaomi, Loop, Campbell Industrial Park, Kapolei, Oahu, Department of Health, Expiration Date: December 28, 2008	Transfer by operation of law or otherwise, from person to person, from place to place, or from one piece of equipment to another	Approval of the Department of Health (DOH); request for transfer from person to person shall be made on DOH’s forms (HAR§ 11-60.1-7)
	Change in control or ownership of the facilities to be constructed or modified	Permit shall be binding on all subsequent owners and operators. The permittee shall notify the succeeding owner and operator of the existence of this permit and its conditions by letter, copies of which will be forwarded to the DOH and the Regional Administrator for the U.S. EPA—See Permit, Attachment I
	Permit may be amended for cause.	After affording permittee an opportunity for a hearing pursuant to HAR § 11-60.1-10
2. Solid Waste Management Permit Nos. SW-312361 and RY-0044-96, Department of Health, Solid and Hazardous Waste Branch, located at 91-086 Kaomi Loop, Campbell Industrial Park, Oahu, as supplemented by Letter, dated	Transfer by operation of law or otherwise, either from one location to another, from one solid waste disposal operation to another, or from one person to another	Written approval of the DOH (HAR § 11-58.1-04)

Permit	Triggering Event	Required Action To Be Taken
June 6, 2003, from Steven Y.K. Chang, Chief of Solid and Hazardous Waste Branch, to Patrick Murphy
3. Underground Injection Control, Permit No. UO-1482, Facility Identification No. 3-1806.04 for AES Hawaii Cogenerational Plant, Department of Health, Expiration Date: March 30, 2007	Change in operator, ownership, control, or facility name	Permittee shall report the change to the DOH in writing at least one month prior to the change—See Permit at 12
	Transfer of permit	Although the Permit itself states that “[t]his UIC permit shall not be transferable from the permittee to any other person,” Permit at 17, HAR § 11-23-16 states that the permit “shall not be transferable from the injection well owner to any other person without the approval of the director.” Also, request for transfer shall be made on an application form furnished by the director.
4. National Pollutant Discharge Elimination System Permit, Permit No. HI 0021130 for AES Hawaii, Inc. Coal-Fired Cogeneration Facility, Department of Health, Expiration Date: 11/30/05	Change in owner	HAR § ll-55-04(d)(2) states that a “new owner of a discharge facility covered by an NPDES permit shall file a new NPDES application for a new NPDES permit unless the new owner submits a notice of automatic transfer that meets 40 CFR §122.61(b). The

Permit	Triggering Event	Required Action To Be Taken
		owner or operator shall pay a $500 filing fee which shall be submitted with the NPDES application or notice of automatic transfer that meets 40 CFR §122.61(b).” Mark Tomomitsu, an environmental engineer with the Clean Water Branch (586-4309) indicated that the permittee should file (1) an application (including, without limitation, “Form 1”), (2) a $500 filing fee, and (3) a letter specifying the dates of transfer and an assumption of responsibility by the old and new permittees.
5. R-O/R-2 Recycled Water for Demineralizers, Department of Health	Change in control or transfer of permit	The Permit, HRS, and HAR Title 11, Chapters 61 and 62 are silent. The Guidelines for the Treatment and Use of Recycled Water at 67 (May 15, 2002) only generally state that “[n]o person shall operate a wastewater system unless that person or the owner of the wastewater system is authorized by the director.” Tom See (586-4294), supervisor of the Wastewater Branch of the DOH confirmed that no administrative rules or guidelines address this issue, adding that the permittee should inform DOH, who would then be able to decide what needed to be done.

Permit	Triggering Event	Required Action To Be Taken
6. Private Sewage Treatment Works Operation Approval (1990)	Change in control	HRS Chapter 342D and HAR Title 11, Chapters 61, 62, and 62a do not address this issue. John Ong, an engineer at the Wastewater Branch of the DOH (586-4294), stated that a courtesy letter should be sent describing the change in control. He also indicated that the statute and regulations do not expressly address this issue.
7. Ground Water Use Permit (WUP No. 161) for Well Nos. of permit 1806-11, 12, 13 and 14	Change in control or transfer of permit	HAR § 13-171-25 requires notification within 90 days of the effective date of the change or transfer. Linore Nakamura, Hydrologist for the Regulatory Branch of the Commission on Water Resources Management (587-0218) indicated that the notification should include the contact information of the new party in control. The Commission on Water Resources Management will then issue a new permit.
8. Permit No. 92-027 for two Flammable/Combustible Materials Storage Tanks (above ground, No. 2 diesel)	Change in ownership	Section 105.2.2 of the Uniform Fire Code states that “[p]ermits shall not be transferable and any change in use, occupancy, operation or ownership shall require a new permit.” Lloyd Trujillo of the HFD’s Fire Prevention Bureau, Plans Examining Section (523-4186) said that if

Permit	Triggering Event	Required Action To Be Taken
		the name of the permittee and all other information on the permit will remain the same, then a new permit is not required. Otherwise, a letter may be sent to the Fire Chief seeking a waiver of the new permit requirement

SCHEDULE IV

HAWAII ENERGY LAWS

HRS chapter 196 (Energy Resources).

HRS chapter 196D (Geothermal and Cable System Development).

HRS chapter 226 (Hawaii State Planning Act).

30 Rockefeller Plaza, New York, NY 10112                         tel 212-408-5100 fax 212-541-5369

March 17, 2004

To Each of the Persons Listed

        on Exhibit A Attached Hereto

Dear Sirs:

We have acted as special New York counsel to AES Eastern Energy, L.P. (“AEE”) and Somerset Railroad Corporation (“Somerset”; together with AEE, the “Project Companies”), in connection with the review of (a) the Third Amended and Restated Credit and Reimbursement Agreement (the “Senior Secured Credit Facility”), dated as of March 17, 2004, among The AES Corporation, a Delaware corporation (“AES”), the Subsidiary Guarantors party thereto and as defined therein, including AES NY Funding, LLC (the “Tier I Company”), the banks party thereto (the “Bank Parties”), Citicorp USA, Inc., as Administrative Agent for the Bank Parties (in such capacity, the “Agent”) and Citibank, N.A., as the Collateral Agent for the Bank Parties (in such capacity, the “Collateral Agent”) and (b) the Indenture (the “Indenture”), dated as of May 8, 2003, between AES and Wells Fargo Bank Minnesota, National Association. We are advised that AEE owns 100% of the ownership interests in AES Somerset, L.L.C. and AES Cayuga, L.L.C., and AEE2, L.L.C. (“AEE2”) owns 100% of the ownership interests in AES Greenidge, L.L.C. and AES Westover, L.L.C. (together, except for AEE2, the “Wholly-Owned Subsidiaries”). Capitalized terms used (but not defined) herein have the meanings assigned to them in the Senior Security Agreement (as defined below). This opinion is being delivered to you pursuant to Section 3.01(c)(iii) of the Senior Secured Credit Facility.

In arriving at the opinions expressed below, we have examined and relied on originals or copies, certified or otherwise identified to our satisfaction, of the following documents: (a) the Senior Secured Credit Facility (including, without limitation, the Subsidiary Guaranty set forth in Article IX thereof (the “Guaranty”), (b) the Indenture, (c) the Collateral Trust Agreement (as amended by Amendment No. 1 to the Collateral Trust Agreement, dated as of July 29, 2003 and Amendment No. 2, dated as of March 17, 2004, the “Senior Collateral Trust Agreement”), dated December 12, 2002, by and among the Grantors referred to therein and the Collateral Trustees referred to therein (the “Senior Collateral Trustees”), (d) the Security Agreement (as amended by Amendment No. 1 to the Security Agreement, dated as of July 29, 2003, the “Senior Security Agreement”), dated December 12, 2002, from the Grantors referred to therein to the Senior Collateral Trustees, (e) the Second Priority Collateral Trust Agreement (the “Second Priority Collateral Trust Agreement”; together with the Senior Collateral Trust Agreement, the “Collateral Trust Agreements”), dated as of May 8, 2003, by and among the Grantors referred to therein and the Second Priority Collateral Trustees referred to therein (the “Second Priority Collateral

New York Washington Los Angeles Houston London (a multinational partnership) Moscow Beijing

Trustees”), (f) the Second Priority Security Agreement (the “Second Priority Security Agreement”; together with the Senior Security Agreement, the “Security Agreements”), dated as of May 8, 2003, from the Grantors referred to therein to the Second Priority Collateral Trustees, (g) the Officers’ Certificate set forth in Schedule I, (h) the Assistant Secretary’s Certificate set forth in Schedule IA, (i) the permits and approvals set forth in Schedules IIA and IIB, (j) the agreements set forth in Schedule III, and (k) the organizational documents set forth in Schedule IV.

The documents listed in items (a) through (f) of the preceding paragraph are sometimes hereinafter referred to as the “Credit Documents.”

As to questions of fact material to the opinions set forth below, we have also relied on the representations and warranties contained in the Credit Documents and in such other documents, instruments and certificates of public officials, and of officers and representatives of AES, the Project Companies and the Tier I Company, and we have made such investigations of law, as we have deemed appropriate as a basis for the opinions expressed below. Except for our review of the documents set forth in Schedule IV, we have made no independent investigation of the corporate, partnership or other organizational documents or records of AES or either of the Project Companies or the Tier I Company or their respective Affiliates or Subsidiaries (each as defined in the Senior Secured Credit Facility) or any party to any of the Credit Documents. We have made no independent investigation as to whether the representations and warranties and other statements in the Credit Documents and in such other documents, instruments and certificates are accurate or complete.

In rendering the opinions expressed below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as copies and the authenticity of the originals of such copies. Further, we have assumed that the Project Companies and their assets and the Wholly-Owned Subsidiaries and their assets, are in compliance with applicable New York Environmental Laws, Federal Environmental Laws, New York Energy Laws, and Federal Energy Laws as defined below.

Based on the foregoing, and subject to the additional assumptions, qualifications and limitations set forth below, we are of the opinion that:

1. The execution and delivery by the Tier I Company of the Guaranty and the granting of a security interest by AES in all right, title and interest in that portion of the Collateral, as defined in each of the Security Agreements, which represents membership interests in the Tier I Company and notes and other amounts payable by the Tier I Company and its subsidiaries to AES (the “Tier I Company Collateral”), and the exercise of remedies by the Senior Collateral Trustees pursuant to the Senior Security Agreement and the Senior Collateral Trust Agreement or the Second Priority Collateral Trustees pursuant to the Second

-2- March 17, 2004

Priority Security Agreement and the Second Priority Collateral Trust Agreement with respect to the Tier I Company Collateral (a) does not require any action by or in respect of, or filing with, the Federal Government by, or on behalf of, AEE or any of the Wholly-Owned Subsidiaries pursuant to any New York Environmental Laws, Federal Environmental Laws, New York Energy Laws or Federal Energy Laws and (b) does not violate any New York Environmental Laws, Federal Environmental Laws, New York Energy Laws, Federal Energy Laws, or the New York Permits or the Federal Permits set forth in Schedules IIA and IIB, provided that with respect to clauses (a) and (b) of this sentence, the exercise of remedies by either the Senior Collateral Trustees or the Second Priority Collateral Trustees does not result in a change in ownership or control of AEE or any of the Wholly-Owned Subsidiaries or the identity of the owner or operator of the assets of AEE or of the assets of any of the Wholly-Owned Subsidiaries. We note that any such change in ownership or control of AEE, AEE2 or any of the Wholly-Owned Subsidiaries or the identity of the owner or operator of the assets of AEE or of the assets of any of the Wholly-Owned Subsidiaries will require the refiling, reissuance or transfer of the New York Permits and/or the Federal Permits set forth in Schedule IIA (and may require the refiling, reissuance or transfer of the New York Permits and/or the Federal Permits set forth in Schedule IIB), an application for approval of the Federal Energy Regulatory Commission (“FERC”) pursuant to Section 203 of the Federal Power Act, and/or a notice, filing, report, or application to the FERC concerning market-based rates. Each of the Wholly-Owned Subsidiaries is an Exempt Wholesale Generator (“EWG”) as defined in Section 32 of the Public Utility Holding Company Act of 1935, as amended (“PUHCA”), and as such is exempt from regulation under PUHCA. The EWG status of each of the Wholly-Owned Subsidiaries was approved by the FERC orders identified on Schedule IIB. With respect to the permits and approvals issued pursuant to Federal Energy Laws listed on Schedule IIB, so long as each of the Wholly-Owned Subsidiaries remains an EWG as defined under the Federal Energy Laws, neither the Secured Holders (as defined in the Senior Collateral Trust Agreement) nor the Second Priority Secured Holders (as defined in the Second Priority Collateral Trust Agreement) will, solely as a result of ownership or operation of AEE, AEE2 or each of the Wholly-Owned Subsidiaries due to the exercise of any remedy provided in the Guaranty, the Security Agreements or the Collateral Trust Agreements, become subject to regulation as a “public-utility company,” an “electric utility company,” a “holding company,” an “affiliate” of a “holding company,” or an “affiliate” of a “subsidiary company” of a “holding company,” as each term is defined under the Federal Energy Laws.

2. The execution and delivery by the Tier I Company of the Guaranty and the granting of a security interest by AES in all right, title and interest in the Tier I Company Collateral does not (a)(i) contravene, or constitute a default under, any material provision of any agreement set forth in Schedule III which agreements have been represented to us by the Project Companies to be all of the material agreements relating to the Projects (as defined in Schedule I) or (ii) contravene any organizational document set forth in Schedule IV which

-3- March 17, 2004

organizational documents have been represented to us by AES to be (x) all the constitutive documents of the Tier I Company, AES New York Holdings, L.L.C., AES NY, L.L.C., AES NY, L.L.C., AES NY3, L.L.C., each of the Project Companies, AEE2 and each of the Wholly-Owned Subsidiaries and (y) in full force and effect on the date hereof or (b) result in or require the creation or imposition of any Lien (as defined in the Senior Secured Credit Facility) on any asset of either Project Company under any agreement set forth in Schedule III. We bring to your attention that the exercise of remedies by either the Senior Collateral Trustees or the Second Priority Collateral Trustees with respect to the Tier I Company Collateral that results in AES ceasing to (i) own, directly or indirectly, the minimum percentage of ownership interests in Somerset specified in such agreements, or (ii) own and control, directly or indirectly, the minimum percentage of the voting and economic interests in AEE, its general partner or AES NY3, LLC, specified in such agreements, would constitute a default under certain of the agreements set forth in Schedule III

As used herein, the term “New York State Government” shall mean the New York State government, or any agency, department, commission, board, bureau, or instrumentality thereof. As used herein, the term “New York Environmental Laws” shall mean the laws, statutes, rules, and regulations of the New York State Government pertaining to protection of human health or safety with respect to hazardous materials or the protection of the environment from contamination by hazardous materials. As used herein, “New York State Energy Laws” shall mean the Public Service Law of New York State, and any applicable regulations issued thereunder. As used herein, “New York Permits” shall mean those material permits and approvals, if any, issued pursuant to Federal Environmental Laws, Federal Energy Laws, New York Environmental Laws and New York Energy Laws set forth in Schedules IIA and IIB that have been issued by the New York State Government and are currently maintained by AEE, AEE2 or any of the Wholly-Owned Subsidiaries for the purpose of ownership or operation of AEE’s, AEE2’s or any of the Wholly-Owned Subsidiaries’ assets.

As used herein, the term “Federal Government” shall mean the United States of America, or any agency, department, commission, board, bureau, or instrumentality thereof. As used herein, the term “Federal Environmental Laws” shall mean the laws, statutes, rules, and regulations of the Federal Government pertaining to protection of human health or safety with respect to hazardous materials or the protection of the environment from contamination by hazardous materials. As used herein, “Federal Energy Laws” shall mean the Public Utility Holding Company Act of 1935, the Federal Power Act, and the Public Utility Regulatory Policies Act of 1978, and any applicable regulations issued thereunder. As used herein, “Federal Permits” shall mean the material permits and approvals issued pursuant to Federal Environmental Laws and Federal Energy Laws as set forth in Schedules IIA and IIB that have been issued by the Federal Government and are currently maintained by AEE, AEE2 or any

-4- March 17, 2004

of the Wholly-Owned Subsidiaries for the purpose of ownership or operation of AEE’s, AEE2’s or any of the Wholly-Owned Subsidiaries’ assets.

Our opinions in paragraph 1 of this letter are based upon a review of the New York Environmental Laws, Federal Environmental Laws, New York Energy Laws, and the Federal Energy Laws in effect on the date hereof, which in our experience typically apply to business operations similar to those of the Project Companies and each of the Wholly-Owned Subsidiaries without any investigation concerning any other laws, rules, or regulations. Our opinions in this letter do not address (a) ministerial or immaterial filings or registrations made by AEE, AEE2, or any of the Wholly-Owned Subsidiaries with (i) the New York State Government pursuant to any New York Environmental Laws, New York Energy Laws or the New York Permits or (ii) the Federal Government pursuant to any Federal Environmental Laws, Federal Energy Laws, or the Federal Permits, (b) any governmental permit or approval required under any law, statute, rule or regulation of any governmental authority other than the New York State Government or the Federal Government, and (c) any governmental permit or approval issued by any state, regional, county, municipal, local, or other governmental authority pursuant to authority delegated to any such entity pursuant to any New York Environmental Laws or any Federal Environmental Laws.

We are members of the Bar of the State of New York and we do not express any opinion herein concerning any law other than the law of the State of New York, the law of the Federal Government, the Limited Liability Company Act of the State of Delaware, the Delaware Revised Uniform Limited Partnership Act, and the General Corporation Law of the State of Delaware. With respect to paragraph 1, we do not herein express any opinions as to any matters governed by any laws other than New York Environmental Laws, Federal Environmental Laws, New York Energy Laws, and Federal Energy Laws.

This opinion is delivered to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent, except that any person that becomes (a) a Bank Party in accordance with the provisions of Section 10.06 of the Senior Secured Credit Facility, (b) a “Secured Holder” under the Senior Collateral Trust Agreement, and (c) a “Second Priority Secured Holder” under the Second Priority Collateral Trust Agreement may rely upon this opinion as if it were specifically addressed and delivered to such person on the date hereof. This opinion is not to be used, circulated, quoted or otherwise referred to for any other purpose without our prior written consent.

Very truly yours,

-5- March 17, 2004

Exhibit A

The Banks, Citicorp USA, Inc., as Administrative Agent and

Citibank, N.A., as Collateral Agent

c/o Citicorp USA, Inc., as Administrative Agent

388 Greenwich Street, 21st Floor

New York, NY 10013

Attention: Stuart Glen

Wilmington Trust Company, as Corporate Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

Bruce L. Bisson, as Individual Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

SCHEDULE I

OFFICERS’ CERTIFICATE

OF

THE PROJECT COMPANIES

The undersigned,                     ,                      of AES Eastern Energy, L.P (“AEE”) and                      of Somerset Railroad Corporation (collectively, the “Project Companies”), does hereby certify, on behalf of the Project Companies and AEE’s and AEE2, L.L.C.’s (“AEE2”) wholly-owned subsidiaries, as follows:

(a) Schedules IIA and IIB contain all of the material permits and approvals currently maintained by AEE, AEE2 or their directly or indirectly wholly-owned subsidiaries required pursuant to New York Environmental Laws, Federal Environmental Laws, New York Energy Laws and Federal Energy Laws (as such terms are defined in the Chadbourne & Parke LLP opinion to which this certificate is attached) for purposes of ownership or operation of AEE’s and AEE2’s assets and the assets of their directly or indirectly wholly-owned subsidiaries including the 675 megawatt power plant located northeast of Niagara Falls, New York (the “Somerset Project”), the 306 megawatt power plant located near the town of Lansing, New York (the “Cayuga Project”), the 161 megawatt power plant located adjacent to the village of Dresden, New York (the “Greenidge Project”), and the 126 megawatt power plant located in Johnson City, New York (the “Westover Project”; together with the Somerset Project, the Cayuga Project and the Greenidge Project, the “Projects”). Further, we certify that true, complete, and correct copies of all such permits and approvals have been provided to Chadbourne & Parke LLP for the purposes of rendering an opinion in connection with the Credit Documents (as such term is defined in the Chadbourne & Parke LLP opinion to which this certificate is attached).

(b) The Somerset Project is owned and operated by AES Somerset, L.L.C.; the Cayuga Project is owned and operated by AES Cayuga, L.L.C.; the Greenidge Project is owned and operated by AES Greenidge, L.L.C.; and the Westover Project is owned and operated by AES Westover, L.L.C.

(c) Schedule III contains all of the material agreements relating to the Projects.

I understand that Chadbourne & Parke LLP will rely on this certificate in giving an opinion in connection with the Credit Documents.

IN WITNESS WHEREOF, I have set my hand to this Officers’ Certificate this      day of March, 2004.

By:

Name:

Title:

SCHEDULE IA

ASSISTANT SECRETARY’S CERTIFICATE

OF

THE AES CORPORATION

The undersigned, Leith Mann, Assistant Secretary of The AES Corporation (“AES”), does hereby certify, on behalf of AES, as follows:

(a) Schedule IV contains all of the constitutive documents of AES New York Funding, L.L.C., AES New York Holdings, L.L.C., AES NY, L.L.C., AES NY2, L.L.C., AES NY3, L.L.C., Somerset Railroad Corporation, AES Eastern Energy, L.P., AES Cayuga, L.L.C., AEE2, L.L.C., AES Somerset, L.L.C., AES Greenidge, L.L.C., and AES Westover, L.L.C.

(b) The constitutive documents set forth in Schedule IV are each in full force and effect on the date hereof.

I understand that Chadbourne & Parke LLP will rely on this certificate in giving an opinion in connection with The AES Corporation refinancing.

IN WITNESS WHEREOF, I have set my hand to this Assistant Secretary’s Certificate this      day of March, 2004.

THE AES CORPORATION
By:
Name:	Leith Mann
Title:	Assistant Secretary

SCHEDULE IIA

LIST OF PERMITS AND APPROVALS ISSUED PURSUANT TO FEDERAL

ENVIRONMENTAL LAWS AND NEW YORK ENVIRONMENTAL LAWS

I. AES SOMERSET

1. Certificate of Environmental Compatibility and Public Need (“CECPN”) No. 80002, as modified, issued by New York State Board on Electric Generation Siting and the Environment.

2. Title V air operating permit, including Acid Rain Phase II permit, No. 9-2938-00003/00002, as modified, issued by New York Department of Environmental Conservation (“DEC”).

3. Prevention of Significant Deterioration (Air) Permit, as modified, issued by U.S. Environmental Protection Agency (“EPA”).

4. NO_x RACT Plan.

5. SPDES Wastewater Permit No. NY-010 4213, as modified, issued by DEC.

6. Beneficial Use Determination (“BUD”) (Bottom Ash in Roadbeds) No. 286-9-32 issued by DEC.

7. BUD (Clean Unadulterated Wood) No. 239-00-09 issued by DEC.

8. BUD (Gypsum) No. 376-09-04 issued by DEC.

9. Great Lakes Water Withdrawal Registration No. NYGLWR-0002608 issued by DEC.

10. Hazardous Substance Storage Registration No. 9-000206 issued by DEC.

11. Petroleum Storage Registration No. 9-225460 issued by DEC.

12. U.S. Department of Transportation Hazardous Materials Certificates #082001002023JL.

II. AES CAYUGA

1. Title V air operating permit, including Acid Rain Phase II permit, No. 2532, issued by DEC with an effective date of December 6, 2001.

2. N0_X RACT Plan.

3. Wastewater SPDES Permit No. NY-000-1333 issued by DEC.

4. Permit to Operate a Solid Waste Disposal Facility No. 7-5032-00069/00001 (Ash Disposal Site).

5. BUD (Surface for Running Track) No. 436-07-04 issued by DEC.

6. BUD (Gypsum) No. 206-07-55 issued by DEC.

7. Great Lakes Water Withdrawal Certificate No. NYGLR-0002406 issued by DEC.

8. Hazardous Substance Storage Registration No. 7-000140 issued by DEC.

9. Petroleum Storage Registration No. 7-388750 issued by DEC.

III. AES WESTOVER

1. Title V air operating permit, including Acid Rain Phase II permit, No. 2526, issued by DEC with an effective date of November 15, 2001.

2. NO_x RACT Plan.

3. Used Oil Burning (Air/Solid Waste) Permit No. 7-0346-00045-00004-0 issued by DEC.

4. SPDES Wastewater Permit No. NY-000 3875 issued by DEC.

5. BUD (Surface for Running Track) No. 436-07-04 issued by DEC.

6. BUD (Fly Ash and Bottom Ash Flowable Fill) No. 530-794 issued by DEC.

7. Intake Dredging Permit No. NY-704-16-0051 issued by DEC.

8. Petroleum Storage Registration No. 7-388742 issued by DEC.

IV. AES GREENIDGE

1. Title V air operating permit, including Acid Rain Phase II permit, No. 2527, issued by DEC with an effective date of September 7, 2001.

2. NO_x RACT Plan.

3. SPDES Wastewater Permit No. NY-000 1325 issued by DEC.

4. Alternative Fuels (Air/Solid Waste) Permit No. 8-5736-00004/00003 issued by DEC.

5. Used Oil (Air/Solid Waste) Permit No. 8-5736-0004/0004-0 issued by DEC.

6. BUD (Clean Unadulterated Wood) No. 239-00-09 issued by DEC.

7. BUD (Processed Construction and Demolition Wood) No. 402-07-04 issued by DEC.

8. BUD (Clean Unadulterated Wood and Fiber Board) No. 494-08-62 issued by DEC.

9. BUD (E-Fuel Material) No. 492-08-62 issued by DEC.

10. BUD (Thermal Material) No. 491-08-62 issued by DEC.

11. Great Lakes Water Withdrawal No. NYGLR-0002507 issued by DEC.

12. Hazardous Substance Storage Registration No. 8-000158 issued by DEC.

13. Petroleum Storage Registration No. 8-144002 issued by DEC.

14. Permit to Operate a Solid Waste Disposal Facility No. 8-5736-0005-00003 issued by DEC.

15. SPDES Wastewater Permit No. NY-010 7069 issued by DEC for Lockwood Ash Disposal facility.

16. Stormwater Discharge No. NYR00A765 issued by DEC for the Lockwood Ash Disposal facility.

V. AES NY/AES EASTERN ENERGY

None.

SCHEDULE IIB

LIST OF PERMITS AND APPROVALS ISSUED

PURSUANT TO FEDERAL ENERGY LAWS AND NEW YORK ENERGY LAWS

I. AES SOMERSET

1. Determination of Exempt Wholesale Generator Status for AES Somerset, L.L.C., Docket No. EG99-63-000 issued by Federal Energy Regulatory Commission (“FERC”) on February 18, 1999.

II. AES CAYUGA

1. Determination of Exempt Wholesale Generator Status for AES Cayuga, L.L.C., Docket No. EG99-65-000 issued by FERC on February 23, 1999.

III. AES WESTOVER

1. Determination of Exempt Wholesale Generator Status for AES Westover, L.L.C., Docket No. EG99-62-000 issued by FERC on February 18, 1999.

IV. AES GREENIDGE

1. Determination of Exempt Wholesale Generator Status for AES Greenidge, L.L.C., Docket No. EG99-64-000 issued by FERC on February 18, 1999.

V. AES NY/AES EASTERN ENERGY

1. Order Approving Transfer of Electric Generation Facilities, Approving Contracts Upon a Condition, and Making Other Findings, Case 96-E-0891 issued by PSC on December 3, 1998.

2. Order Accepting for Filing Proposed Market-Based Rates for AES NY, L.L.C. issued by FERC on January 5, 1999.

3. Notice of Issuance of Order re: Commission preapproval of Financing issued by FERC on January 7, 1999.

4. Order Authorizing Disposition of Jurisdictional Facilities issued by FERC on January 29, 1999.

5. Notice of Succession in Ownership and Operation of AES Eastern Energy, L.P. to the FERC Rate Schedule of AES NY, L.L.C. issued by FERC on January 22, 1999.

6. Determination of Exempt Wholesale Generator Status for AES Eastern Energy, L.P., Docket No. EG99-55-000 issued by FERC on February 5, 1999.

7. AES Eastern Energy, L.P. re: rate schedule designations accepted for filing issued by FERC on February 17, 1999.

8. Letter Accepting Revisions to Market-Based Rate Tariff to include Ancillary Services issued by FERC on March 16, 1999.

9. Declaratory Ruling on Lightened Regulation; disclaiming jurisdiction over passive financing participants issued by PSC on March 23, 1999.

10. Order Granting Request for a Declaratory Order and Disclaiming Jurisdiction, Docket No. EL99-37-000 issued by FERC on April 6, 1999.

11. Determination of Exempt Wholesale Generator Status for AEE 2, L.L.C., Docket No. EG99-102-000 issued by FERC on April 6, 1999.

12. Order Authorizing Disposition of Jurisdictional Facilities (section 203 for AEE 2), Docket No. EC99-57-000 issued by FERC on April 9, 1999.

13. Letter Accepting Market-Based Rate Schedule (section 205 for AEE 2), Docket No. ER99-2284-000 issued by FERC on April 23, 1999.

14. Order Providing for Lightened Regulation, Case 99-E-0148 for AES Eastern Energy, L.P. and AEE 2, L.L.C. issued by FERC on April 23, 1999.

15. Order Authorizing Issuance of Lease Obligation Notes and Entry Into Revolving Credit Agreements (Under Section 69 of the Public Service Law) Case No. 99-E-0605 issued by PSC on May 6, 1999.

16. NYSEG, NGE Gen and AES NY, L.L.C. joint filing re: Amendment No. 1 to the Interconnection Agreement between NYSEG and AES NY, L.L.C. and Amendment No. 1 to the Milliken Operating Agreement between NYSEG and AES NY, L.L.C., Docket No. ER98-4406-000 issued by FERC.

17. Notice of Succession, assignments of various agreements to the other AES entities from AES NY issued by FERC.

18. EWG (12) applications, Docket Nos. EG99-128-000 through EG99-139-000 for 6 Milliken and 6 Kintigh Trusts issued by FERC.

19. AES Entities must file substation contracts and quarterly reports of short term transactions and long term contracts under market-based tariffs as required by FERC.

SCHEDULE III

LIST OF MATERIAL AGREEMENTS¹

1. Participation Agreement, dated as of May 1, 1999, as amended by that certain Omnibus Amendment to Kintigh A-1 Transaction Documents, dated as of December 1, 2000, as further amended by the Second Amendment to Kintigh A-1 Participation Agreement and Appendix A dated, as of April 10, 2001, among AES Eastern Energy, L.P. (“AEE”), Kintigh Facility Trust A-1, DCC Project Finance Fourteen, Inc., and Bankers Trust Company (the “Indenture Trustee”).

2. Participation Agreement, dated as of May 1, 1999, as amended by that certain Omnibus Amendment to Kintigh A-2 Transaction Documents, dated as of December 1, 2000, as further amended by the Second Amendment to Kintigh A-2 Participation Agreement and Appendix A, dated as of April 10, 2001, among AEE, Kintigh Facility Trust A-2, DCC Project Finance Fifteen, Inc., and the Indenture Trustee.

3. Participation Agreement, dated as of May 1, 1999, as amended by that certain Omnibus Amendment to Kintigh B-1 Transaction Documents, dated as of December 1, 2000, as further amended by the Second Amendment to Kintigh B-1 Participation Agreement and Appendix A, dated as of April 10, 2001, among AEE, Kintigh Facility Trust B-1, First Chicago Leasing Corporation, and the Indenture Trustee.

4. Participation Agreement, dated as of May 1, 1999, as amended by that certain Omnibus Amendment to Kintigh B-2 Transaction Documents, dated as of December 1, 2000, as further amended by the Second Amendment to Kintigh B-2 Participation Agreement and Appendix A, dated as of April 10, 2001, among AEE, Kintigh Facility Trust B-2, First Chicago Leasing Corporation, and the Indenture Trustee.

¹ We have placed an asterisk (*) prior to those agreements set forth in this Schedule III which contain default provisions that would be contravened upon an exercise of remedies by the Senior Collateral Trustees or the Second Priority Collateral Trustees with respect to the Tier I Company Collateral. We note that certain other agreements set forth in this Schedule III may contain cross-default provisions that would be contravened upon the occurrence of a default under those documents described in the preceding sentence.

5. Participation Agreement, dated as of May 1, 1999, as amended by that certain Omnibus Amendment to Kintigh C-1 Transaction Documents, dated as of December 1, 2000, as further amended by the Second Amendment to Kintigh C-1 Participation Agreement and Appendix A, dated as of April 10, 2001, among AEE, Kintigh Facility Trust C-1, Bankers Commercial Corporation, and the Indenture Trustee.

6. Participation Agreement, dated as of May 1, 1999, as amended by that certain Omnibus Amendment to Kintigh C-2 Transaction Documents, dated as of December 1, 2000, as further amended by the Second Amendment to Kintigh C-2 Participation Agreement and Appendix A, dated as of April 10, 2001, among AEE, Kintigh Facility Trust C-2, Bankers Commercial Corporation, and the Indenture Trustee.

7. Participation Agreement, dated as of May 1, 1999, as amended by that certain Omnibus Amendment to Milliken A-1 Transaction Documents, dated as of December 1, 2000, as further amended by the Second Amendment to Milliken A-1 Participation Agreement and Appendix A, dated as of April 10, 2001, among AEE, Milliken Facility Trust A-1, DCC Project Finance Fourteen, Inc., and the Indenture Trustee.

8. Participation Agreement, dated as of May 1, 1999, as amended by that certain Omnibus Amendment to Milliken A-2 Transaction Documents, dated as of December 1, 2000, as further amended by the Second Amendment to Milliken A-2 Participation Agreement and Appendix A, dated as of April 10, 2001, among AEE, Milliken Facility Trust A-2, DCC Project Finance Fifteen, Inc., and the Indenture Trustee.

9. Participation Agreement, dated as of May 1, 1999, as amended by that certain Omnibus Amendment to Milliken B-1 Transaction Documents, dated as of December 1, 2000, as further amended by the Second Amendment to Milliken B-1 Participation Agreement and Appendix A, dated as of April 10, 2001, among AEE, Milliken Facility Trust B-1, First Chicago Leasing Corporation, and the Indenture Trustee.

10. Participation Agreement, dated as of May 1, 1999, as amended by that certain Omnibus Amendment to Milliken B-2 Transaction Documents, dated as of December 1, 2000, as further amended by the Second Amendment to Milliken B-2 Participation Agreement and Appendix A, dated as of April 10, 2001, among AEE, Milliken Facility Trust B-2, First Chicago Leasing Corporation, and the Indenture Trustee.

11. Participation Agreement, dated as of May 1,1999, as amended by that certain Omnibus Amendment to Milliken C-1 Transaction Documents, dated as of December 1, 2000, as further amended by the Second Amendment to Milliken C-1 Participation Agreement and Appendix A, dated as of April 10, 2001, among AEE, Milliken Facility Trust C-1, Bankers Commercial Corporation, and the Indenture Trustee.

12. Participation Agreement, dated as of May 1, 1999, as amended by that certain Omnibus Amendment to Milliken C-2 Transaction Documents, dated as of December 1, 2000, as further amended by the Second Amendment to Milliken C-2 Participation Agreement and Appendix A, dated as of April 10, 2001, among AEE, Milliken Facility Trust C-2, Bankers Commercial Corporation, and the Indenture Trustee.

13. *Facility Lease Agreement, dated as of May 1, 1999, between Kintigh Facility Trust A-1 and AEE.

14. *Facility Lease Agreement, dated as of May 1, 1999, between Kintigh Facility Trust A-2 and AEE.

15. *Facility Lease Agreement, dated as of May 1, 1999, between Kintigh Facility Trust B-1 and AEE.

16. *Facility Lease Agreement, dated as of May 1, 1999, between Kintigh Facility Trust B-2 and AEE.

17. *Facility Lease Agreement, dated as of May 1, 1999, between Kintigh Facility Trust C-1 and AEE.

18. *Facility Lease Agreement, dated as of May 1, 1999, between Kintigh Facility Trust C-2 and AEE.

19. *Facility Lease Agreement, dated as of May 1, 1999, between Milliken Facility Trust A-1 and AEE.

20. *Facility Lease Agreement, dated as of May 1, 1999, between Milliken Facility Trust A-2 and AEE.

21. *Facility Lease Agreement, dated as of May 1, 1999, between Milliken Facility Trust B-1 and AEE.

22. *Facility Lease Agreement, dated as of May 1, 1999, between Milliken Facility Trust B-2 and AEE.

23. *Facility Lease Agreement, dated as of May 1, 1999, between Milliken Facility Trust C-1 and AEE.

24. *Facility Lease Agreement, dated as of May 1, 1999, between Milliken Facility Trust C-2 and AEE.

25. Site Lease Agreement, dated as of May 1, 1999, between AEE and Kintigh Facility Trust A-1.

26. Site Lease Agreement, dated as of May 1, 1999, between AEE and Kintigh Facility Trust A-2.

27. Site Lease Agreement, dated as of May 1, 1999, between AEE and Kintigh Facility Trust B-1.

28. Site Lease Agreement, dated as of May 1, 1999, between AEE and Kintigh Facility Trust B-2.

29. Site Lease Agreement, dated as of May 1, 1999, between AEE and Kintigh Facility Trust C-1.

30. Site Lease Agreement, dated as of May 1, 1999, between AEE and Kintigh Facility Trust C-2.

31. Site Lease Agreement, dated as of May 1, 1999, between AEE and Milliken Facility Trust A-1.

32. Site Lease Agreement, dated as of May 1, 1999, between AEE and Milliken Facility Trust A-2.

33. Site Lease Agreement, dated as of May 1, 1999, between AEE and Milliken Facility Trust B-1.

34. Site Lease Agreement, dated as of May 1, 1999, between AEE and Milliken Facility Trust B-2.

35. Site Lease Agreement, dated as of May 1, 1999, between AEE and Milliken Facility Trust C-1

36. Site Lease Agreement, dated as of May 1, 1999, between AEE and Milliken Facility Trust C-2.

37. Indenture of Trust and Security Agreement, dated as of May 1, 1999, between Kintigh Facility Trust A-1 and the Indenture Trustee.

38. Indenture of Trust and Security Agreement, dated as of May 1, 1999, between Kintigh Facility Trust A-2 and the Indenture Trustee.

39. Indenture of Trust and Security Agreement, dated as of May 1, 1999, between Kintigh Facility Trust B-1 and the Indenture Trustee.

40. Indenture of Trust and Security Agreement, dated as of May 1, 1999, between Kintigh Facility Trust B-2 and the Indenture Trustee.

41. Indenture of Trust and Security Agreement, dated as of May 1, 1999, between Kintigh Facility Trust C-1 and the Indenture Trustee.

42. Indenture of Trust and Security Agreement, dated as of May 1, 1999, between Kintigh Facility Trust C-2 and the Indenture Trustee.

43. Indenture of Trust and Security Agreement, dated as of May 1, 1999, between Milliken Facility Trust A-1 and the Indenture Trustee.

44. Indenture of Trust and Security Agreement, dated as of May 1, 1999, between Milliken Facility Trust A-2 and the Indenture Trustee.

45. Indenture of Trust and Security Agreement, dated as of May 1, 1999, between Milliken Facility Trust B-1 and the Indenture Trustee.

46. Indenture of Trust and Security Agreement, dated as of May 1, 1999, between Milliken Facility Trust B-2 and the Indenture Trustee.

47. Indenture of Trust and Security Agreement, dated as of May 1, 1999, between Milliken Facility Trust C-1 and the Indenture Trustee.

48. Indenture of Trust and Security Agreement, dated as of May 1, 1999, between Milliken Facility Trust C-2 and the Indenture Trustee.

49. Rent Reserve Account Payment Undertaking Agreement, dated as of May 1, 1999, among AEE, Kintigh Facility Trust A-1, Kintigh Facility Trust A-2, Kintigh Facility Trust B-1, Kintigh Facility Trust B-2, Kintigh Facility Trust C-1, Kintigh Facility Trust C-2, Milliken Facility Trust A-1, Milliken Facility Trust A-2, Milliken Facility Trust B-1, Milliken Facility Trust B-2, Milliken Facility Trust C-1, Milliken Facility Trust C-2 and Morgan Guaranty Trust Company of New York.

50. Master Power Purchase and Sale Agreement, undated, between Aquila Energy Marketing Corporation and AEE.

51. Credit Agreement, dated as of April 10, 2001, as amended by Amendment No. 1 and Waiver to Credit Agreement, dated as of August 31, 2001, Amendment No. 2 to Credit Agreement, dated as of November 20, 2002, Amendment No. 3 to Credit

Agreement, dated as of April 16, 2003, and Amendment No. 4 to Credit Agreement, dated as of April 25, 2003, among AEE, the Banks named therein, the Letter of Credit Issuing Bank parties thereto from time to time, and Union Bank of California, N.A. (“UBOC”).

52. LLC Membership Interest Pledge Agreement, dated as of April 10, 2001 between AEE and UBOC.

53. *Secured Credit Agreement, dated as of May 6, 1999, among Somerset Railroad Corporation (“Somerset”), the banks listed on the signature pages thereof and CIBC, Inc. (“CIBC”).

54. Assignment and Acceptance, dated as of August 14, 2000, between CIBC and Fortis Capital Corp. (“Fortis”).

55. *Amended and Restated Secured Credit Agreement, dated as of August 14, 2000, among Somerset, the banks listed on the signature pages thereof and Fortis.

56. Security Agreement, dated as of May 6, 1999, between Somerset and CIBC.

57. Pledge Agreement, dated as of May 6, 1999 between AES NY3, LLC and CIBC.

58. Mortgage and Security Agreement, dated as of May 6, 1999, between Somerset and CIBC.

59. Railcar Mortgage and Security Agreement, dated as of May 6, 1999, between Somerset and CIBC.

60. Railcar Mortgage Assignment, dated as of August 14, 2000, by CIBC in favor of Fortis.

61. Letter of Credit and Reimbursement Agreement effective as of January 1, 2004 between AEE and The AES Corporation.

SCHEDULE IV

LIST OF ORGANIZATIONAL DOCUMENTS

1. AES New York Funding, L.L.C.

(a) Limited Liability Company Agreement, dated as of March 16, 1999.

(b) Certificate of Formation, filed on March 8, 1999.

2. AES New York Holdings, L.L.C.

(a) Limited Liability Company Agreement, dated as of April 22, 1999.

(b) Certificate of Formation, filed on April 21, 1999.

3. AES NY, L.L.C.

(a) Amended and Restated Limited Liability Company Agreement, dated as of May 4, 1999.

(b) Certificate of Formation, filed on August 3, 1998.

4. AES NY2, L.L.C.

(a) Second Amended and Restated Limited Liability Company Agreement, dated as of March 1, 2002.

(b) Certificate of Formation, filed on December 2, 1998.

5. AES NY3, L.L.C.

(a) Amended and Restated Limited Liability Company Agreement, dated as of May 4, 1999.

(b) Certificate of Formation, filed on April 12,1999.

6. Somerset Railroad Corporation

(a) By-Laws of the Somerset Railroad Corporation.

(b) Certificate of Incorporation, dated as of August 10, 1979.

7. AES Eastern Energy, L.P.

(a) Agreement of Limited Partnership, dated as of May 4, 1999, by and between AES NY, L.L.C. and AES NY2, L.L.C.

(b) Certificate of Limited Partnership, filed on December 2, 1998.

8. AES Cayuga, L.L.C.

(a) Amended and Restated Limited Liability Company Agreement, dated as of March 9, 2001.

(b) Certificate of Formation, filed on November 18, 1998.

9. AEE2, L.L.C.

(a) Amended and Restated Limited Liability Company Agreement, dated as of May 4, 1999.

(b) Certificate of Formation, filed on March 22, 1999.

10. AES Somerset, L.L.C.

(a) Amended and Restated Limited Liability Company Agreement, dated as of March 9, 2001.

(b) Certificate of Formation, filed on November 18, 1998.

11. AES Greenidge, L.L.C.

(a) Second Amended and Restated Limited Liability Company Agreement, dated as of March 1, 2002.

(b) Certificate of Formation, filed on November 18, 1998.

12. AES Westover, L.L.C.

(a) Second Amended and Restated Limited Liability Company Agreement, dated as of March 1,2002.

(b) Certificate of Formation, filed on November 18, 1998.

OFFICERS’ CERTIFICATE

OF

THE PROJECT COMPANIES

The undersigned, Amy Conley, Vice-President of AES Eastern Energy, L.P (“AEE”) and Treasurer of Somerset Railroad Corporation (collectively, the “Project Companies”), does hereby certify, on behalf of the Project Companies and AEE’s and AEE2, L.L.C.’s (“AEE2”) wholly-owned subsidiaries, as follows:

(a) Schedules IIA and IIB contain all of the material permits and approvals currently maintained by AEE, AEE2 or their directly or indirectly wholly-owned subsidiaries required pursuant to New York Environmental Laws, Federal Environinental Laws, New York Energy Laws and Federal Energy Laws (as such terms are defined in the Chadbourne & Parke LLP opinion to which this certificate is attached) for purposes of ownership or operation of AEE’s and AEE2’s.assets and the assets of their directly or indirectly wholly-owned subsidiaries including the 675 megawatt power plant located northeast of Niagara Falls, New York (the “Somerset Project”), the 306 megawatt power plant located near the town of Lansing, New York (the “Cayuga Project”), the 1.61 megawatt power plant located adjacent to the village of Dresden, New York (the “Greenidge Project”), and the 126 megawatt power plant located in Johnson City, New York (the “Westover Project”; together with the Somerset Project, the Cayuga Project and the Greenidge Project, the “Projects”). Further, we certify that true, complete, and correct copies of all such permits and approvals have been provided to Chadbourne & Parke LLP for the purposes of rendering an opinion in connection with the Credit Documents (as such term is defined in the Chadbourne & Parke LLP Opinion to which this certificate is attached).

(b) The Somerset Project is owned and operated by AES Somerset, L.L.C.; the Cayuga Project is owned and operated by AES Cayuga, L.L.C.; the Greenidge Project is owned and operated by AES Greenidge, L.L.C.; and the Westover Project is owned and operated by AES Westover, L.L.C.

(c) Schedule III contains all of the material agreements relating to the Projects.

AES Eastern Energy, L.P. & 7725 Lake Road & Barker, NY 14012

Telephone (716) 795-9501 & Fax (716) 795-3153

I understand that Chadbourne & Parke LLP will rely on this certificate in giving an opinion in connection with the Credit Documents.

IN WITNESS WHEREOF, I have set my hand to this Officers’ Certificate this 5^th day of March, 2004.

By:	/s/ Amy V. Conley
Name:	Amy Conley
Title:	Vice-President, AES NY

AES Eastern Energy, L.P. & 7725 Lake Road & Barker, NY 14012

Telephone (716) 795-9501 Fax (716) 795-3153

ASSISTANT SECRETARY’S CERTIFICATE

OF

THE AES CORPORATION

The undersigned, Leith Mann, Assistant Secretary of The AES Corporation (“AES”), does hereby certify, on behalf of AES, as follows:

(a) Schedule IV contains all of the constitutive documents of AES New York Funding, L.L.C., AES New York Holdings, L.L.C., AES NY, L.L.C., AES NY2, L.L.C, AES NY3, L.L.C,, Somerset Railroad Corporation, AES Eastern Energy, L.P., AES Cayuga, L.L.C, AEE2, L.L.C., AES Somerset, L.L.C., AES Greenidge, L.L.C, and AES Westover, L.L.C.

(b) The constitutive documents set forth in Schedule IV are each in full force and effect on the date hereof.

I understand that Chadbourne & Parke LLP will rely on this certificate in giving an opinion in connection with The AES Corporation refinancing.

IN WITNESS WHEREOF, I have set my hand to this Assistant Secretary’s Certificate this 17^th day of March, 2004,

THE AES CORPORATION
By:	/s/ Leith Mann
Name;	Leith Mann
Title:	Assistant Secretary

	30 Rockefeller Plaza, New York, NY 10112
	tel 212-408-5100 fax 212-541-5369

March 17, 2004

To Each of the Persons Listed

     on Exhibit A Attached Hereto

Dear Sirs:

We have acted as special New York counsel to AES WR Limited Partnership (the “Project Company”), in connection with the review of (a) the Third Amended and Restated Credit and Reimbursement Agreement (the “Senior Secured Credit Facility”), dated as of March 17, 2004, among The AES Corporation, a Delaware corporation (“AES”), the Subsidiary Guarantors party thereto and as defined therein, including AES Warrior Run Funding, L.L.C. (the “Tier I Company”), the banks party thereto (the “Bank Parties”), Citicorp USA, Inc., as Administrative Agent for the Bank Parties (in such capacity, the “Agent”) and Citibank, N.A., as the Collateral Agent for the Bank Parties (in such capacity, the “Collateral Agent”) and (b) the Indenture (the “Indenture”), dated as of May 8, 2003, between AES and Wells Fargo Bank Minnesota, National Association. Capitalized terms used (but not defined) herein have the meanings assigned to them in the Senior Security Agreement (as defined below). This opinion is being delivered to you pursuant to Section 3.01(c)(iii) of the Senior Secured Credit Facility.

In arriving at the opinions expressed below, we have examined and relied on originals or copies, certified or otherwise identified to our satisfaction, of the following documents: (a) the Senior Secured Credit Facility (including without limitation, the Subsidiary Guaranty set forth in Article IX thereof (the “Guaranty”)), (b) the Indenture, (c) the Collateral Trust Agreement (as amended by Amendment No. 1 to the Collateral Trust Agreement, dated as of July 29, 2003 and Amendment No. 2, dated as of March 17, 2004, the “Senior Collateral Trust Agreement”), dated December 12, 2002, by and among the Grantors referred to therein and the Collateral Trustees referred to therein (the “Senior Collateral Trustees”), (d) the Security Agreement (as amended by Amendment No. 1 to the Security Agreement, dated as of July 29, 2003, the “Senior Security Agreement”), dated December 12, 2002, from the Grantors referred to therein to the Senior Collateral Trustees, (e) the Second Priority Collateral Trust Agreement (the “Second Priority Collateral Trust Agreement”; together with the Senior Collateral Trust Agreement, the “Collateral Trust Agreements”), dated as of May 8, 2003, by and among the Grantors referred to therein and the Second Priority Collateral Trustees referred to therein (the “Second Priority Collateral Trustees”), (f) the Second Priority Security Agreement (the “Second Priority Security Agreement”; together with the Senior Security Agreement, the “Security Agreements”), dated as of May 8, 2003, from the Grantors referred to therein to the Second Priority Collateral Trustees, (g) the Officer’s Certificate set forth in Schedule I, (h) the Assistant

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Secretary’s Certificate set forth in Schedule IA, (i) the permits and approvals set forth in Schedules IIA and IIB, (j) the agreements set forth in Schedule III, and (k) the organizational documents set forth in Schedule IV.

The documents listed in items (a) through (f) of the preceding paragraph are sometimes hereinafter referred to as the “Credit Documents.”

As to questions of fact material to the opinions set forth below, we have also relied on the representations and warranties contained in the Credit Documents and in such other documents, instruments and certificates of public officials, and of officers and representatives of AES, the Tier I Company and the Project Company and we have made such investigations of law, as we have deemed appropriate as a basis for the opinions expressed below. Except for our review of the documents set forth in Schedule IV, we have made no independent investigation of the corporate, partnership or other organizational documents or records of AES, the Tier I Company, the Project Company or their respective Affiliates or Subsidiaries (each as defined in the Senior Secured Credit Facility) or any party to any of the Credit Documents. We have made no independent investigation as to whether the representations and warranties and other statements in the Credit Documents and in such other documents, instruments and certificates are accurate or complete.

In rendering the opinions expressed below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as copies and the authenticity of the originals of such copies. Further, we have assumed that the Project Company and its assets are in compliance with applicable Federal Environmental Laws and Federal Energy Laws as defined below.

Based on the foregoing, and subject to the additional assumptions, qualifications and limitations set forth below, we are of the opinion that:

1. The execution and delivery by the Tier I Company of the Guaranty and the granting of a security interest by AES in all right, title and interest in that portion of the Collateral, as defined in each of the Security Agreements, which represents the capital stock of the Tier I Company and notes and other amounts payable by the Tier I Company and its subsidiaries to AES (the “Tier I Company Collateral”), and the exercise of remedies by the Senior Collateral Trustees pursuant to the Senior Security Agreement and the Senior Collateral Trust Agreement or the Second Priority Collateral Trustees pursuant to the Second Priority Security Agreement and the Second Priority Collateral Trust Agreement with respect to the Tier I Company Collateral (a) does not require any action by or in respect of, or filing with, the Federal Government by, or on behalf of, the Project Company pursuant to any Federal Environmental Laws and Federal Energy Laws and (b) does not violate any Federal Environmental Laws, Federal Energy Laws, or the Federal Permits set forth in Schedules IIA

-2- March 17, 2004

and IIB, provided that, with respect to clauses (a) and (b) of this sentence, the exercise of remedies by either the Senior Collateral Trustees or the Second Priority Collateral Trustees does not result in a change in ownership or control of the Project Company or the identity of the owner or operator of the assets of the Project Company. We note that any such change in ownership or control of the Project Company or the identity of the owner or operator of the assets of the Project Company will require the refiling, reissuance or transfer of the Federal Permits set forth in Schedule IIA and may require the refilling, reissuance or transfer of the Federal Permits set forth in Schedule IIB. With respect to the permits and approvals issued pursuant to Federal Energy Laws listed on Schedule IIB, so long as the Project Company remains a qualifying cogeneration facility as defined under the Federal Energy Laws, neither the Secured Holders (as defined in the Senior Collateral Trust Agreement) nor the Second Priority Secured Holders (as defined in the Second Priority Collateral Trust Agreement) will, solely as a result of ownership or operation of the Project Company due to the exercise of any remedy provided in the Guaranty, Security Agreements or the Collateral Trust Agreements, become subject to regulation as a “public-utility company,” an “electric utility company,” a “holding company,” an “affiliate” of a “holding company,” or an “affiliate” of a “subsidiary company” of a “holding company,” as each term is defined under the Federal Energy Laws.

2. The execution and delivery by the Tier I Company of the Guaranty and the granting of a security interest by AES in all right, title and interest in the Tier I Company Collateral does not (a) (i) contravene, or constitute a default under, any material provision of any agreement set forth in Schedule III which agreements have been represented to us by the Project Company to be all of the material agreements relating to the Project (as defined in Schedule I) or (ii) contravene any organizational document set forth in Schedule IV which organizational documents have been represented to us by AES to be (x) all the constitutive documents of the Tier I Company, AES Western Maryland Management, L.L.C. (f/k/a AES Western Maryland Management Co., Inc.) (“AES Western”), AES Warrior Run, L.L.C. (f/k/a AES Warrior Run, Inc.) (“AES Warrior”), AES Mexico Farms, L.L.C. (f/k/a AES Mexico Farms, Inc.), and the Project Company and (y) in full force and effect on the date hereof or (b) result in or require the creation or imposition of any Lien (as defined in the Senior Secured Credit Facility) on any asset of the Project Company under any agreement set forth in Schedule III hereto. We bring to your attention that the exercise of remedies by either the Senior Collateral Trustees or the Second Priority Collateral Trustees with respect to the Tier I Company Collateral that results in AES ceasing to own, directly or indirectly, the minimum percentage of the ownership interests of any of the Project Company, AES Western, or AES Warrior (or, if applicable, any other managing General Partner of the Project Company), in each case as specified in such agreements, would constitute a default under certain of the agreements set forth in Schedule III.

As used herein, the term “Federal Government” shall mean the United States of America, or any agency, department, commission, board, bureau, or instrumentality thereof.

-3- March 17, 2004

As used herein, the term “Federal Environmental Laws” shall mean the laws, statutes, rules, and regulations of the Federal Government pertaining to protection of human health or safety with respect to hazardous materials or the protection of the environment from contamination by hazardous materials. As used herein, “Federal Energy Laws” shall mean the Public Utility Holding Company Act of 1935, the Federal Power Act, and the Public Utility Regulatory Policies Act of 1978, and any applicable regulations issued thereunder. As used herein, “Federal Permits” shall mean those material permits and approvals, if any, issued pursuant to Federal Environmental Laws and Federal Energy Laws set forth in Schedules IIA and IIB that have been issued by the Federal Government and are currently maintained by the Project Company for the purpose of ownership or operation of the Project Company’s assets, provided, however, that the term “Federal Permits” shall not include any federal air permitting matter specifically addressed in the Piper Rudnick LLP opinion dated as of the date hereof.

Our opinions in paragraph 1 of this letter are based upon a review of the Federal Environmental Laws and the Federal Energy Laws in effect on the date hereof, which in our experience typically apply to business operations similar to those of the Project Company without any investigation concerning any other laws, rules, or regulations. Our opinions in this letter do not address (a) ministerial or immaterial filings or registrations made by the Project Company with the Federal Government pursuant to any Federal Environmental Laws, Federal Energy Laws, or the Federal Permits, (b) any governmental permit or approval required under any law, statute, rule or regulation of any governmental authority other than the Federal Government, and (c) any governmental permit or approval issued by any state, regional, county, municipal, local, or other governmental authority pursuant to authority delegated to any such entity pursuant to any Federal Environmental Laws.

We note that certain agreements set forth in Schedule III contain provisions which prohibit AES from transferring (which includes an assignment or sale) any of its indirect ownership interests in the Tier I Company or its subsidiaries to the extent such transfer would cause AES to cease to own the applicable percentage ownership interests in the Tier I Company or its subsidiaries.

Our opinions set forth in paragraph 2 above are based upon and wholly limited by the assumption and reasoning that the granting by AES of a security interest in the Tier I Company Collateral (as distinct from any exercise by either the Senior Collateral Trustees or the Second Priority Collateral Trustees of their remedies in connection with any such pledge) does not breach the applicable provisions of the relevant agreements. This conclusion is based solely on whether the prohibition against transferring (which includes an assignment or sale) the applicable amounts of AES’ ownership interests was also intended to so prohibit a pledge of such ownership interests. In order to conclude that a pledge was intended to be so prohibited, two determinations would have to be made — first, that the pledge constitutes a “collateral assignment” or other type of “assignment”, and second, that the contractual prohibition on assignments is intended to cover such “collateral assignments” as well as

-4- March 17, 2004

absolute assignments. In this regard, we have relied upon In re I & M Acquisition Corp., et al., Debtors Reorganized Gilbert/Robinson, Inc. v. Galen Wagner, 1995 WL 606353 (S.D.N.Y.). In this case (involving whether the pledge of a party’s leasehold interest as security for a loan constituted an “assignment” and thereby triggered a rent increase provision of the lease), the Court concluded that the pledge of such leasehold interest did not constitute an “assignment” as contemplated by the applicable lease (which term was not expressly defined in the lease). The Court’s reasoning was based upon both an analysis of the “general purpose” of the applicable provisions (which the Court determined was intended to apply to absolute assignments and not to a pledge in which the pledgor has not transferred any of its present rights and title remained with the pledgor, and the pledgor remains in beneficial ownership and control of the leased premises), as well as an analysis that the pledge does not constitute an assignment (which the Court based on an analysis of the substance of the transaction and not merely its descriptive title, and, citing 72 C.J.S. Pledge §§ 3021 (1995), stated that “a pledge is distinguishable from an assignment in that title to the pledged property remains with the pledgor”). It would seem reasonable that the application of such reasoning and analysis to the circumstances of the contractual restrictions on assignments set forth in certain agreements set forth in Schedule III should lead to the conclusion that the granting by AES of a security interest in the Tier I Company Collateral does not breach such contractual restrictions.

We are members of the Bar of the State of New York and we do not express any opinion herein concerning any law other than the law of the State of New York, the law of the Federal Government, the Limited Liability Company Act of the State of Delaware, the Delaware Revised Uniform Limited Partnership Act, and the General Corporation Law of the State of Delaware. With your permission, we have assumed for purposes of this opinion that, notwithstanding that certain of the agreements set forth in Schedule III hereto may contain governing law clauses which provide for a governing law other than the laws of the State of New York, the law governing the agreements set forth in Schedule III hereto is the internal law of the State of New York. With respect to paragraph 1, we do not herein express any opinions as to any matters governed by any laws other than Federal Environmental Laws and Federal Energy Laws.

-5- March 17, 2004

This opinion is delivered to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent, except that any person that becomes (a) a Bank Party in accordance with the provisions of Section 10.06 of the Senior Secured Credit Facility, (b) a “Secured Holder” under the Senior Collateral Trust Agreement, and (c) a “Second Priority Secured Holder” under the Second Priority Collateral Trust Agreement may rely upon this opinion as if it were specifically addressed and delivered to such person on the date hereof. This opinion is not to be used, circulated, quoted or otherwise referred to for any other purpose without our prior written consent.

Very truly yours,

-6- March 17, 2004

Exhibit A

The Banks, Citicorp USA, Inc., as Administrative Agent and

Citibank, N.A., as Collateral Agent

c/o Citicorp USA, Inc., as Administrative Agent

388 Greenwich Street, 21st Floor

New York, NY 10013

Attention: Stuart Glen

Wilmington Trust Company, as Corporate Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

Bruce L. Bisson, as Individual Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

SCHEDULE I

OFFICER’S CERTIFICATE

OF

THE PROJECT COMPANY

The undersigned,                     ,                    of AES WR Limited Partnership (the “Project Company”), does hereby certify, on behalf of the Project Company, as follows:

(a) Schedules IIA and IIB contain all of the material permits and approvals currently maintained by the Project Company required pursuant to Federal Environmental Laws and Federal Energy Laws (as such terms are defined in the Chadbourne & Parke LLP opinion to which this certificate is attached) for purposes of ownership or operation of the Project Company’s assets, including the 180 megawatt power plant located in Cumberland, Maryland (the “Project”). Further, we certify that true, complete and correct copies of all such permits and approvals have been provided to Chadbourne & Parke LLP for the purposes of rendering an opinion in connection with the Credit Documents (as such term is defined in the Chadbourne & Parke LLP opinion to which this certificate is attached).

(b) The Project is owned by AES WR Limited Partnership and operated by AES Western Maryland Management, L.L.C.

(c) Schedule III contains all of the material agreements relating to the Project.

I understand that Chadbourne & Parke LLP will rely on this certificate in giving an opinion in connection with the Credit Documents.

IN WITNESS WHEREOF, I have set my hand to this Officer’s Certificate this      day of March, 2004.

By:

Name

Title

SCHEDULE IA

ASSISTANT SECRETARY’S CERTIFICATE

OF

THE AES CORPORATION

The undersigned, Leith Mann, Assistant Secretary of The AES Corporation (“AES”), does hereby certify, on behalf of AES, as follows:

(a) Schedule IV contains all of the constitutive documents of AES Warrior Run Funding, L.L.C, AES Western Maryland Management, L.L.C. (f/k/a AES Western Maryland Management Co., Inc.), AES Warrior Run, L.L.C. (f/k/a AES Warrior Run, Inc.), AES Mexico Farms, L.L.C. (f/k/a AES Mexico Farms, Inc.), and AES WR Limited Partnership.

(b) The constitutive documents set forth in Schedule IV are each in full force and effect on the date hereof.

I understand that Chadbourne & Parke LLP will rely on this certificate in giving an opinion in connection with The AES Corporation refinancing.

IN WITNESS WHEREOF, I have set my hand to this Assistant Secretary’s Certificate this      day of March, 2004.

THE AES CORPORATION
By:
Name:	Leith Mann
Title:	Assistant Secretary

SCHEDULE IIA

LIST OF PERMITS AND APPROVALS

ISSUED PURSUANT TO FEDERAL ENVIRONMENTAL LAWS

1. Clean Water Act, Section 10/404 Wetlands permit issued by the U.S. Army Corps of Engineers on June 8, 1993.

2. Permit to install and maintain a 14-inch water intake pipe, a 10-inch wastewater discharge pipe, and a 138-kV transmission line issued by the U.S. National Park Service on November 3, 1994.

3. 30 year Right-of-Way Permit to cross lands of the Chesapeake and Ohio Canal National Historical Park in order to operate and maintain 14-inch water intake pipe, a 10-inch wastewater discharge pipe and a 138-kV transmission line issued by the U.S. National Park Service on February 3, 1997.

SCHEDULE IIB

LIST OF PERMITS AND APPROVALS

ISSUED PURSUANT TO FEDERAL ENERGY LAWS

1. Federal Energy Regulatory Commission order granting application for certification as a qualifying cogeneration facility dated July 10, 1992 in Docket QF92-123.

2. Federal Energy Regulatory Commission order granting application for recertification as a qualifying cogeneration facility dated October 27, 1994 in Docket QF 92-123.

SCHEDULE III

LIST OF MATERIAL AGREEMENTS¹

1. *Participation and Loan Agreement (the “Participation Agreement”), dated as of September 1, 1995, among the AES WR Limited Partnership (the “Partnership”), Wilmington Trust Company (“Wilmington Trust”), The First National Bank of Maryland, as Bond Trustee (the “Bond Trustee”), and various financial institutions named therein.

2. *Credit Line Deed of Trust and Security Agreement, dated as of September 1, 1995, made by the Partnership to John R. Lukens and Harvey A. Siler for the benefit of the Secured Parties (as defined in the Participation Agreement).

3. Security Deposit Agreement, dated as of September 1, 1995, between the Partnership and Wilmington Trust for the benefit of the Secured Parties.

4. General Partner Assignment and Security Agreement, dated as of September 1, 1995, made by AES Warrior Run, Inc (“AES Warrior”) in favor of Wilmington Trust for the benefit of the Secured Parties.

5. Limited Partner Assignment and Security Agreement, dated as of September 1, 1995, made by AES Warrior in favor of Wilmington Trust for the benefit of the Secured Parties.

6. Limited Partner Assignment and Security Agreement, dated as of September 1, 1995, made by AES Mexico Farms, Inc. (“AES Mexico”) in favor of Wilmington Trust for the benefit of the Secured Parties.

¹ We have placed an asterisk (*) prior to those agreements set forth in this Schedule III which contain default provisions that would be contravened upon an exercise of remedies by the Senior Collateral Trustees or the Second Priority Collateral Trustees with respect to the Tier I Company Collateral. We note that certain other agreements set forth in this Schedule III may contain cross-default provisions that would be contravened upon the occurrence of a default under those documents described in the preceding sentence.

7. Equity Contribution Agreement, dated as of September 1, 1995, among AES Warrior, AES Mexico, the Partnership and Wilmington Trust for the benefit of the Secured Parties.

8. Senior Intercreditor Agreement, dated as of September 1, 1995, among Union Bank of California, N.A., The First National Bank of Maryland, Wilmington Trust for the benefit of the Secured Parties and acknowledged by the Partnership.

9. Credit Agreement, dated as of September 1, 1995, among the Partnership and various financial institutions named therein.

10. General Partner Assignment and Security Agreement, dated as of September 1, 1995, between AES Warrior and the Potomac Edison Company.

11. Assignment and Security Agreement, dated as of September 1, 1995, between AES Western and the Potomac Edison Company.

12. Loan Agreement, dated as of September 1, 1995, between Maryland Energy Financing Administration and the Partnership.

13. Trust Indenture, dated as of September 1, 1995, between Maryland Energy Financing Administration and the First National Bank of Maryland.

14. Consent, Assignment and Waiver Agreement, dated May 2, 1994, between AES Warrior, Potomac Edison and the Partnership.

15. Recognition Agreement, dated as of September 1, 1995, among The Potomac Edison Company, the Partnership, the Bond Trustee, Union Bank of California, N.A., and Wilmington Trust.

16. Indemnity Deed of Trust and Security Agreement, dated as of September 1,1995, among the Partnership, Steven A. Teitelbaum and Kay A. Hooker as trustees, and the Potomac Edison Company.

17. Cost Overrun Subordinated Debt Facility Agreement, dated as of September 1, 1995, among the Partnership, Raytheon Engineers & Constructos, Inc. and Combustion Engineering, Inc.

18. Electric Energy Purchase Agreement, dated as of January 15,1988, between AES Petrolia, Inc. and The Potomac Edison Company.

SCHEDULE IV

LIST OF ORGANIZATIONAL DOCUMENTS

1. AES Warrior Run Funding, L.L.C.

(a) Amended and Restated Limited Liability Company Agreement, dated as of April 20, 1999.

(b) Certificate of Formation, filed on March 8, 1999.

2. AES Western Maryland Management, L.L.C. (f/k/a AES Western Maryland Management Co., Inc.)

(a) Limited Liability Company Agreement, dated as of January 1, 2003.

(b) Certificate of Formation, filed on January 2, 2003.

3. AES Warrior Run, L.L.C. (f/k/a AES Warrior Run, Inc.)

(a) Limited Liability Company Agreement, dated as of January 1, 2003.

(b) Certificate of Formation, filed on January 2, 2003.

4. AES Mexico Farms, L.L.C. (f/k/a AES Mexico Farms, Inc.)

(a) Limited Liability Company Agreement, dated as of January 1, 2003.

(b) Certificate of Formation, filed on January 2, 2003.

5. AES WR Limited Partnership

(a) Second Amended and Restated Agreement of Limited Partnership, dated as of December 1,1994, by and among AES Warrior Run, Inc., AES Mexico Farms, Inc. and ER&L Western Maryland.

(b) Certificate of Limited Partnership, filed on February 12, 1993.

	AES Warrior Run, Inc.
	11600 Mexico Farms Road, S,E.
	Cumberland, Maryland 21502
	Tel: (301) 777-0055
	Fax: (301) 777-8772

OFFICER’S CERTIFICATE

OF

THE PROJECT COMPANY

The undersigned, Edward P. Convery, President of AES WR Limited Partnership (the “Project Company”), does hereby certify, on behalf of the Project Company, as follows:

(a) Schedules IIA and IIB contain all of the material permits and approvals currently maintained by the Project Company required pursuant to Federal Environmental Laws and Federal Energy Laws (as such terms are defined in the Chadbourne & Parke LLP opinion to which this certificate is attached) for purposes of ownership or operation of the Project Company’s assets, including the 180 megawatt power plant located in Cumberland, Maryland (the “Project”). Further, we certify that true, complete and correct copies of all such permits and approvals have been provided to Chadbourne & Parke LLP for the purposes of rendering an opinion in connection with the Credit Documents (as such term is defined in the Chadbourne & Parke LLP opinion to which this certificate is attached).

(b) The Project is owned by AES WR Limited Partnership and operated by AES Western Maryland Management, L.L.C.

(c) Schedule III contains all of the material agreements relating to the Project.

I understand that Chadbourne & Parke LLP will rely on this certificate in giving an opinion in connection with the Credit Documents.

IN WITNESS WHEREOF, I have set my hand to this Officer’s Certificate this 4th day of March, 2004.

By:
Name
Title	President

ASSISTANT SECRETARY’S CERTIFICATE

OF

THE AES CORPORATION

The undersigned, Leith Mann, Assistant Secretary of The AES Corporation (“AES”), does hereby certify, on behalf of AES, as follows.:

(a) Schedule IV contains all of the constitutive documents of AES Warrior Run Funding, L.L.C., AES Western Maryland Management, L.L.C., (f/k/a AES Western Maryland Management Co., Inc.), AES Warrior Run, L.L.C. (f/k/a AES Warrior Run, Inc.), AES Mexico Farms, L.L.C. (f/k/a AES Mexico Farms, Inc.), and AES WR Limited Partnership.

(b) The constitutive documents set forth in Schedule IV are each in full force and effect on the date hereof.

I understand that Chadbourne & Parke LLP will rely on this certificate in giving an opinion in connection with The AES Corporation refinancing.

IN WITNESS WHEREOF, I have set my hand to this Assistant Secretary’s Certificate this 17^th day of March, 2004.

THE AES CORPORATION
By:	/s/ Leith Mann
Name:	Leith Mann
Title:	Assistant Secretary

OPINION OF

PIPER RUDNICK LLP

LOCAL COUNSEL FOR AES WR Limited Partnership

March 17, 2004

The Banks, Citicorp USA, Inc., as Administrative Agent and

    Citibank, N.A., as Collateral Agent

c/o Citicorp USA, Inc., as Administrative Agent

388 Greenwich Street, 21^st Floor

New York, NY 10013

Wilmington Trust Company	Bruce L. Bisson
as Corporate Trustee	as Individual Trustee
Rodney Square North	Rodney Square North
1100 North Market Street	1100 North Market Street
Wilmington, DE 19890	Wilmington, DE 19890
Attn: Corporate Trust Division

Dear Sirs:

We have acted as special Maryland counsel to AES WR Limited Partnership (the “Project Company”), in connection with certain matters relating to The AES WR Limited Partnership Project (the “Project”). We have been provided with a copy of the Third Amended and Restated Credit and Reimbursement Agreement dated as of March 17, 2004 (the “Credit Agreement”) among the AES Corporation, a Delaware corporation (“AES”), the Subsidiary Guarantors party thereto (the “Subsidiary Guarantors”), the banks party thereto (the “Banks”), Citicorp USA, Inc., as Administrative Agent for the Banks (in such capacity, the “Administrative Agent”) and Citibank, N.A., as Collateral Agent for the Banks (in such capacity, the “Collateral Agent”). We have also been provided with a copy of the Senior Indenture, dated May 8, 2003, between AES and Wells Fargo Bank Minnesota, National Association as Trustee (the “Senior Indenture”). Capitalized terms used (but not defined) herein have the meanings given in the Senior Security Agreement (as defined below). This opinion is being delivered to you pursuant to Section 3.01(c)(iii) of the Credit Agreement.

In arriving at the opinions expressed below, we have examined and relied on copies of the following documents: (a) the Credit Agreement including, without limitation, the Subsidiary Guaranty in article IX thereof (the “Guaranty”); (b) the security agreement (as amended, the “Senior Security Agreement”) dated as of December 12, 2002 and amended by Amendment No. 1 dated as of July 29, 2003 (the “Security Amendment”) from the Grantors to Wilmington Trust Company, as Corporate Trustee (the “Existing Corporate Trustee”) and Bruce L. Bisson, as Individual Trustee (the “Existing Individual Trustee” and together with the Corporate Trustee, the “First Priority Collateral Trustees”); (c) the collateral trust agreement (as amended, the “First Priority Collateral Trust Agreement”) dated December 12, 2002, and amended by Amendment No. 2 dated as of March 17, 2004, and amended by Amendment No. 1 dated as of July 29,2003 (the “Collateral Trust Amendment”), among AES, the Additional Grantors party thereto and defined therein, and the Collateral Trustees (the “First Priority Collateral Trustees”); (d) the Senior Indenture; (e) the Second Priority Security Agreement (the “Second Priority Security Agreement”), dated May 8, 2003, made by the Grantors referred to and defined therein to Wells Fargo Bank Minnesota, National Association, as Corporate Trustee (the “Second Priority Corporate Trustee”) and Jeffery T. Rose, as Individual Trustee (the “Second Priority Individual Trustee,” and together with the Second Priority Corporate Trustee, the “Second Priority Collateral Trustees”); (f) the Second Priority Collateral Trust Agreement (the “Second Priority Collateral Trust Agreement”), dated May 8, 2003, among AES, the Additional Guarantors party thereto and the Second Priority Collateral Trustees; (g) the Officer’s Certificate set forth in Schedule I; and (h) the list of Maryland permits set forth in Schedule II, and the list of material agreements reviewed in connection with this opinion set forth in Schedule III.

The documents listed in items (a)through (f) above are collectively referred to as the “Credit Documents.” The documents described in items (a), (b), (c) above are collectively referred to herein as the “First Priority Credit Documents.” The copy of the draft Credit Agreement was provided to us unsigned in electronic form.

As to questions of fact material to the opinions set forth below, we have relied on the representations and warranties contained in the Credit Documents and in such other documents, instruments and certificates of public officials, and of officers and representatives of the relevant parties, and we have made such investigations of law, as we have deemed appropriate as a basis for the opinions expressed below. We have made no independent investigation of the corporate, partnership or other organizational documents or records of any party to any of the Credit Documents.

Piper Rudnick LLP 2

In rendering the opinions expressed below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as copies and the authenticity of the originals of such copies. In addition, we have assumed that (a) each Credit Document is the legal, valid and binding obligation of the parties thereto enforceable against such parties in accordance with its terms, (b) each of the parties to the Credit Documents is an entity duly organized or formed, validly existing and in good standing in each relevant jurisdiction, (c) each party has full power and authority to execute, deliver and perform each of the Credit Documents to which it is a party, (d) the execution, delivery and performance by each party to each of the Credit Documents to which it is a party have been duly authorized by all necessary corporate, partnership or other organizational action of such party, (e) each of the Credit Documents has been duly executed and delivered by each party thereto, and (f) that the First Priority Credit Documents, as executed, do not materially differ from the drafts reviewed by us. Further, we have assumed that the Project Company and its assets, including its wholly-owned project-level subsidiaries and their assets are in compliance with applicable Maryland Environmental Laws and Maryland Energy Laws, as defined below.

Based on the foregoing, and subject to the assumptions and qualifications set forth below, we are of the opinion that:

1. The execution and delivery by AES Warrior Run Funding, L.L.C. (“Tier I Company”) of the Guaranty and the granting of a security interest in all right, title and interest by AES in that portion of the Collateral, as defined in each of the Senior Security Agreement and the Second Priority Security Agreement, in each case, which represents membership interests in the Tier I Company and notes and other amounts receivable by AES from the Tier I Company and its subsidiaries (the “Tier I Company Collateral”), and the exercise of remedies by the First Priority Collateral Trustees and the Second Priority Collateral Trustees with respect to the Tier I Company Collateral pursuant to the Senior Security Agreement or Second Priority Security Agreement and the First Priority Collateral Trust Agreement or Second Priority Collateral Trust Agreement, require no action by or in respect of, or filing with, any governmental agency or authority of the State of Maryland by, or on behalf of, the Project Company, except that to the extent the exercise of remedies by the First Priority Collateral Trustees or the Second Priority Collateral Trustees would result in a change in ownership or control of the Project Company, such change in ownership or operating control of the Project Company would require, with regard to the Project Company’s Air Quality Part 70 Permit to Operate (Env. Art. § 2-401, Ann. Code of MD and COMAR 26.11.03), the submission and approval described below.

Piper Rudnick LLP 3

A change in ownership or control of the Project Company would require submittal of a written agreement containing a specific date for transfer of permit responsibility, coverage and liability between the current and new permittee to MDE in order to request that MDE make an administrative permit amendment reflecting the change. Provided that MDE determines that no other change is necessary, MDE should take final action on the administrative change request within 60 days from the receipt of the request, but the permittee may make the change addressed in the application for an administrative amendment upon receipt by MDE of the application.¹ The application for the amendment must further include a statement certified by a responsible official as to the truth, accuracy and completeness of the information contained in the application.²

With regard to the Project Company’s National Pollutant Discharge Elimination System (NPDES) permit, in order to facilitate a transfer of ownership or operational control of the Project Company, the Project Company would need to submit to MDE a written request for a minor modification of the NPDES permit.³ The written request must include a written agreement containing the specific date for transfer of permit responsibility, coverage, and liability between the current and new permittees.⁴

With regard to the Project Company’s Water Appropriation Permit, such permit may not be transferred without prior written approval of MDE.⁵ If approved, MDE will issue a new permit, which may contain new conditions at the discretion of MDE.⁶ The permittee seeking to convey the water appropriation permit and the person who wants to obtain the permit must each state their intentions in writing to MDE.⁷

With regard to the Project Company’s Oil Operations Permit, the permit may be transferred by written notification to the succeeding owner of the existence of the permit and any outstanding violations of the permit. This notification is required to be forwarded to MDE at least 30 days prior to the change in ownership. The succeeding owner is also required to notify MDE in

¹ COMAR 26.11.02.02E, 26.11.03.15B(4), 26.11.03.15D, 26 11.03.15F.

² COMAR26.11.03.15A(2), COMAR 26.11.03.02F, COMAR 26.11.02.02F.

³ COMAR 26.08.04.10C(3)(d).

⁴ Id.

⁵ COMAR 26.17.06.06A(9).

⁶ Id.

⁷ Id.

Piper Rudnick LLP 4

writing within 30 days of the change in ownership that it accepts the terms and conditions of the permit.⁸

2. The execution and delivery by the Tier I Company of the Guaranty and the granting of a security interest in all right, title and interest of AES in the Tier I Company Collateral, and the exercise of remedies by the First Priority Collateral Trustees and Second Priority Collateral Trustees with respect to the Tier I Company Collateral pursuant to the Senior Security Agreement or Second Priority Security Agreement and the First Priority Collateral Trust Agreement or Second Priority Collateral Trust Agreement does not violate any Maryland Environmental or Maryland Energy Laws, or the Maryland Environmental and/or Energy Permits set forth in Schedule II, provided that the exercise of remedies by the First Priority Collateral Trustees or the Second Priority Collateral Trustees does not result in a change in ownership or control of the Project Company, such change in ownership or control of the Project Company would require the action . with regard to each environmental permit described, supra.

3. The execution and delivery by the Tier I Company of the Guaranty and the granting of a security interest by AES in all right, title and interest in the Tier I Company Collateral does not (a) contravene, or constitute a default under, any material provision of any of the five agreements set forth in Schedule III, which agreements have been represented to us by the Project Company to be all of the material agreements relating to the Project which purport to be governed by Maryland law or (b) result in or require the creation or imposition of a Lien (as defined in the Credit Agreement) on any asset of the Project Company under any agreement set forth in Schedule III hereto. We bring to your attention that the exercise of remedies by the First Priority Collateral Trustees and Second Priority Collateral Trustees with respect to the Tier I Company Collateral that results in AES ceasing to own, directly or indirectly, the minimum percentage of the ownership interests of any of the Project Company, AES, Western Maryland Management Co., Inc., or AES Warrior Run, Inc. (or, if applicable, any other managing General Partner of the Project Company), in each case as specified in such agreements, would constitute a default under certain of the agreements set forth in Schedule III. We have reviewed copies of such agreements provided to us by the Project Company or its counsel and we have not reviewed any document, instrument or agreement referred to in any of the agreements set forth in Schedule III, or the amendments, if any, made to any of such agreements.

As used herein, the term “Maryland Government” shall mean the Maryland government, or any agency, department, commission, board, bureau, or instrumentality thereof. As used herein, the term “Maryland Environmental Law”

⁸ Oil Operations Permit 99-OPT-2014A.

Piper Rudnick LLP 5

shall mean the laws, statutes, rules, and regulations of the Maryland Government pertaining to protection of human health or safety with respect to hazardous materials or the protection of the environment from contamination by hazardous materials, which laws are listed below. As used herein, “Maryland Energy Laws” shall mean the laws pertaining to electric generating facilities and any applicable regulations issued thereunder, which laws are listed below. As used herein, “Maryland Environmental and/or Energy Permits” shall mean the material permits as set forth in Schedule II that have been issued by the Maryland Government and are currently maintained by the Project Company or its wholly-owned project-level subsidiaries for the purpose of ownership or operation of the Project Company’s or its subsidiaries’ assets.

Our opinions in paragraph 1 and paragraph 2 of this letter are based upon a review of Maryland Environmental Laws, Md. Env’t. Code Ann., and Regulations, Code of Maryland Regulations, Title 26, and the Md. Code Ann. Public Utility Companies, and Regulations, Code of Maryland Regulations, Title 20, without any investigation concerning any other laws, rules, or regulations. Our opinion in paragraph 3 is based solely on Maryland law. Our opinions in this letter do not address (a) ministerial or immaterial filings or registrations made by the Project Company with the Maryland Government pursuant to any Maryland Environmental or Energy Laws or the Maryland Environmental Permits, and (b) any governmental permit or approval required under any law, statute, rule or regulation of any governmental authority other than the Maryland Government.

This opinion is delivered to you in connection with the transactions contemplated by the Credit Documents. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent, except that any person that becomes a Bank Party in accordance with the provisions of Section 10.06 of the Credit Agreement and any other person that becomes a “Secured Holder” under the First Priority Collateral Trust Agreement or a “Second Priority Secured Holder” under the Second Priority Collateral Trust Agreement may rely upon this opinion as if it were specifically addressed and delivered to such person on the date hereof.

The foregoing opinion is limited to the laws of Maryland.

Very truly yours,

Piper Rudnick LLP

Piper Rudnick LLP 6

SCHEDULE I

OFFICER’S CERTIFICATE

OF

THE PROJECT COMPANY

The undersigned, Wilma L. Braun, Vice President of AES Warrior Run, L.L.C. the General Partner of AES WR Limited Partnership (the “Project Company”), does hereby certify, on behalf of the General Partner of the Project Company, as follows:

(a) Schedule II contains all of the material permits currently maintained by the Project Company required pursuant to Maryland Environmental or Maryland Energy Laws and (as such terms are defined in the Piper Rudnick LLP attorney opinion) for purposes of ownership or operation of the Project Company’s assets including the 180 megawatt power plant located in Cumberland, Maryland and owned and operated by AES WR Limited Partnership.

(b) Schedule III contains all of the material agreements relating to the Project which purport to be governed by Maryland law.

I understand that Piper Rudnick LLP will rely on this certificate in giving an opinion in connection with The AES Corporation refinancing.

Dated: March 17, 2004

AES WR Limited Partnership
/s/ Wilma L. Braun
By:	AES Warrior Run, L.L.C.
As:	General Partner
Name:	Wilma L. Braun
Title:	Vice President

SCHEDULE II

LIST OF MARYLAND PERMITS

1. Air Quality Part 70 Permit to Operate

Maryland Department of the Environment

Air and Radiation Management Administration

2. Water Discharge Permit

Maryland Department of the Environment

Water Management Administration

State Discharge Permit 99-DP-2937

(NPDES No. MD0066079)

3. Water Appropriation Permit

Maryland Department of the Environment

Water Rights Division

State Water Appropriation Permit No. AL1969S036(06)

4. Oil Operations Permit – Renewal Application Pending

Maryland Department of the Environment

Waste Management Administration, Oil Control Program

Oil Operations Permit 99-OPT-2014A

Piper Rudnick LLP

8

SCHEDULE III

LIST OF MATERIAL AGREEMENTS

1. Credit Line Deed of Trust and Security Agreement, dated as of September 1, 1995, made by the Partnership to John R. Lukens and Harvey A. Siler for the benefit of the Secured Parties (as defined in the Participation Agreement).

2. Loan Agreement, dated as of September 1, 1995, between Maryland Energy Financing Administration and the Partnership.

3. Trust Indenture, dated as of September 1, 1995, between Maryland Energy Financing Administration and the First National Bank of Maryland.

4. Indemnity Deed of Trust and Security Agreement, dated as of September 1, 1995, among the Partnership, Steven A. Teitelbaum and Kay A. Hooker as trustees, and the Potomac Edison Company.

5. Electric Energy Purchase Agreement, dated as of January 15, 1988, between AES Petrolia, INC. and The Potomac Edison Company.

Piper Rudnick LLP

9

  333 West Vine Street, Suite 1201 Lexington, Kentucky 40507 Telephone (859) 225-8700   101 South Queen Street Martinsburg, West Virginia 25401 Telephone (304) 263-0836   7000 Hampton Center, Suite K Morgantown, West Virginia 26505 Telephone (304) 285-2500     ATTORNEYS AT LAW   600 Quarrier Street Charleston, West Virginia 25301 Post Office Box 1386 Charleston, West Virginia 25325-1386 Telephone (304) 347-1100 www.bowlesrice.com   5th Floor, United Square 501 Avery Street Parkersburg, West Virginia 26101 Telephone (304) 485-8500   3 West Piccadilly Street Winchester, Virginia 22601 Telephone (540) 723-8877

March 17, 2004

To Each of the Persons Listed

on Exhibit A Attached Hereto

Dear Sirs:

We have acted as special West Virginia counsel to AES WR Limited Partnership, a Delaware limited partnership (the “Project Company”), in connection with certain aspects of (i) the Third Amended and Restated Credit and Reimbursement Agreement dated as of March 17, 2004, (the “Credit Agreement”) among The AES Corporation, a Delaware corporation (“AES”), the Subsidiary Guarantors party thereto (the “Subsidiary Guarantors”), including AES Warrior Run Funding, L.L.C. (the “Tier I Company”), the banks party thereto (the “Banks”), Citicorp USA, Inc., as Administrative Agent for the Banks (in such capacity, the “Administrative Agent”) and Citibank, N.A., as Collateral Agent for the Banks (in such capacity, the “Collateral Agent”) and (ii) the Senior Indenture dated as of May 8, 2003, by and between AES and Wells Fargo Bank Minnesota, National Association, as Trustee (the “Indenture”). Capitalized terms used (but not defined) herein have the meanings assigned to them in the Security Agreement.

This opinion is being delivered to you pursuant to Section 3.01(c)(iii) of the Credit Agreement.

In arriving at the opinions expressed below, we have examined and relied on documents as hereinafter set out and represented by you to be in all material respects identical to the executed documents. The documents relied upon are as follows: (a) the Credit Agreement including without limitation, the Subsidiary Guaranty in Article IX thereof (the “Guaranty”), (b) the Security Agreement from the Grantors (as defined therein) to Wilmington Trust Company, as Corporate Trustee, and Bruce L. Bisson, as Individual Trustee, dated as of December 12, 2002, and as amended by Amendment No. 1, dated as of July 29, 2003, (as amended the “Security Agreement”), (c) the Collateral Trust Agreement among the Grantors (as defined therein) and Wilmington Trust Company, as Corporate Trustee, and Bruce L. Bisson, as Individual Trustee, dated as of December 12, 2002, and as amended by Amendment No. 1 to the Collateral Trust Agreement, dated as of July 29, 2003 (as amended, the “Collateral Trust Agreement”), (d) Amendment No. 2 to the Collateral Trust Agreement, dated as of March 17, 2004, (e) the Indenture, (f) a Credit Line Deed of Trust and Security Agreement, dated as of September 1, 1995, from AES WR Limited Partnership, Grantor to John R. Lukens and Harvey A. Siler, Trustee, for the use and benefit of Wilmington Trust Company, as Collateral Trustee, Beneficiary (the “Deed of Trust”), (g)

To Each of the Persons Listed

on Exhibit A Attached Hereto

March 17, 2004

Page 2

the Indenture, (h) a Collateral Trust Agreement among the Grantors (as defined therein) and Wells Fargo Bank Minnesota, National Association, as Second Priority Corporate Trustee, and Jeffery T. Rose, as Individual Trustee, dated as of May 8, 2003 (the “Second Priority Collateral Trust Agreement”), and (i) a Security Agreement from the Grantors (as defined therein) to Wells Fargo Bank Minnesota, National Association, as Corporate Trustee, and Jeffery T. Rose, as Individual Trustee, dated as of May 8, 2003 (the “Second Priority Security Agreement”).

The documents listed in items (a), (b), (c), (d) and (e) of the preceding paragraph are sometimes hereinafter referred to as the “Credit Documents” and the documents listed in items (g), (h) and (i) of the preceding paragraph are sometimes hereafter referred to as the “Second Priority Documents”.

As to questions of fact material to the opinions set forth below, we have also relied on the representations and warranties contained in the Credit Documents, the Second Priority Documents, and in such other documents, instruments and certificates of public officials, and of officers and representatives of AES, the Tier I Company and the Project Company and we have made such investigations of law, as we have deemed appropriate as a basis for the opinions expressed below. We have made no independent investigation of the corporate, partnership or other organizational documents or records of AES, the Tier I Company, the Project Company or their respective Affiliates or subsidiaries or any party to any of the Credit Documents or the Second Priority Documents. We have made no independent investigation as to whether the representations and warranties and other statements in the Credit Documents, the Second Priority Documents, and in such other documents, instruments and certificates are accurate or complete.

In rendering the opinions expressed below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as copies and the authenticity of the originals of such copies. Further, we have assumed that the Project Company and its assets are in compliance with applicable Federal Environmental Laws and Federal Energy Laws as defined below.

Based on the foregoing, and subject to the additional assumptions, qualifications and limitations set forth below, we are of the opinion that:

1. The execution and delivery by the Tier I Company of the Guaranty and the granting of a security interest by AES in all right, title and interest in that portion of the Collateral, as defined in each of the Security Agreement and Second Priority Security Agreement, which in each case represents the membership units in the Tier I Company and notes and other amounts payable to the Tier I Company and its subsidiaries to AES (collectively, the “Tier I Company Collateral”) does not (a) contravene, or constitute a default under, any material provision of the

To Each of the Persons Listed

on Exhibit A Attached Hereto

March 17, 2004

Page 3

Deed of Trust or (b) result in or require the creation or imposition of any Lien (as defined in the Credit Agreement) on any asset of the Project Company under the Deed of Trust. We bring to your attention that the exercise of remedies by the Agent with respect to the Tier I Company Collateral that results in AES ceasing to own, directly or indirectly, the minimum percentage of the ownership interests of any of the Project Company, AES Western Maryland Management Co., Inc. or AES Warrior Run, Inc. (or, if applicable, any other managing General Partner of the Project Company), in each case as specified in such agreements, would constitute a default under the Deed of Trust.

Our opinion is further subject to the following qualifications:

A. We express no opinion regarding the laws of any jurisdiction other than the laws of the State of West Virginia. The opinions expressed herein concern only the effect of the laws (excluding the principles of conflict of laws) of the State of West Virginia. To the extent Credit Documents and/or the Second Priority Documents are governed by the laws of a jurisdiction other than West Virginia, we have assumed with your permission that the laws of any such jurisdiction are the same as the substantive laws of the State of West Virginia and that the interpretation of any such document would result in the same conclusion as if West Virginia law, without regards to conflict of laws provisions, applied. We assume no obligation to supplement this opinion letter if any applicable laws change after the date hereof or if we become aware of any facts that might change the opinions expressed herein after the date hereof.

B. We express no opinion with respect to the provisions of the Credit Documents and/or the Second Priority Documents to the extent that such provisions (i) state that the failure or delay by the Bank or any successor and assign in exercising rights, powers, privileges or remedies under the Credit Documents shall not operate as a waiver thereof; (ii) purport to establish evidentiary standards for suits or proceedings to enforce the Credit Documents or evidentiary standards relating to powers granted to the Bank or any respective successor and assign; (iii) purport to preserve or maintain the Credit Documents or liability thereunder despite negligence or omission by the Bank, or any respective successor and assign in enforcing claims; (iv) purport to sever unenforceable provisions from the Credit Documents, to the extent that the enforcement of remaining provisions would frustrate the fundamental intent of the parties to the Credit Documents; or (v) restrict access to (or are subject to) legal or equitable remedies or restrict access to courts or waive rights granted by statute or common law.

C. We express no opinion with respect to the legality, validity or enforceability under the Credit Documents and/or the Second Priority Documents of (i) any waivers of future rights, any vague or broadly stated waivers or provisions that do not delineate the subject matter of the waiver or the provision with reasonable specificity, or any waivers or provisions found contrary to public policy; or (ii) any indemnity provision, to the extent such provision encompasses

To Each of the Persons Listed

on Exhibit A Attached Hereto

March 17, 2004

Page 4

indemnification or exculpation with respect to the negligence, misconduct or violations of law or public policy of the Bank, or any respective successor and assign or anyone acting on its behalf.

D. Our opinions herein are subject to, and we express no opinion regarding: (i) the exercise of judicial discretion in accordance with general principles of equity (whether applied by court of law or by court of equity); (ii) the valid exercise of the constitutional powers of the United States of America and of the sovereign police and taxing powers of the State or other governmental units having jurisdiction; (iii) the bankruptcy, receivership, insolvency, reorganization, liquidation, moratorium, and other similar laws heretofore or hereafter enacted relating to, or affecting generally, the enforcement of creditors’ rights and remedies; (iv) antitrust laws; and (v) or income tax laws.

E. The opinions expressed herein are limited to the laws in effect on the date hereof, and we assume no obligation to revise or supplement this opinion should such laws be changed by legislative action, judicial decision, or otherwise.

F. Without our prior written consent, this opinion is not to be (1) relied upon by any person or entity other than the addressees, their successors and assigns, except that any person that becomes a Bank Party in accordance with Section 10.06 of the Credit Agreement and any other person that becomes a “Secured Holder” under the Collateral Trust Agreement or a “Second Priority Secured Holder” under the Second Priority Collateral Trust Agreement may rely on this opinion as if it were specifically addressed and delivered to such person on the date hereof; (ii) referred to, or quoted from, in any document, report, or financial statement; or (iii) filed with or delivered to any governmental agency or other person or entity.

The opinions expressed in this letter are limited to the matters set forth in this opinion letter, and no other opinions should be inferred beyond the matters expressly herein stated.

Very truly yours,

EXHIBIT A

The Banks, Citicorp USA, Inc. as Administrative Agent and

  Citibank, N.A. as Collateral Agent

c/o Citicorp USA Inc., as Administrative Agent

388 Greenwich Street, 21st Floor

New York, New York 10013

Wilmington Trust Company

  as Corporate Trustee

Rodney Square North

1100 North Market Street

Wilmington, Delaware 19890

Attn: Corporate Trust Division

Bruce L. Bisson

  as Individual Trustee

Rodney Square North

1100 North Market Street

Wilmington, Delaware 19890

Attn: Corporate Trust Division

HALL, ESTILL, HARDWICK, GABLE, GOLDEN & NELSON

March 17, 2004 Del L. Gustafson (918) 594-0413 dgustafson@hallestill.com

The Banks, Citicorp USA, Inc., the

    Administrative Agent and

    Citibank, N.A. as Collateral Agent

c/o Citicorp USA, Inc., as Administrative Agent

388 Greenwich Street, 21st Floor

New York, NY 10013

Attention: Stuart Glen

Wilmington Trust Company, as Corporate Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

Bruce L. Bisson, as Individual Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

Dear Sirs:

We have acted as Oklahoma counsel to AES Oklahoma Holdings, L.L.C., a Delaware limited liability company (the “Company”) and its subsidiaries, in connection with the transactions contemplated by that certain Third Amended and Restated Credit and Reimbursement Agreement (as amended, the “Senior Credit Agreement”) dated as of March 17, 2004, among The AES Corporation, a Delaware corporation (“AES”), the Subsidiary Guarantors party thereto (the “Subsidiary Guarantors”), the banks party thereto (the “Banks”),

March 17, 2004

Page 2

Citicorp USA, Inc., as Administrative Agent for the Banks (in such capacity, the “Administrative Agent”) and Citibank, N.A., as Collateral Agent (in such capacity, the “Collateral Agent”). Terms used (but not defined) herein have the meanings assigned to them in the Security Agreement (as defined below).

We have reviewed copies of:

(a) the Senior Credit Agreement, including without limitation, the Subsidiary Guaranty in Article IX thereof (the “Senior Guaranty”);

(b) the Security Agreement from the Grantors referred to therein to Wilmington Trust Company, as Corporate Trustee, and Bruce L. Bisson, as Individual Trustee, dated as of December 12, 2002, as amended by Amendment No. 1 dated July 29, 2003 (the “Security Agreement”);

(c) the Collateral Trust Agreement among the Grantors referred to therein and Wilmington Trust Company, as Corporate Trustee, and Bruce L. Bisson, as Individual Trustee, dated as of December 12, 2002, as amended by Amendment No. 1 dated as of July 29, 2003 and by Amendment No. 2 dated as of March 17, 2004 (as amended, the “Collateral Trust Agreement”);

(d) the Senior Indenture by and between AES and Wells Fargo Bank Minnesota, National Association, as Trustee, dated as of May 8, 2003 (the “Indenture”);

(e) the Second Priority Security Agreement between the Grantors referred to therein and Wells Fargo Bank Minnesota, National Association as Second Priority Corporate Trustee and Jeffrey T. Rose as Second Priority Individual Trustee, dated as of May 8, 2003 (the “Second Priority Security Agreement”); and

(f) the Second Priority Collateral Trust Agreement between the Grantors referred to therein and Wells Fargo Bank Minnesota, National Association as Second Priority Corporate Trustee and Jeffrey T. Rose as Second Priority Individual Trustee, dated as of May 8, 2003 (the “Second Priority Collateral Trust Agreement”).

We have also reviewed the documents and agreements set forth on Schedule I attached hereto.

The documents listed in items (a), (b) and (c) above are collectively hereinafter referred to as the “Senior Credit Documents,” the documents listed in items (d), (e) and (f) above are collectively hereinafter referred to as the “Second Priority Credit Documents,” and the Senior Credit Documents and the Second Priority Credit Documents are collectively hereinafter referred to as the “Credit Documents.” The Security Agreement and the Second Priority Security Agreement are collectively hereinafter referred to as the “Security Agreements”; and the Collateral Trust Agreement and the Second Priority Collateral Trust Agreement are collectively hereinafter referred to as the “Collateral Trust Agreements.”

March 17, 2004

Page 3

We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records and certificates of public officials and officers of the Company and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. In our examination, we have assumed the genuineness of all signatures on, and the authenticity of, all documents submitted to us as originals or copies and the conformity with the originals of all documents submitted to us as copies.

Assumptions for Legal Opinions

The opinions hereafter expressed are premised upon assumptions that:

1. The Senior Credit Agreement constitutes the legal, valid and binding agreement of the parties thereto, enforceable against such parties in accordance with its terms.

2. All parties to the Credit Documents (other than the Company), have full power and authority to execute, to deliver and to perform their obligations under the Credit Documents and under the documents required or permitted to be delivered and performed thereunder, and all such documents have been duly authorized by all necessary action, have been fully executed by such parties, have been duly delivered by such parties and are or will be valid, binding and enforceable obligations of such parties.

3. All natural persons who are signatories to the Credit Documents have sufficient legal capacity to enter into and perform their respective obligations thereunder; all signatures on the Credit Documents are genuine; the copies of all documents submitted to us are accurate and complete and conform to the originals.

4. The conduct of the parties to the Credit Documents complies with and will comply with any requirement of good faith, fair dealing, conscionability and commercial reasonableness.

5. There has not been any mutual mistake of fact or misunderstanding, fraud, duress or undue influence in connection with the transaction contemplated by the Credit Documents.

6. (a) Each party to each of the Credit Documents (other than the Company) is validly existing and in good standing under the law of the jurisdiction in which it is incorporated or organized; and (b) the execution, delivery and performance by each party (other than the Company) of the Credit Documents does not breach, conflict with or constitute a violation of (i) the certificate of incorporation, bylaws or any other charter document of such party, or (ii) the laws or governmental rules and regulations of any jurisdiction, or (iii) any agreement, instrument or document to which any such party is a party or by which any such party or any of its properties is bound; or (iv) any order, judgment or decree to which any such party is subject or by which any of its properties is bound.

7. The parties to the Credit Documents have the requisite minimum contacts with New York, and the New York courts have subject matter jurisdiction of those matters in the Credit Documents for which jurisdiction of the New York courts is provided.

March 17, 2004

Page 4

8. AES holds the requisite title and rights to the collateral pledged under the Security Agreements.

9. The Company has received fair and adequate consideration in exchange for execution, delivery and performance of the Senior Credit Agreement, and the Company’s execution, delivery and performance of the Senior Credit Agreement does not constitute a fraudulent transfer or conveyance.

10. Any lawsuit seeking to foreclose on the collateral secured by the Security Agreements or the Collateral Trust Agreements will not be brought in Oklahoma.

11. None of the Obligors under the Senior Credit Agreement and none of the Grantors under the Security Agreements or the Collateral Trust Agreements (a) is organized in the State of Oklahoma, (b) owns property in the State of Oklahoma, or (c) conducts business in the State of Oklahoma.

Legal Opinions

Based on the foregoing, and subject to the assumptions and qualifications set forth below, we are of the opinion that:

1. The Company is a limited liability company validly existing and in good standing under the laws of Delaware.

2. The execution and delivery by the Company of the Senior Credit Agreement and the performance of its obligations thereunder, are within its powers as a limited liability company and have been duly authorized by all necessary action. The Company has duly executed and delivered the Senior Credit Agreement.

3. (a) The execution and delivery by the Company of the Senior Credit Agreement, including, without limitation, the Senior Guaranty and the performance of its obligations thereunder and (b) the granting of a security interest in all right, title and interest of AES in that portion of the Collateral, as defined in the Security Agreements, which represents a membership interest in the Company and notes and other amounts receivable from the Company and its subsidiaries (the “Company Collateral”), and the exercise of remedies by the Existing Collateral Trustees and Second Priority Collateral Trustees with respect to the Company Collateral in accordance with applicable law and pursuant to the Security Agreements and the Collateral Trust Agreements, require no action by or in respect of, or filing with, any Oklahoma governmental body, agency or official and do not (i) contravene, or constitute a default under, any provision of (A) applicable law or regulation of the State of Oklahoma, that in our experience is normally applicable in relation to transactions of the type contemplated by the Credit Documents, (B) the certificate of formation or limited liability company agreement or other constitutive documents of the Company or any of its subsidiaries or (C) any agreement or instrument listed in Schedule I hereto, which agreements have been represented to us by the Company to be the material agreements of the Company and its subsidiaries (other than those material agreements which are governed by New York law) or (ii) result in or require the

March 17, 2004

Page 5

creation or imposition of any Lien on any asset of the Company or any of its subsidiaries under any agreement or instrument listed in such Schedule I.

4. The obligations of the Company under the Senior Credit Agreement, including, without limitation, the Senior Guaranty will at all times rank at least pari passu in all respects with all other present and future unsecured Debt of the Company other than those which, on the liquidation or bankruptcy of the Company and without any agreement, notarization or other voluntary act, would be preferred by operation of law and other than obligations to governmental authorities.

5. No income, stamp or other taxes or duties of the State of Oklahoma with respect to the preparation, execution, delivery or performance of the Credit Documents or with respect to the enforcement of the Credit Documents, or with respect to the creation, perfection, priority or enforcement of the Liens (as defined in the Senior Credit Agreement) created or intended to be created by the Credit Documents will be imposed on any party thereto or on any payment to be made by any party pursuant to the Credit Documents.

6. It is not necessary in order to ensure the legality, validity, admissibility in evidence or enforceability of any of the Credit Documents or the legality, validity, perfection, priority, admissibility in evidence or enforceability of the Liens (as defined in the Senior Credit Agreement) created or intended to be created by the Credit Documents that any document be filed, registered, recorded or enrolled with any court or authority of the State of Oklahoma or that any stamp, registration or similar tax be paid to the State of Oklahoma on or in relation to the same or that any other action be taken in relation thereto.

7. The choice of New York law to govern the Credit Documents should be a legal, valid and binding choice of law under the laws of Oklahoma and a court sitting in Oklahoma should recognize and enforce such choice of law, provided that (i) application of the relevant portion of New York law is not held to be contrary to Oklahoma public policy; (ii) the State of New York has a substantial relationship to the parties to the Credit Documents or the transactions contemplated by the Credit Documents or there is some other reasonable basis for the parties’ choice; and (iii) issues pertaining to the validity, creation and perfection of the security interest under the Security Agreements, and matters of procedure and remedies may be governed by and construed in accordance with the laws of a state other than New York.

8. The submission by the Company to the non-exclusive jurisdiction of the state and federal courts in the State of New York specified in the Credit Documents should be legal, valid and binding upon the Company and should be recognized and enforced by the courts of Oklahoma; a final judgment for a sum of money of any such court in relation to the Credit Documents obtained against the Company should be recognized and enforced by the courts of Oklahoma.

March 17, 2004

Page 6

Limitations and Qualifications

The conclusions set forth in this opinion letter are subject to the following additional limitations and qualifications:

1. The enforceability of the Credit Documents or any Lien (as defined in the Senior Credit Agreement) may be limited by applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance and other similar laws now or hereafter in effect relating to or affecting creditors’ rights generally.

2. The enforcement of rights and remedies under the Credit Documents or any Lien (as defined in the Senior Credit Agreement) may be limited by general principles of equity, regardless of whether such enforcement is considered in a proceeding in equity or at law, and in this regard we have assumed that you will exercise your rights and remedies under the Credit Documents in good faith and in circumstances and a manner which are commercially reasonable.

3. We express no opinion with respect to matters of title or the perfection or priority of Liens (as defined in the Senior Credit Agreement) and security interests.

4. We express no opinion with regard to the effect of any (a) federal or state securities and “blue sky” laws and regulations, (b) federal or state antitrust and unfair competition laws and regulations, (c) federal or state pension and employee benefit laws and regulations, (d) federal or state environmental, subdivision, zoning, health, safety or land use laws and regulations, (e) federal or state racketeering laws and regulations and banking laws and regulations, and (f) administrative decisions, and rules and regulations of county, municipal, and special political subdivisions, whether state level, regional, or otherwise.

5. Our opinions stated in opinion paragraphs 5 and 6 apply to the Senior Credit Agreement only to the extent of the Company’s Obligations under the Senior Credit Agreement and to the Security Agreements and the Collateral Trust Agreements only to the extent of the Company Collateral.

This opinion letter sets forth our professional judgments as to the matters set forth herein and you may rely upon the matters set forth herein as a legal opinion only. In expressing the conclusions set forth in this opinion letter, we have not intended to and do not render any guarantees or warranties of the matters discussed in this opinion letter.

We do not undertake to update this opinion letter or to advise you of any changes in the laws of the State of Oklahoma that could affect the conclusions set forth herein.

This opinion is delivered to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent, except that any person that becomes a Bank Party in accordance with the provisions of Section 10.06 of the Senior Credit Agreement and any person that becomes a “Secured Holder” under the Senior Collateral Trust Agreement or a “Second Priority Secured Holder” under the Second Priority Collateral Trust Agreement may rely upon this opinion as if it were specifically addressed and delivered to such person on the date hereof.

March 17, 2004

Page 7

We are members of the Bar of Oklahoma and the foregoing opinion is limited to the laws of Oklahoma except to the extent the opinion stated in opinion paragraph 1 above pertains to the limited liability company laws of the State of Delaware.

Very truly yours,

HALL, ESTILL, HARDWICK, GABLE, GOLDEN & NELSON, P.C.

Attachment

March 17, 2004

Page 8

		SCHEDULE I
No.	Date	Material Agreements not Governed by New York Law
1.	12/10/85	Amended Power Sales Agreement (between Oklahoma Gas and Electric Company and AES Shady Point (“SP”))
2.	12/19/85	First Amendment to the Amended Power Sales Agreement (between Oklahoma Gas and Electric Company and SP)
3.	12/05/90	Food Grade Liquid Carbon Dioxide Sales and Purchase Agreement (between Tyson Foods, Inc. and SP)
4.	10/01/94	Amended Coal and Limestone Supply and Ash Disposal Agreement (between LeFlore County Coal Company and SP)
5.	10/01/94	Amended Coal and Limestone Supply and Ash Disposal Agreement (between P&K Co., Ltd. and SP)
6.	10/01/94	Coal and Limestone Supply and Ash Disposal Agreement (between Brazil Creek Minerals and SP)
7.	02/29/96	Collateral Assignment of Coal Supply Agreement (with SP by Marine Coal Sales Company, successor to LeFlore County Coal Company; also attached 07/26/96 Consent to Assignment)
8.	06/28/99	Amendment to Food Grade Liquid Carbon Dioxide Sales and Purchase Agreement (between SP and Tyson Foods, Inc.)
9.	01/01/00	Coal and Limestone Supply and Ash Disposal Agreement (between Brazil Creek Minerals, Inc. and SP)
10.	03/14/00	Coal and Limestone Supply and Ash Disposal Agreement (between Farrell Cooper Mining Company and SP)
11.	12/28/01	Amendment to P&K+ Co., Ltd. Agreement (between Georges Colliers, Inc. as successor to P&K Co., Ltd. and SP)
12.	12/28/01	Amendment (between Marine Coal Sales Company, successor to LeFlore County Coal Company and SP)
13.	12/28/01	Amendment (to Amended Coal and Limestone Supply and Ash Disposal Agreement dated October 1, 1994) (between Marine Coal Sales Company, successor to LeFlore County Coal Company, Seller and SP)
14.	12/28/01	Amendment (to Amended Coal and Limestone Supply and Ash Disposal Agreement dated October 1, 1994) (between Brazil Creek Minerals, Inc. and SP)
15.	12/28/01	Amendment (to Amended Coal and Limestone Supply and Ash Disposal Agreement dated October 1, 1994) (between Georges Colliers, Inc., successor to P&K Co., Ltd. and SP)
16.	4/16/03	Amendment to Food Grade Solid Carbon Dioxide Sales and Purchase Agreement (between AES Shady Point LLC and Continental Carbonic Products, Inc.)

March 17, 2004

Page 9

		SCHEDULE I
No.	Date	Material Agreements not Governed by New York Law
17.	08/29/03	Amendment to Food Grade Liquid Carbon Dioxide Sales and Purchase Agreement (between AES Shady Point, LLC and Tyson Foods, Inc.)

OFFICER’S CERTIFICATE

OF

AES SHADY POINT, LLC

The undersigned, Roger Hurst, Vice President of AES Shady Point, LLC, a Delaware limited liability company (“Project Company”), does hereby certify, on behalf of Project Company, that Schedule I hereto contains all of the material agreements of Project Company and its subsidiaries other than those material agreements which are governed by New York law.

I understand that Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C. will rely on this certificate in giving an opinion in connection with a Third Amended and Restated Credit and Reimbursement Agreement to be entered into by The AES Corporation.

IN WITNESS WHEREOF, the undersigned has caused this Certificate to be duly executed as of this 17^th day of March, 2004.

AES SHADY POINT, LLC
By:	/s/ Roger Hurst
	Roger Hurst, Vice President

SCHEDULE I

	Date	Material Agreements not Governed by New York Law
1.	12/10/85	Amended Power Sales Agreement (between Oklahoma Gas and Electric Company and SP)
2.	12/19/85	First Amendment to the Amended Power Sales Agreement (between Oklahoma Gas and Electric Company and SP)
3.	12/05/90	Food Grade Liquid Carbon Dioxide Sales and Purchase Agreement (between Tyson Foods, Inc. and SP)
4.	10/01/94	Amended Coal and Limestone Supply and Ash Disposal Agreement (between LeFlore County Coal Company and SP)
5.	10/01/94	Amended Coal and Limestone Supply and Ash Disposal Agreement (between P&K Co., Ltd. and SP)
6.	10/01/94	Coal and Limestone Supply and Ash Disposal Agreement (between Brazil Creek Minerals and SP)
7.	02/29/96	Collateral Assignment of Coal Supply Agreement (with SP by Marine Coal Sales Company, successor to LeFlore County Coal Company; also attached 07/26/96 Consent to Assignment)
8.	06/28/99	Amendment to Food Grade Liquid Carbon Dioxide Sales and Purchase Agreement (between AES Shady Point, Inc. and Tyson Foods, Inc.)
9.	01/01/00	Coal and Limestone Supply and Ash Disposal Agreement (between Brazil Creek Minerals, Inc. and SP)
10.	03/14/00	Coal and Limestone Supply and Ash Disposal Agreement (between Farrell Cooper Mining Company and SP)
11.	12/28/01	Amendment to P&K+ Co., Ltd. Agreement (between Georges Colliers, Inc. as successor to P&K Co., Ltd. and SP)
12.	12/28/01	Amendment (between Marine Coal Sales Company, successor to LeFlore County Coal Company and SP)
13.	12/28/01	Amendment (to Amended Coal and Limestone Supply and Ash Disposal Agreement dated October 1, 1994) (between Marine Coal Sales Company, successor to LeFlore County Coal Company, Seller; and SP, Buyer)
14.	12/28/01	Amendment (to Amended Coal and Limestone Supply and Ash Disposal Agreement dated October 1, 1994) (between Brazil Creek Minerals, Inc. (Seller), and SP (Buyer))
15.	12/28/01	Amendment (to Amended Coal and Limestone Supply and Ash Disposal Agreement dated October 1, 1994) (between Georges Colliers, Inc., successor to P&K Co., Ltd., Seller; and SP, Buyer)
16.	4/16/03	Amendment to Food Grade Solid Carbon Dioxide Sales and Purchase Agreement (between AES Shady Point LLC and Continental Carbonic Products, Inc.)
17.	8/29/03	Amendment to Food Grade Liquid Carbon Dioxide Sales and Purchase Agreement (between AES Shady Point, LLC and Tyson Foods, Inc.)

OFFICER’S CERTIFICATE

OF

AES OKLAHOMA MANAGEMENT CO., LLC

The undersigned, Roger Hurst, Vice President of AES Oklahoma Management Co., LLC, a Delaware limited liability company (“Project Company”), does hereby certify, on behalf of Project Company, that Schedule I hereto contains all of the material agreements of Project Company and its subsidiaries other than those material agreements which are governed by New York law.

I understand that Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C. will rely on this certificate in giving an opinion in connection with a Third Amended and Restated Credit and Reimbursement Agreement to be entered into by The AES Corporation.

IN WITNESS WHEREOF, the undersigned has caused this Certificate to be duly executed as of this 17^th day of March, 2004.

AES OKLAHOMA MANAGEMENT CO., LLC
By:	/s/ Roger Hurst
	Roger Hurst, Vice President

SCHEDULE I
	Date	Material Agreements not Governed by New York Law
1.	12/10/85	Amended Power Sales Agreement (between Oklahoma Gas and Electric Company and SP)
2.	12/19/85	First Amendment to the Amended Power Sales Agreement (between Oklahoma Gas and Electric Company and SP)
3.	12/05/90	Food Grade Liquid Carbon Dioxide Sales and Purchase Agreement (between Tyson Foods, Inc. and SP)
4.	10/01/94	Amended Coal and Limestone Supply and Ash Disposal Agreement (between LeFlore County Coal Company and SP)
5.	10/01/94	Amended Coal and Limestone Supply and Ash Disposal Agreement (between P&K Co., Ltd. and SP)
6.	10/01/94	Coal and Limestone Supply and Ash Disposal Agreement (between Brazil Creek Minerals and SP)
7.	02/29/96	Collateral Assignment of Coal Supply Agreement (with SP by Marine Coal Sales Company, successor to LeFlore County Coal Company; also attached 07/26/96 Consent to Assignment)
8.	06/28/99	Amendment to Food Grade Liquid Carbon Dioxide Sales and Purchase Agreement (between AES Shady Point, Inc. and Tyson Foods, Inc.)
9.	01/01/00	Coal and Limestone Supply and Ash Disposal Agreement (between Brazil Creek Minerals, Inc. and SP)
10.	03/14/00	Coal and Limestone Supply and Ash Disposal Agreement (between Farrell Cooper Mining Company and SP)
11.	12/28/01	Amendment to P&K+ Co., Ltd. Agreement (between Georges Colliers, Inc. as successor to P&K Co., Ltd. and SP)
12.	12/28/01	Amendment (between Marine Coal Sales Company, successor to LeFlore County Coal Company and SP)
13.	12/28/01	Amendment (to Amended Coal and Limestone Supply and Ash Disposal Agreement dated October 1, 1994) (between Marine Coal Sales Company, successor to LeFlore County Coal Company, Seller; and SP, Buyer)
14.	12/28/01	Amendment (to Amended Coal and Limestone Supply and Ash Disposal Agreement dated October 1, 1994) (between Brazil Creek Minerals, Inc. (Seller), and SP (Buyer))
15.	12/28/01	Amendment (to Amended Coal and Limestone Supply and Ash Disposal Agreement dated October 1, 1994) (between Georges Colliers, Inc., successor to P&K Co., Ltd., Seller; and SP, Buyer)
16.	4/16/03	Amendment to Food Grade Solid Carbon Dioxide Sales and Purchase Agreement (between AES Shady Point LLC and Continental Carbonic Products, Inc.)
17.	8/29/03	Amendment to Food Grade Liquid Carbon Dioxide Sales and Purchase Agreement (between AES Shady Point, LLC and Tyson Foods, Inc.)

	THE WARNER	AUSTIN
	1299 PENNSYLVANIA AVE., NW	BAKU
	WASHINGTON, DC	DALLAS
	20004-2400	HOUSTON
	202.639.7700	LONDON
	FAX 202.639.7890	MOSCOW
		NEW YORK
		RIYADH
		WASHINGTON

March 17, 2004

To the Addressees Listed on Attachment

    A Attached Hereto

Ladies and Gentlemen:

We have acted as special New York counsel to AES Oklahoma Holdings, L.L.C. (the “Company”) and its Subsidiaries, in connection with (i) the Third Amended and Restated Credit and Reimbursement Agreement dated as of March 17, 2004 (the “Credit Agreement”), including, without limitation, the Subsidiary Guaranty in Article IX thereof (the “Guaranty”) among The AES Corporation, a Delaware corporation (“AES”), the Subsidiary Guarantors party thereto (the “Subsidiary Guarantors”), the banks party thereto (the “Banks”), Citicorp USA, Inc., as Administrative Agent for the Banks (in such capacity, the “Administrative Agent”) and Citibank, N.A., as the Collateral Agent for the Banks (in such capacity, the “Collateral Agent”); and (ii) the Senior Indenture dated May 8, 2003 (the “Senior Indenture”) among AES and Wells Fargo Bank Minnesota, National Association, as trustee. This opinion is being furnished to you pursuant to Section 3.01(c)(iii) of the Credit Agreement. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Security Agreement (as defined below).

We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records and certificates as we have deemed necessary for the purposes of this opinion, including without limitation:

(a) the Credit Agreement, including, without limitation, the Guaranty,

(b) the Collateral Trust Agreement, dated as of December 12, 2002, among the Grantors listed therein and Wilmington Trust Company, as Corporate Trustee, and Bruce L. Bisson, as Individual Trustee (together the “First Priority Collateral Trustees”), as amended by Amendment No. 1 to the Collateral Trust Agreement dated as of July 29, 2003 (as amended, the “Collateral Trust Agreement”),

(c) Amendment No. 2 to the Collateral Trust Agreement, dated as of March 17, 2004 (the “Collateral Trust Amendment”),

(d) the Security Agreement, dated as of December 12, 2002, made by the Grantors listed therein to Wilmington Trust Company, as Corporate Trustee, and Bruce L. Bisson, as Individual Trustee, as amended by Amendment No. 1 to the Security Agreement dated as of July 29, 2003 (as amended, the “Security Agreement”),

(e) the Second Priority Security Agreement, dated as of May 8, 2003, made by the Grantors referred to therein to Wells Fargo Bank Minnesota, National Association, as Second Priority Corporate Trustee, and Jeffery T. Rose, as Second Priority Individual Trustee (the “Second Priority Security Agreement”),

(f) the Second Priority Collateral Trust Agreement, dated as of May 8, 2003, among the Grantors listed therein and Wells Fargo Bank Minnesota, National Association, as Second Priority Corporate Trustee, and Jeffery T. Rose, as Second Priority Individual Trustee (the “Second Priority Collateral Trust Agreement”), and

(g) the Senior Indenture.

The documents listed in items (e) and (f) above are collectively hereinafter referred to as the “Related Documents.” The Related Documents together with the Senior Indenture are collectively hereinafter referred to as the “Senior Note Credit Documents.”

Based on the foregoing, and subject to the assumptions and qualifications set forth below, it is our opinion that:

1. The execution and delivery by the Company of the Credit Agreement, including, without limitation, the Guaranty, and the granting of a security interest by AES in all right, title and interest of AES in that portion of the Collateral, as defined in the Security Agreement, which represents membership interests in the Company and notes and other amounts receivable owed to AES from the Company and its Subsidiaries (the “Company Collateral”) and the exercise of remedies with respect to the Company Collateral pursuant to the Security Agreement and the Collateral Trust Agreement, do not (i) contravene, or constitute a default under, any provision of any agreement or other document listed in Schedule I hereto (which agreements and documents, as provided to us by the Company, have been represented to us by the Company to be as of the date hereof all of the material agreements of the Company and its Subsidiaries that are governed by the laws of the State of New York), (ii) contravene any organizational documents set forth in Schedule II which organizational documents have been represented to us by the Company to be (x) all the constitutive documents of the Company and its Subsidiaries and (y) in full force and effect on the date hereof, or (iii) result in or require the creation or imposition of any Lien (other than under the Security Agreement) on any asset of the Company or any of its Subsidiaries (which Subsidiaries have been represented to us by the Company to include only the companies listed on Schedule III) under any agreement or other document listed in such Schedule I, except that (a) any exercise by the Collateral Trustees (as defined in the Security Agreement) of remedies under the Security Agreement and the Collateral Trust Agreement that results in AES

owning, directly or indirectly, less than 100% of the limited liability company membership interests of AES Oklahoma Management Co., LLC, or failing to continue to control the management and operations of AES Oklahoma Management Co., LLC would constitute a default under that certain Amended and Restated Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of January 14, 2003, among AES Oklahoma Management Co., LLC (formerly known as AES Oklahoma Management Co., Inc.), the banks named in such agreement and Union Bank of California, N.A., as agent, and (b) any exercise by the First Priority Collateral Trustees of remedies under the Security Agreement and the Collateral Trust Agreement that causes AES and AES Shady Point, LLC (formerly known as AES Shady Point, Inc.) to cease to be part of an “affiliated group” (as defined in Section 1504 of the Code) would constitute a default under that certain Second Amended and Restated Application for Letter of Credit and Reimbursement Agreement, as amended, dated as of November 30, 1999 among AES Shady Point, Inc., the banks named in such agreement, Bank of America, N.A., as issuing bank, and Union Bank of California, N.A., as agent.

2. The execution and delivery by the Company of the Senior Indenture, and the Related Documents and the granting of a security interest by AES in all right, title and interest of AES in that portion of the Collateral, as defined in the Second Priority Security Agreement which represents membership interests in the Company and notes and other amounts receivable owed to AES from the Company and its Subsidiaries (the “Senior Note Collateral”) and the exercise of remedies with respect to the Senior Note Collateral pursuant to the Second Priority Security Agreement and the Second Priority Collateral Trust Agreement, do not (i) contravene, or constitute a default under, any provision of any agreement or other document listed in Schedule I hereto, (ii) contravene any organizational documents set forth in Schedule II hereto or (iii) result in or require the creation or imposition of any Lien, (other than under the Second Priority Security Agreement) on any asset of the Company or any of its Subsidiaries under any agreement or other document listed in such Schedule I, except that (a) any exercise by the Second Priority Collateral Trustees of remedies under the Second Priority Security Agreement, and the Second Priority Collateral Trust Agreement that results in AES owning, directly or indirectly, less than 100% of the limited liability membership interests of AES Oklahoma Management Co., LLC, or failing to continue to control the management and operations of AES Oklahoma Management Co., LLC would constitute a default under that certain Amended and Restated Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of January 14, 2003, among AES Oklahoma Management Co., LLC, the banks named in such agreement and Union Bank of California, N.A. as agent, and (b) any exercise by the Second Priority Collateral Trustees of remedies under the Second Priority Security Agreement, and the Second Priority Collateral Trust Agreement that causes AES and AES Shady Point, LLC to cease to be part of an “affiliated group” (as defined in Section 1504 of the Code) would constitute a default under that certain Second Amended and Restated Application for Letter of Credit and Reimbursement Agreement, as amended, dated as of November 30,1999 among AES Shady Point, Inc., the banks named in such agreement, Bank of America, N.A., as issuing bank, and Union Bank of California, N.A., as agent.

Without prejudice to the foregoing, we express no opinion as to the validity or enforceability of the Credit Agreement, Collateral Trust Agreement, Collateral Trust Amendment, the Security Agreement, or the Senior Note Credit Documents or the creation,

perfection or priority of the security interest of any party in or to any property purported to be created or granted thereby.

For purposes of this opinion, we have assumed that the Credit Agreement and Collateral Trust Amendment as executed, will not materially differ from the drafts we have reviewed as of the date hereof.

We are members of the Bar of the State of New York, and the foregoing opinion is limited to the laws of the State of New York. With respect to the Tax Sharing Agreement dated June 23, 1987, among Applied Energy Services, Inc., AES Oklahoma Management Co., Inc., AES Shady Point, Inc., Security Pacific National Bank, as agent, and Combustion Engineering, Inc. (which agreement is not explicitly governed by the laws of any state), as amended by Amendment to Tax Sharing Agreement, dated as of November 30, 1999, among AES, AES Oklahoma Management Co., Inc., AES Shady Point, Inc., and Union Bank of California, N.A. (formerly known as Union Bank), as successor in interest to Security Pacific National Bank, as agent (which Amendment to Tax Sharing Agreement is explicitly governed by the laws of the State of New York), we have assumed that the law governing the Tax Sharing Agreement does not materially differ from the laws of the State of New York.

This opinion letter sets forth our professional judgments as to the matters set forth herein and you may rely upon the matters set forth herein as a legal opinion only. In expressing the conclusions set forth in this opinion letter, we have not intended to and do not render any guarantees or warranties of the matters discussed herein.

This opinion is furnished to you solely in connection with the above matters. This opinion may not be relied upon by you for any other purpose or relied upon by any other person or described or quoted from by any other persons without our prior written consent, except that any person that becomes (i) a Bank Party in accordance with the provisions of Section 10.06 of the Credit Agreement, (ii) a “Secured Holder” under the First Priority Collateral Trust Agreement, or (iii) a “Second Priority Secured Holder” under the Second Priority Collateral Trust Agreement, may rely upon this opinion as if it were specifically addressed and delivered to such person on the date hereof.

Very truly yours,

/s/ BAKER BOTTS L.L.P.

BAKER BOTTS L.L.P.

SCHEDULE I

Material Agreements Governed by New York Law

1. AES Oklahoma Equity Subscription Agreement, dated as of June 23, 1987, among AES Oklahoma Management Co., Inc., AES Shady Point, Inc., and Security Pacific National Bank, as Agent

2. Assignment Agreement, dated as of June 23, 1987, between AES Oklahoma Management Co., Inc. and Security Pacific National Bank, as Agent

3. Consent and Agreement, dated as of June 23, 1987, made by Applied Energy Services, Inc. and accepted by Security Pacific National Bank, as Agent

4. Consent and Agreement, dated as of June 23, 1987, made by AES Oklahoma Management Co., Inc. and accepted by Security Pacific National Bank, as Agent

5. Guaranty, dated as June 23, 1987, made by Applied Energy Services, Inc. and accepted by Security Pacific National Bank, as Agent

6. Letter Agreement regarding Issuance of Commercial Paper Notes for AES Shady Point, Inc., dated as of June 23, 1987, between AES Shady Point, Inc. and Security Pacific National Bank, as Agent and Issuing Bank, and accepted by Bankers Trust Company, as Depositary

7. Management Agreement, dated as of June 23, 1987, between AES Oklahoma Management Co., Inc. and AES Shady Point, Inc.

8. Services Agreement, dated as of June 23, 1987, between Applied Energy Services, Inc. and AES Oklahoma Management Co., Inc.

9. Tax Sharing Agreement, dated as of June 23, 1987, among Applied Energy Services, Inc., AES Oklahoma Management Co., Inc., AES Shady Point, Inc., Security Pacific National Bank, as Agent, and Combustion Engineering, Inc.*

10. Subordinated Debt Agreement, dated as of December 6, 1991, between AES Shady Point, Inc. and The AES Corporation, as amended by Amendment No. 1 thereto dated as of September 28, 1994, as further amended by Amendment No. 2 thereto dated as of January 14, 2003

11. AES Funding Agreement, dated as of December 6, 1991, among AES Shady Point, Inc., Union Bank, as Agent, and The AES Corporation, as Subordinated Lender

12. Amended and Restated Assignment and Security Agreement, dated as of September 28, 1994, between AES Shady Point, Inc. and Union Bank, as Agent, as amended by Amendment No. 1, dated as of August 17, 1995, Amendment No. 2, dated as of January

* Not governed by the law of the State of New York, but amendment thereto is governed by the law of the State of New York.

30, 1998, the Amendment to Amended and Restated Application for Letter of Credit and Reimbursement Agreement, Depositary Agreement and Amended and Restated Assignment and Security Agreement, dated as of January 8, 1999, and the Amendment to Amended and Restated Assignment and Security Agreement, dated as of November 30, 1999.

13. Amended and Restated Equity Contribution Agreement, dated as of January 14, 2003, by and among The AES Corporation, AES Oklahoma Management Co., LLC and Union Bank of California, N.A., for itself and as Agent

14. Amended and Restated Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of January 14, 2003, by and among AES Oklahoma Management Co., LLC, the Participating Banks named therein and Union Bank of California, N.A., as Issuing Bank and Agent

15. Amendment to Amended and Restated Assignment and Security Agreement, dated as of November 30, 1999, by and between AES Shady Point, Inc. and Union Bank of California, N.A. (as successor to Union Bank), as Agent

16. Amendment to Tax Sharing Agreement, dated as of November 30, 1999, by and among The AES Corporation (formerly known as Applied Energy Services, Inc.), AES Oklahoma Management Co., Inc., AES Shady Point, Inc. and Union Bank of California, N.A., (formerly known as Union Bank) as successor in interest to Security Pacific National Bank, as Agent

17. Amendment to Depositary Agreement, dated as of November 30, 1999, by and among Shady Point, Inc., Bankers Trust Company, as Depositary, Bank of America, N.A. (as successor to NationsBank, N.A.), as Issuing Bank and Union Bank of California, N.A. (as successor to Union Bank), as Agent

18. Second Amended and Restated Application for Letter of Credit and Reimbursement Agreement, dated as of November 30,1999, by and among AES Shady Point, Inc., Bank of America, N.A., as Issuing Bank, the Banks named therein and Union Bank of California, N.A., as Agent, as amended by Amendment No. 1 thereto dated as of August 31, 2002, as further amended by Amendment No. 2 thereto dated as of January 14, 2003, as further amended by Amendment No. 3 thereto dated as of February 28, 2003, and as further amended by Amendment No. 4 thereto dated as of December 9, 2003.

19. Pledge Agreement, dated as of June 23, 1987, as amended and restated as of August 31, 2002, from AES Oklahoma Management Co., LLC to Union Bank of California, N.A., as Agent

20. Cash Collateral Security Agreement, dated as of January 14, 2003 by and among AES Oklahoma Management Co., LLC and Union Bank of California, N.A., as Agent

SCHEDULE II

Organizational Documents

AES Oklahoma Holdings, L.L.C.

1. Certificate of Formation of AES Oklahoma Holdings, L.L.C., dated September 17, 2002.

2. Application for Registration as a Foreign Limited Liability Company of AES Oklahoma Holdings, L.L.C., filed in the Commonwealth of Virginia, dated September 17, 2002.

3. Limited Liability Company Agreement of AES Oklahoma Holdings, L.L.C., dated as of September 17, 2002.

AES Oklahoma Management Co., LLC

1. Certificate of Formation of AES Oklahoma Management Co., LLC, effective August 31, 2002; as amended by Certificate of Amendment of Certificate of Formation of AES Oklahoma Management Co., LLC dated as of January 14, 2003.

2. Limited Liability Company Agreement of AES Oklahoma Management Co., LLC, dated as of August 31, 2002, as amended by First Amendment to Limited Liability Company Agreement of AES Oklahoma Management Co., LLC dated as of January 14, 2003.

AES Shady Point, LLC

1. Certificate of Formation of AES Shady Point, LLC, effective August 31, 2002, as amended by Certificate of Amendment of Certificate of Formation of AES Shady Point, LLC dated as of January 14, 2003.

2. Limited Liability Company Agreement of AES Shady Point, LLC, dated as of August 31, 2002, as amended by First Amendment to Limited Liability Company Agreement of AES Shady Point, LLC dated as of January 14, 2003.

SCHEDULE III

Subsidiaries of AES Oklahoma Holdings, L.L.C.

1. AES Oklahoma Management Co., LLC

2. AES Shady Point, LLC

ATTACHMENT A

List of Addressees

The Banks, Citicorp USA, Inc., as Administrative Agent and

Citibank, N.A., as Collateral Agent

c/o Citicorp USA, Inc., as Administrative Agent

388 Greenwich Street, 21st Floor

New York, NY 10013

Attention: Stuart Glen

Wilmington Trust Company, as Corporate Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

Bruce L. Bisson, as Individual Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

OFFICER’S CERTIFICATE

AES OKLAHOMA MANAGEMENT CO., LLC

I, Roger Hurst, Vice President of AES Oklahoma Management Co., LLC, a Delaware limited liability company (hereinafter called the “Company”), do hereby certify, as an officer of the Company, and not individually, on behalf of the Company, that:

(i) the documents listed on Schedule I constitute all of the material agreements to which the Company is a party and that are governed by the laws of the State of New York and such agreements are in full force and effect as of the hereof;

(ii) the documents listed on Schedule II constitute all of the organizational documents of the Company in effect as of the date hereof; and

(iii) the companies listed on Schedule III constitute all of the direct or indirect subsidiaries of the Company.

I understand that Baker Botts L.L.P. will rely on this certificate in giving an opinion in connection with (a) that certain Third Amended and Restated Credit and Reimbursement Agreement to be entered into by The AES Corporation on or about March 12, 2004; and (b) the Senior Indenture dated May 8, 2003 among The AES Corporation and Wells Fargo Bank Minnesota, National Association, as trustee.

IN WITNESS WHEREOF, I have executed this certificate on behalf of the Company as of this 17^th day of March, 2004.

/s/ Roger Hurst
Name:	Roger Hurst
Title:	Vice President

SCHEDULE I

Material Agreements Governed by New York Law

1. AES Oklahoma Equity Subscription Agreement, dated as of June 23, 1987, among AES Oklahoma Management Co., Inc., AES Shady Point, Inc., and Security Pacific National Bank, as Agent

2. Assignment Agreement, dated as of June 23, 1987, between AES Oklahoma Management Co., Inc. and Security Pacific National Bank, as Agent

3. Consent and Agreement, dated as of June 23, 1987, made by AES Oklahoma Management Co., Inc. and accepted by Security Pacific National Bank, as Agent

4. Management Agreement, dated as of June 23, 1987, between AES Oklahoma Management Co., Inc. and AES Shady Point, Inc.

5. Services Agreement, dated as of June 23, 1987, between Applied Energy Services, Inc. and AES Oklahoma Management Co., Inc.

6. Tax Sharing Agreement, dated as of June 23, 1987, among Applied Energy Services, Inc., AES Oklahoma Management Co., Inc., AES Shady Point, Inc., Security Pacific National Bank, as Agent, and Combustion Engineering, Inc.*

7. Amended and Restated Equity Contribution Agreement, dated as of January 14, 2003, by and among The AES Corporation, AES Oklahoma Management Co., LLC. and Union Bank of California, N.A., for itself and as Agent

8. Amended and Restated Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of January 14, 2003, by and among AES Oklahoma Management Co., LLC, the Participating Banks named therein and Union Bank of California, N.A., as Issuing Bank and Agent

9. Amendment to Tax Sharing Agreement, dated as of November 30, 1999, by and among The AES Corporation (formerly known as Applied Energy Services, Inc.), AES Oklahoma Management Co., Inc., AES Shady Point, Inc. and Union Bank of California, N.A., (formerly known as Union Bank) as successor in interest to Security Pacific National Bank, as Agent

10. Pledge Agreement, dated as of June 23, 1987, as amended and restated as of August 31, 2002, from AES Oklahoma Management Co., LLC to Union Bank of California, N.A., as Agent

* Not governed by the law of the State of New York, but amendment thereto is governed by the law of the State of New York.

11. Cash Collateral Security Agreement dated as of January 14, 2003 by and among AES Oklahoma Management Co., LLC and Union Bank of California, N.A. as Agent

SCHEDULE II

Organizational Documents

1. Certificate of Formation of AES Oklahoma Management Co., LLC, effective August 31, 2002, as amended by Certificate of Amendment of Certificate of Formation of AES Oklahoma Management Co., LLC dated as of January 14, 2003.

2. Limited Liability Company Agreement of AES Oklahoma Management Co., LLC, dated as of August 31, 2002, as amended by First Amendment to Limited Liability Company Agreement of AES Oklahoma Management Co., LLC dated as of January 14, 2003.

SCHEDULE III

The Companies

1. AES Shady Point, LLC

OFFICER’S CERTIFICATE

AES SHADY POINT, LLC

I, Roger Hurst, Vice President of AES Shady Point, LLC, a Delaware limited liability company (hereinafter called the “Company”), do hereby certify, as an officer of the Company, and not individually, on behalf of the Company, that:

(i) the documents listed on Schedule I constitute all of the material agreements to which the Company is a party and that are governed by the laws of the State of New York and such agreements are in full force and effect as of the date hereof;

(ii) the documents listed on Schedule II constitute all of the organizational documents of the Company in effect as of the date hereof; and

(iii) the Company has no direct or indirect subsidiaries.

I understand that Baker Botts L.L.P. will rely on this certificate in giving an opinion in connection with (a) that certain Third Amended and Restated Credit and Reimbursement Agreement to be entered into by The AES Corporation on or about March 12, 2004; and (b) the Senior Indenture dated May 8, 2003 among The AES Corporation and Wells Fargo Bank Minnesota, National Association, as trustee.

IN WITNESS WHEREOF, I have executed this certificate on behalf of the Company as of this 17^th day of March, 2004.

/s/ Roger Hurst
Name:	Roger Hurst
Title:	Vice President

SCHEDULE I

Material Agreements Governed by New York Law

1. AES Oklahoma Equity Subscription Agreement, dated as of June 23, 1987, among AES Oklahoma Management Co., Inc., AES Shady Point, Inc., and Security Pacific National Bank, as Agent

2. Letter Agreement regarding Issuance of Commercial Paper Notes for AES Shady Point, Inc., dated as of June 23, 1987, between AES Shady Point, Inc. and Security Pacific National Bank, as Agent and Issuing Bank, and accepted by Bankers Trust Company, as Depositary

3. Management Agreement, dated as of June 23, 1987, between AES Oklahoma Management Co., Inc. and AES Shady Point, Inc.

4. Tax Sharing Agreement, dated as of June 23, 1987, among Applied Energy Services, Inc., AES Oklahoma Management Co., Inc., AES Shady Point, Inc., Security Pacific National Bank, as Agent, and Combustion Engineering, Inc.*

5. Subordinated Debt Agreement, dated as of December 6, 1991, between AES Shady Point, Inc. and The AES Corporation, as amended by Amendment No. 1 thereto dated as of September 28, 1994, as further amended by Amendment No. 2 thereto dated as of January 14, 2003

6. AES Funding Agreement, dated as of December 6, 1991, among AES Shady Point, Inc., Union Bank, as Agent, and The AES Corporation, as Subordinated Lender

7. Amended and Restated Assignment and Security Agreement, dated as of September 28, 1994, between AES Shady Point, Inc. and Union Bank, as Agent, as amended by Amendment No. 1, dated as of August 17, 1995, Amendment No. 2, dated as of January 30, 1998, the Amendment to Amended and Restated Application for Letter of Credit and Reimbursement Agreement, Depositary Agreement and Amended and Restated Assignment and Security Agreement, dated as of January 8, 1999, and the Amendment to Amended and Restated Assignment and Security Agreement, dated as of November 30, 1999.

8. Amendment to Amended and Restated Assignment and Security Agreement, dated as of November 30, 1999, by and between AES Shady Point, Inc. and Union Bank of California, N.A. (as successor to Union Bank), as Agent

9. Amendment to Tax Sharing Agreement, dated as of November 30, 1999, by and among The AES Corporation (formerly known as Applied Energy Services, Inc.), AES Oklahoma Management Co., Inc., AES Shady Point, Inc. and Union Bank of California,

* Not governed by the law of the State of New York, but amendment thereto is governed by the law of the State of New York.

N.A., (formerly known as Union Bank) as successor in interest to Security Pacific National Bank, as Agent

10. Amendment to Depositary Agreement, dated as of November 30, 1999, by and among AES Shady Point, Inc., Bankers Trust Company, as Depositary, Bank of America, N.A. (as successor to NationsBank, N.A.), as Issuing Bank and Union Bank of California, N.A. (as successor to Union Bank), as Agent

11. Second Amended and Restated Application for Letter of Credit and Reimbursement Agreement, dated as of November 30, 1999, by and among AES Shady Point, Inc., Bank of America, N.A., as Issuing Bank, the Banks named therein and Union Bank of California, N.A., as Agent, as amended by Amendment No. 1 thereto dated as of August 31, 2002, as further amended by Amendment No. 2 thereto dated as of January 14, 2003, as further amended by Amendment No. 3 thereto dated as of February 28, 2003 and as further amended by Amendment No. 4 thereto dated as of December 9, 2003.

SCHEDULE II

Organizational Documents

1. Certificate of Formation of AES Shady Point, LLC, effective August 31, 2002, as amended by Certificate of Amendment of Certificate of Formation of AES Shady Point, LLC dated as of January 14, 2003.

2. Limited Liability Company Agreement of AES Shady Pointy LLC, dated as of August 31, 2002, as amended by First Amendment to Limited Liability Company Agreement of AES Shady Point, LLC dated as of January 14, 2003.

OFFICER’S CERTIFICATE

AES OKLAHOMA HOLDINGS, L.L.C.

I, Randy J. DeWulf, Vice President of AES Oklahoma Holdings, L.L.C., a Delaware limited liability company (hereinafter called the “Company”), do hereby certify, as an officer of the Company, and not individually, on behalf of the Company, that:

(i) the documents listed on Schedule I constitute all of the material agreements to which the Company, AES Oklahoma Management Co., LLC, or AES Shady Point, LLC is a party and that are governed by the laws of the State of New York and such agreements are in full force and effect as of the date hereof;

(ii) the documents listed on Schedule II constitute all of the organizational documents of the Company in effect as of the date hereof; and

(iii) as of the date hereof, the companies listed on Schedule III constitute all of the direct or indirect subsidiaries of the Company.

I understand that Baker Botts L.L.P. will rely on this certificate in giving an opinion in connection with (a) that certain Third Amended and Restated Credit and Reimbursement Agreement to be entered into by The AES Corporation on or about March 12, 2004; and (b) the Senior Indenture dated May 8, 2003 among The AES Corporation and Wells Fargo Bank Minnesota, National Association, as trustee.

IN WITNESS WHEREOF, I have executed this certificate on behalf of the Company as of this 17 ^th day of March, 2004.

/s/ Randy J. DeWulf
Name:	Randy J. DeWulf
Title:	Vice President

SCHEDULE I

Material Agreements Governed by New York Law

1. AES Oklahoma Equity Subscription Agreement, dated as of June 23, 1987, among AES Oklahoma Management Co., Inc., AES Shady Point, Inc., and Security Pacific National Bank, as Agent

2. Assignment Agreement, dated as of June 23, 1987, between AES Oklahoma Management Co., Inc. and Security Pacific National Bank, as Agent

3. Consent and Agreement, dated as of June 23, 1987, made by Applied Energy Services, Inc. and accepted by Security Pacific National Bank, as Agent

4. Consent and Agreement, dated as of June 23, 1987, made by AES Oklahoma Management Co., Inc. and accepted by Security Pacific National Bank, as Agent

5. Guaranty, dated as June 23, 1987, made by Applied Energy Services, Inc. and accepted by Security Pacific National Bank, as Agent

6. Letter Agreement regarding Issuance of Commercial Paper Notes for AES Shady Point, Inc., dated as of June 23, 1987, between AES Shady Point, Inc. and Security Pacific National Bank, as Agent and Issuing Bank, and accepted by Bankers Trust Company, as Depositary

7. Management Agreement, dated as of June 23, 1987, between AES Oklahoma Management Co., Inc. and AES Shady Point, Inc.

8. Services Agreement, dated as of June 23, 1987, between Applied Energy Services, Inc. and AES Oklahoma Management Co., Inc.

9. Tax Sharing Agreement, dated as of June 23, 1987, among Applied Energy Services, Inc., AES Oklahoma Management Co., Inc., AES Shady Point, Inc., Security Pacific National Bank, as Agent, and Combustion Engineering, Inc.*

10. Subordinated Debt Agreement, dated as of December 6, 1991, between AES Shady Point, Inc. and The AES Corporation, as amended by Amendment No. 1 thereto dated as of September 28, 1994, as further amended by Amendment No. 2 thereto dated as of January 14, 2003

11. AES Funding Agreement, dated as of December 6, 1991, among AES Shady Point, Inc., Union Bank, as Agent, and The AES Corporation, as Subordinated Lender

* Not governed by the law of the State of New York, but amendment thereto is governed by the law of the State of New York.

12. Amended and Restated Assignment and Security Agreement, dated as of September 28, 1994, between AES Shady Point, Inc. and Union Bank, as Agent, as amended by Amendment No. 1, dated as of August 17, 1995, Amendment No. 2, dated as of January 30, 1998, the Amendment to Amended and Restated Application for Letter of Credit and Reimbursement Agreement, Depositary Agreement and Amended and Restated Assignment and Security Agreement, dated as of January 8, 1999, and the Amendment to Amended and Restated Assignment and Security Agreement, dated as of November 30, 1999.

13. Amended and Restated Equity Contribution Agreement, dated as of January 14, 2003, by and among The AES Corporation, AES Oklahoma Management Co., LLC. and Union Bank of California, N.A., for itself and as Agent

14. Amended and Restated Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of January 14, 2003, by and among AES Oklahoma Management Co., LLC, the Participating Banks named therein and Union Bank of California, N.A., as Issuing Bank and Agent

15. Amendment to Amended and Restated Assignment and Security Agreement, dated as of November 30, 1999, by and between AES Shady Point, Inc. and Union Bank of California, N.A. (as successor to Union Bank), as Agent

16. Amendment to Tax Sharing Agreement, dated as of November 30, 1999, by and among The AES Corporation (formerly known as Applied Energy Services, Inc.), AES Oklahoma Management Co., Inc., AES Shady Point, Inc. and Union Bank of California, N.A., (formerly known as Union Bank) as successor in interest to Security Pacific National Bank, as Agent

17. Amendment to Depositary Agreement, dated as of November 30, 1999, by and among AES Shady Point, Inc., Bankers Trust Company, as Depositary, Bank of America, N.A. (as successor to NationsBank, N.A.), as Issuing Bank and Union Bank of California, N.A. (as successor to Union Bank), as Agent

18. Second Amended and Restated Application for Letter of Credit and Reimbursement Agreement, dated as of November 30, 1999, by and among AES Shady Point, Inc., Bank of America, N.A., as Issuing Bank, the Banks named therein and Union Bank of California, N.A., as Agent, as amended by Amendment No. 1 thereto dated as of August 31, 2002, as further amended by Amendment No. 2 thereto dated as of January 14, 2003, as further amended by Amendment No. 3 thereto dated as of February 28, 2003 and as further amended by Amendment No. 4 thereto dated as of December 9, 2003.

19. Pledge Agreement, dated as of June 23, 1987, as amended and restated as of August 31, 2002, from AES Oklahoma Management Co., LLC to Union Bank of California, N.A., as Agent

20. Cash Collateral Security Agreement dated as of January 14, 2003 by and among AES Oklahoma Management Co., LLC and Union Bank of California, N.A. as Agent

SCHEDULE II

Organizational Documents

1. Certificate of Formation of AES Oklahoma Holdings, L.L.C., dated September 17, 2002.

2. Application for Registration as a Foreign Limited Liability Company of AES Oklahoma Holdings, L.L.C., filed in the Commonwealth of Virginia, dated September 17, 2002.

3. Limited Liability Company Agreement of AES Oklahoma Holdings, L.L.C., dated as of September 17, 2002.

SCHEDULE III

The Companies

1. AES Oklahoma Management Co., LLC

2. AES Shady Point, LLC

Exhibit 10.1.Q

EXHIBIT B-4

MORRIS, NICHOLS, ARSHT & TUNNELL

1201 NORTH MARKET STREET

P.O. Box 1347

WILMINGTON, DELAWARE 19899-1347

302 658 9200

302 658 3989 FAX

March 17, 2004

The addressees listed on Schedule I attached hereto

Re:    The AES Corporation

Ladies and Gentlemen:

We have acted as special Delaware counsel to The AES Corporation, a Delaware corporation (“Borrower”), in connection with certain matters of Delaware law set forth below relating to that certain Third Amended and Restated Credit and Reimbursement Agreement dated March 17, 2004 (the “Credit Agreement”) among the Borrower, the Subsidiary Guarantors (as defined therein) party thereto, the banks party thereto (the “Banks”), Citicorp USA, Inc, as administrative agent for the Banks (in such capacity, the “Administrative Agent”) and Citibank, N.A., as collateral agent for the Banks (in such capacity, the “Collateral Agent”). Noncapitalized terms used in connection with the opinions given herein with respect to matters within the scope of Article 9 of the Uniform Commercial Code are used as defined in the Uniform Commercial Code as enacted and presently in effect in the State of Delaware (the “Delaware UCC”), to the extent that they are defined in the Delaware UCC.

In rendering this opinion, we have examined and relied upon copies of the following documents in the forms provided to us: the Security Agreement dated December 12, 2002 (the “Original Security Agreement”) by and among the Borrower, the other persons listed on the signature pages thereof and the Additional Grantors (as defined therein), Wilmington Trust Company, as corporate trustee (the “Corporate Trustee”) and Bruce L. Bisson, as individual trustee (the “Individual Trustee” and together with the Corporate Trustee, the “Collateral Trustees”); Amendment No. 1 dated July 29, 2003 to the Original Security Agreement (the “Security Agreement Amendment” and together with the Original Security Agreement amended thereby, the “Security Agreement”); the Collateral Trust Agreement dated as of December 12, 2002 (the “Original Collateral Trust Agreement”) by and among the

To the addressees listed on Schedule I

March 17, 2004

Page 2

Borrower, the other persons listed on the signature pages thereto, the Additional Grantors (as defined in the Security Agreement) and the Collateral Trustees; Amendment No. 1 dated July 29, 2003 to the Original Collateral Trust Agreement (the “Collateral Trust First Amendment” and together with the Original Collateral Trust Agreement amended thereby, the “First Amended Collateral Trust Agreement”); Amendment No. 2 dated March 17, 2004 to the First Amended Collateral Trust Agreement (the “Collateral Trust Second Amendment” and together with the First Amended Collateral Trust Agreement amended thereby, the “Collateral Trust Agreement”); the UCC-1 Financing Statement No. 23125147 naming Borrower as “debtor” and the Collateral Trustees as “secured party” (the “Original Borrower Security Agreement Financing Statement”) as filed in the Office of the Secretary of State of the State of Delaware (the “State Office”) on December 13, 2002; the UCC Financing Statement Amendment No. 31952897 naming Borrower as “debtor” and the Collateral Trustees as “secured party” (the “Borrower Security Agreement Financing Statement Amendment”) as filed in the State Office on July 29, 2003; the UCC-1 Financing Statement No. 23125089 naming Borrower as “debtor” and the Collateral Trustees as “secured party” (the “Original Borrower Collateral Trust Agreement Financing Statement” and together with the Original Borrower Security Agreement Financing Statement, the “Original Financing Statements” and each individually, an “Original Financing Statement”) as filed in the State Office on December 13, 2002; the UCC Financing Statement Amendment No. 31952756 naming Borrower as “debtor” and the Collateral Trustees as “secured party” (the “Borrower Collateral Trust Agreement Financing Statement Amendment”) as filed in the State Office on July 29, 2003; and a certification of good standing of the Borrower obtained as of a recent date from the State Office. In such examinations, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies or drafts of documents to be executed and the legal competence and capacity of natural persons to complete the execution of documents. We have further assumed for purposes of this opinion; (i) the due formation or organization, valid existence and good standing of each entity that is a signatory to any of the above-referenced documents under the laws of the jurisdiction of its formation or organization; (ii) the due authorization, authentication, adoption, approval, certification, acknowledgement, execution, filing, indexing and delivery, as applicable, of each of the above-referenced documents by each of the parties thereto; (iii) that the Original Borrower Security Agreement Financing Statement provides the mailing address of Borrower and the names and mailing addresses of the Collateral Trustees and sufficiently indicates the “Collateral” (as defined in the Original Security Agreement) in accordance with Section 9-502 of the Delaware UCC; (iv) that the Original Borrower Collateral Trust Agreement Financing Statement provides the mailing address of Borrower and the names and mailing addresses of the Collateral Trustees and sufficiently indicates the “Additional Collateral Trust Agreement Collateral” (as defined in the Original Collateral Trust Agreement) in accordance with Section 9-502 of the Delaware UCC; (v) that the Borrower Security Agreement Financing Statement Amendment accurately provides the names of the Collateral Trustees as “secured party” of record authorizing the amendment and sufficiently indicates the Borrower Collateral (as defined below) in accordance with Section 9-502 of the Delaware UCC; (vi) that the Borrower Collateral Trust Agreement. Financing Statement Amendment accurately provides the names of the Collateral Trustees as “secured party” of record authorizing the amendment and sufficiently indicates the Borrower Additional Collateral Trust Agreement Collateral (as defined below) in accordance with Section 9-502 of

To the addressees listed on Schedule I

March 17, 2004

Page 3

the Delaware UCC; (vii) that the Borrower was not originally or is not organized or existing under the laws of any jurisdiction other than the State of Delaware; (viii) that each of the above-referenced documents constitutes a legal, valid and binding agreement of each of the parties thereto and is enforceable against each of the parties thereto in accordance with its terms; and (ix) that the documents examined by us are in full force and effect, express the entire understanding of the parties thereto with respect to the subject matter thereof and have not been amended, supplemented or otherwise modified, except as referenced herein. No opinion is expressed herein with respect to the requirements of, or compliance with, federal or state securities or blue sky laws. As to any facts material to our opinion, other than those assumed, we have relied without independent investigation on the above-referenced documents and on the accuracy as of the date hereof of the matters therein contained. We have not reviewed any documents other than those referenced above in connection with rendering this opinion, and we have assumed there are no documents that are contrary to or inconsistent with the opinions herein expressed.

Based on and subject to the foregoing and to the further assumptions and qualifications set forth below, and limited in all respects to matters of Delaware law, it is our opinion that:

1. The Original Borrower Security Agreement Financing Statement and the Borrower Security Agreement Financing Statement Amendment having been filed, solely to the extent that the Delaware UCC is applicable to the perfection of the security interest of the Collateral Trustees in the “Collateral” (as defined in the Security Agreement) owned or acquired by Borrower (the “Borrower Collateral”), the security interest of the Collateral Trustees in that portion of the Borrower Collateral as to which a security interest can be perfected by filing a financing statement in the State Office under the Delaware UCC (the “Borrower Filing Collateral”) is perfected.

2. The Original Borrower Collateral Trust Agreement Financing Statement and the Borrower Collateral Trust Agreement Financing Statement Amendment having been filed, solely to the extent that the Delaware UCC is applicable to the perfection of the security interest of the Collateral Trustees in the “Additional Collateral Trust Agreement Collateral” (as defined in the Collateral Trust Agreement) owned or acquired by Borrower (the “Borrower Additional Collateral Trust Agreement Collateral”), the security interest of the Collateral Trustees in that portion of the Borrower Additional Collateral Trust Agreement Collateral as to which a security interest can be perfected by filing a financing statement in the State Office under the Delaware UCC (the “Borrower Additional Collateral Trust Agreement Filing Collateral”) is perfected.

In connection with the opinions set forth above, we have assumed that (i) the Security Agreement creates or, with respect to after acquired property, will create in favor of the Collateral Trustees a valid security interest in and to the Borrower Filing Collateral, which security interest has attached or, with respect to after acquired property, will attach under the Uniform Commercial Code as in effect in the State of New York (the “New York UCC”), (ii) the Collateral Trust Agreement creates or, with respect to after acquired property, will create in favor of the Collateral Trustees a valid security interest in and to the Borrower Additional Collateral

To the addressees listed on Schedule I

March 17, 2004

Page 4

Trust Agreement Filing Collateral (collectively with the Borrower Filing Collateral, the “Filing Collateral”), which security interest has attached or, with respect to after acquired property, will attach under the New York UCC, and (iii) the substantive laws of the Delaware UCC (and not the Delaware UCC choice-of-law rules) govern the perfection of a security interest in the Filing Collateral.

In addition, in connection with the opinions set forth above, we express no opinion as to (i) the effect of perfection or nonperfection or the priority of any security interest of the Collateral Trustees in any portion of the Filing Collateral, (ii) the existence, legality, validity, binding effect or enforceability of any security interest under the Security Agreement, the Collateral Trust Agreement or otherwise, (iii) the rights or interests of any of the parties to the Security Agreement, the Collateral Trust Agreement or any other person or entity in, or title of any such parties, persons or entities to, any of the Filing Collateral, or as to the value of any such Filing Collateral, (iv) any Borrower Collateral or Borrower Additional Collateral Trust Agreement Collateral until such Borrower Collateral or Borrower Additional Collateral Trust Agreement Collateral is acquired by Borrower; (v) in the case of any Filing Collateral that is secured by other property, the rights or interests of any of the parties to the Security Agreement, the Collateral Trust Agreement or any other person or entity in, or title of any such parties, persons or entities to, any of such underlying property, (vi) any collateral other than the Filing Collateral, (vii) any Filing Collateral due from any government or any agency or instrumentality thereof, (viii) any Filing Collateral that constitutes fixtures, as-extracted collateral or timber to be cut, (ix) any Filing Collateral that constitutes commercial tort claims, (x) any Filing Collateral that constitutes consumer goods, (xi) any Filing Collateral that constitutes goods subject to a negotiable document of title and (xii) transactions excluded from the application of Article 9 of the Delaware UCC pursuant to the provisions of Section 9-109 thereof. Further, to the extent the opinions set forth above relate to proceeds, such opinions are subject to the qualification that the perfection of an interest in proceeds is subject to the limitations and requirements of Section 9-315 of the Delaware UCC.

Further, in connection with the opinions set forth above, we note that the security interest of the Collateral Trustees in certain Filing Collateral may be subject to the rights of account debtors in respect of such Filing Collateral, claims and defenses of such account debtors and terms of agreements with such account debtors.

In addition, we express no opinion as to any actions that may be required to be taken periodically under the Delaware UCC or other applicable law in order for the effectiveness of the Original Borrower Security Agreement Financing Statement as amended by the Borrower Security Agreement Financing Statement Amendment (the “Borrower Security Agreement Financing Statement”) or the Original Borrower Collateral Trust Agreement Financing Statement as amended by the Borrower Collateral Trust Agreement Financing Statement Amendment (the “Borrower Collateral Trust Agreement Financing Statement” and together with the Borrower Security Agreement Financing Statement, the “Financing Statements” and each individually, a ‘Financing Statement”), or the perfection of the security interest of the Collateral Trustees in the Filing Collateral, to be maintained. We note, however, that the perfection of the security interest of the Collateral Trustees in the Filing Collateral and the effectiveness of each Financing

To the addressees listed on Schedule I

March 17, 2004

Page 5

Statement will either terminate or be materially limited (i) unless an appropriate continuation statement is properly filed (a) within the period of six months prior to the expiration of the five-year period from the date of the original filing of each Original Financing Statement and (b) if a prior continuation statement has been filed, within the period of six months prior to the expiration of the Original Financing Statement continued by such prior continuation statement, (ii) if Borrower changes its name so as to make the relevant Financing Statement seriously misleading, unless an amendment to such Financing Statement that renders such Financing Statement not seriously misleading is properly filed within four months after such a change in name, (iii) if Borrower changes its jurisdiction of formation or organization to another jurisdiction, four months after Borrower changes its jurisdiction of formation or organization to another jurisdiction, unless such security interest is perfected in such new jurisdiction within such time, (iv) if Borrower transfers the relevant Filing Collateral to a person or entity that thereby becomes a debtor and is located in another jurisdiction, one year after Borrower transfers such Filing Collateral to a person or entity that thereby becomes a debtor and is located in another jurisdiction, unless such security interest is perfected in such new jurisdiction within such time, and (v) if Borrower becomes organized under the laws of another jurisdiction in addition to the State of Delaware.

Further, the opinions set forth above are subject to the effect of (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other laws of general application relating to or affecting the enforcement of creditors’ rights and remedies, as from time to time in effect, (ii) application of equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law), (iii) principles of course of dealing or course of performance and standards of good faith, fair dealing, materiality and reasonableness that maybe applied by a court to the exercise of rights and remedies by, and other acts of, a creditor, and (iv) considerations of public policy with respect to the enforceability of exculpation, indemnification and limitation on damages provisions.

This opinion speaks only as of the date hereof, and is based on our understandings and assumptions as to present facts and a review of the above referenced documents and the application of Delaware law as the same exist on the date hereof, and we undertake no duty to update or supplement this opinion for the benefit of any person or entity with respect to any facts or circumstances that may hereafter come to our attention or any changes in facts, circumstances or law that may hereafter occur or take effect. The opinions herein expressed are intended solely for the benefit of the addressees hereof and may not be relied upon by any other person or entity or for any other purpose without our prior written consent.

Very truly yours,

MORRIS, NICHOLS, ARSHT & TUNNELL

/s/ Louis G. Hering

Louis G. Hering

SCHEDULE I

The Banks, Citicorp USA, Inc., as Administrative Agent and

Citibank, N.A., as Collateral Agent

c/o Citicorp USA, Inc., as Administrative Agent

388 Greenwich Street, 21st Floor

New York, NY 10013

Attention: Stuart Glen

Wilmington Trust Company, as Corporate Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

Bruce L. Bisson, as Individual Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

Exhibit 10.1.R

EXHIBIT B–5

MAPLES AND CALDER

CAYMAN EUROPE ASIA

17th March, 2004

To: the addressees listed in the Schedule

Dear Sirs

AES International Holdings II, Ltd. (the “Company”)

We have acted as counsel as to Cayman Islands law to the Company in connection with the entry by the Company into the Third Amended and Restated Credit and Reimbursement Agreement (the “Credit Agreement”), dated as of 17th March, 2004 among The AES Corporation, the Subsidiary Guarantors party thereto (the “Subsidiary Guarantors”), the Banks party thereto, Citicorp USA, Inc., as Administrative Agent and Citibank, N.A. as Collateral Agent.

1 DOCUMENTS REVIEWED

We have reviewed originals, copies, drafts or conformed copies of the following documents:

1.1 the Certificate of Incorporation and Memorandum and Articles of Association of each of AES El Salvador, Ltd. and AES South American Holdings, Ltd. (the “Cayman Companies”);

1.2 the Register of Members of each of the Cayman Companies as provided to as by Citco Trust (Cayman Islands) Ltd.;

1.3 a certificate from a Director of each of the Cayman Companies, copies of which are annexed hereto (the “Director’s Certificate”); and

1.4 the Charge and Assignment of Shares (“Charge of Shares”), dated as of 12 December, 2002 between the Company, as charger, the Wilmington Trust Company, as corporate trustee, and Bruce L. Bisson, as the individual trustee.

2 ASSUMPTIONS

The following opinion is given only as to, and based on, circumstances and matters of fact existing and known to us on the date of this opinion. This opinion only relates to the laws of the Cayman Islands which are in force on the date of this opinion. In giving this opinion we have relied (without further verification) upon the completeness and accuracy of the Director’s Certificates. We have also relied upon the following assumptions, which we have not independently verified:

2.1 the Charge of Shares has been authorised and duly executed and delivered by or on behalf of all relevant parties in accordance with all relevant laws (other than the laws of the Cayman Islands);

2.2 the Charge of Shares is legal, valid, binding and enforceable against all relevant parties in accordance with its terms under British Virgin Islands law and all other relevant laws (other than the laws of the Cayman Islands);

2.3 the choice of Cayman Islands law as the governing law of the Charge of Shares has been made in good faith;

2.4 copy documents, conformed copies or drafts of documents provided to us are true and complete copies of, or in the final forms of, the originals;

2.5 all signatures, initials and seals are genuine;

2.6 the power, authority and legal right of all parties under all relevant laws and regulations to enter into, execute, deliver, and perform their respective obligations under the Charge of Shares;

2.7 there is nothing under any law (other than the law of the Cayman Islands) which would or might affect the opinions hereinafter appearing. Specifically, we have made no independent investigation of the laws of the British Virgin Islands;

2.8 that no encumbrances or equities exist in respect of the shares of the Cayman Companies which are the subject of the Charge of Shares (the “Secured Shares”) (other than arising by virtue of the laws of the Cayman Islands) and that there is no contractual or other prohibition (other than one arising by virtue of the laws of the Cayman Islands) binding upon the Company preventing the Company from creating the charge over the Secured Shares pursuant to the Charge of Shares;

2.9 the share certificates representing the Secured Shares have been deposited with the Chargee together with a signed but undated share transfer form, and a security power of attorney.

2

3 OPINIONS

Based upon, and subject to, the foregoing assumptions and the qualifications set out below, and having regard to such legal considerations as we deem relevant, we are of the opinion that:

3.1 The Charge of Shares when duly authorised, executed and delivered by or on behalf of the Company, will constitute legal, valid and binding obligations of the Company enforceable against the Company in accordance with its terms except and insofar as such enforcement may be limited as hereinafter set forth.

3.2 No authorisations, consents or approvals are required from, and no notice to or filing or registration with, any governmental authorities or agencies or other official bodies in the Cayman Islands in connection with the execution or delivery of the Charge of Shares.

3.3 Subject as set out in paragraph 4.2 below, no stamp duties or other taxes are payable under the laws of the Cayman Islands in respect of the execution or delivery of the Charge of Shares or the enforcement thereof.

3.4 It is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of the Charge of Shares that any document be filed, recorded or enrolled with any governmental department or other authority in the Cayman Islands.

3.5 The courts of the Cayman Islands will observe and give effect to the choice of Cayman Islands law as the governing law of the Charge of Shares.

3.6 It is not necessary under the laws of the Cayman Islands (i) in order to enable any party to enforce its rights under the Charge of Shares or (ii) by reason of the execution, delivery or performance of the Charge of Shares that any party should be licensed, qualified or otherwise entitled to do business in the Cayman Islands or any political sub-division thereof.

3.7 No party to the Charge of Shares is or will be deemed to be resident, domiciled or carrying on business in the Cayman Islands by reason only of the execution, delivery or performance and/or enforcement of the Charge of Shares in the Cayman Islands or elsewhere.

3.8 The Charge of Shares:

3.8.1 Creates a valid charge over the Secured Shares; and

3.8.2 no further steps are required as a matter of Cayman Islands law to perfect such charge, or to regulate its ranking in point of priority; and

3.8.3 subject to the assumptions and qualifications herein, the charge created by the Charge of Shares will have priority over any claims by third parties (other than those preferred by law) including any liquidator or a creditor of the Company,

3

subject in the case of a winding up of the Company in a jurisdiction other than the Cayman Islands to any provisions of the laws of that jurisdiction as to priority of claims in a winding up.

4 QUALIFICATIONS

The opinions expressed above are subject to the following qualifications:

4.1 The term “enforceable” as used above means that the obligations assumed by the Company under the Charge of Shares are of a type which the courts of the Cayman Islands will enforce. It does not mean that those obligations will necessarily be enforced in all circumstances in accordance with their terms. In particular:

4.1.1 enforcement may be limited by bankruptcy, insolvency, liquidation, reorganisation, readjustment of debts or moratorium or other laws of general application relating to or affecting the rights of creditors;

4.1.2 enforcement may be limited by general principles of equity. For example, equitable remedies such as specific performance may not be available, inter alia, where damages are considered to be an adequate remedy;

4.1.3 some claims may become barred under the statutes of limitation or may be or become subject to defenses of set-off, counterclaim, estoppel and similar defenses;

4.1.4 where obligations are to be performed in a jurisdiction outside the Cayman Islands, they may not be enforceable in the Cayman Islands to the extent that performance would be illegal under the laws of that jurisdiction;

4.1.5 the Cayman Islands court has jurisdiction to give judgment in the currency of the relevant obligation and statutory rates of interest payable upon judgments will vary according to the currency of the judgment. If the Company becomes insolvent and is made subject to a liquidation proceeding, the Cayman Islands court will require all debts to be proved in a common currency, which is likely to be the “functional currency” of the Company determined in accordance with applicable accounting principles. Currency indemnity provisions have not been tested, so far as we are aware, in the courts of the Cayman Islands; and

4.1.6 obligations to make payments that may be regarded as penalties will not be enforceable.

4.2 Cayman Islands stamp duty may be payable if the original Charge of Shares is brought to or executed in the Cayman Islands.

4.3 A certificate, determination, calculation or designation of any party to the Charge of Shares as to any matter provided therein might be held by a Cayman Islands court not to

4

be conclusive final and binding if, for example, it could be shown to have an unreasonable or arbitrary basis, or in the event of manifest error.

4.4 In principle a Cayman Islands court will award costs and disbursements in litigation in accordance with the relevant contractual provisions but there remains some uncertainty as to the way in which the rules of the Grand Court will be applied in practice. Whilst it is clear that costs incurred prior to judgment can be recovered in accordance with the contract, it is likely that post-judgment costs (to the extent recoverable at all) will be subject to taxation in accordance with Grand Court Rules Order 62.

4.5 We reserve our opinion as to the extent to which a Cayman Islands court would, in the event of any relevant illegality, sever the offending provisions and enforce the remainder of the transaction of which such provisions form a part, notwithstanding any express provisions in this regard.

4.6 We make no comment with regard to the references to foreign statutes in the Charge of Shares.

4.7 The interest of the Chargee created pursuant to the Charge of Shares will rank after (i) any prior legal or perfected equitable interest in the Secured Shares and (ii) any later legal interest in the Secured Shares created in favour of a bona fide purchaser or mortgagee for value without notice of the charge created pursuant to the Charge of Shares.

4.8 Following the English decision in MacMillan Inc. V Bishopsgate Trust (No. 3) [1995] 1. W.L.R. 978, which would be persuasive although not technically binding in the courts of the Cayman Islands, it is not necessarily the case that, as a matter of Cayman Islands conflict of law rules, priorities of competing interests in shares in a Cayman Islands company will be determined according to the jurisdiction of incorporation of company, for example, when the register of members is maintained in another jurisdiction.

4.9 The articles of association of the Cayman Companies contain restrictions on the transferability of its shares which may affect the ability of the Chargee to realise its security by for example, selling the Secured Shares. For example, Article 9 of the Articles of Association of AES El Salvador, Ltd and Article 9 of the Articles of Association of AES South America Holdings, Ltd. confer on the Board of Directors of the relevant Cayman Company the right to refuse to register transfers of shares in its sole discretion. Unless and until the Board of Directors resolves to register a transfer of Secured Shares in accordance with the Articles and such transfer is duly registered in the relevant Cayman Company’s Register of Members, the Company shall, as a matter of Cayman Islands law, remain the legal and registered holder of the Secured Shares

5

We express no view as to the commercial terms of the Charge of Shares or whether such terms represent the intentions of the parties and make no comment with regard to the representations which may be made by the Company.

This opinion may be relied upon by the addressees only. It may not be relied upon by any other person except with our prior written consent.

Yours faithfully,

/s/ MAPLES and CALDER

MAPLES and CALDER

6

SCHEDULE

The Banks, Citicorp USA, Inc. as Administrative Agent

and Citibank, N.A. as Collateral Agent

c/o Citicorp USA, Inc., as Administrative Agent

and Collateral Agent

388 Greenwich Street, 21^st Floor

New York, New York 10013

Attn: Stuart Glen

Wilmington Trust Company

as Corporate Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attn: Corporate Trust Division

Bruce L. Bisson

as Individual Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attn: Corporate Trust Division

7

AES South American Holdings, Ltd.

P O Box 31106 SMB, West Bay Road,

Grand Cayman, Cayman Islands

11 March, 2004

To: Maples and Calder PO Box 309GT Ugland House South Church Grand Cayman Cayman Islands

Dear Sirs,

AES South American Holdings, Ltd. (the “Company”)

I, Barry J. Sharp, being a director of the Company, am aware that you are being asked to provide a legal opinion (the “Opinion”) in relation to certain aspects of Cayman Islands law. Capitalised terms used in this certificate have the meaning given to them in the Opinion. I hereby certify that:

1 The Memorandum and Articles of Association of the Company as registered on 22 April, 2002 remain in full force and effect and are unamended.

2 The authorised share capital of the Company is US$50,000 divided into 50,000 shares of US$1.00 par value each. The issued share capital of the Company is 5,030 shares of US$1.00 each, which have been issued and are fully paid up.

I confirm that you may continue to rely on this Certificate as being true and correct on the day that you issue the Opinion unless I shall have previously notified you personally to the contrary.

Signature:
	Director

AES El Salvador, Ltd.

P O Box 31106 SMB, West Bay Road,

Grand Cayman, Cayman Islands

11 March, 2004

To: Maples and Calder PO Box 309GT Ugland House South Church Grand Cayman Cayman Islands

Dear Sirs,

AES El Salvador, Ltd. (the “Company”)

I, Barry J. Sharp, being a director of the Company, am aware that you are being asked to provide a legal opinion (the “Opinion”) in relation to certain aspects of Cayman Islands law. Capitalised terms used in this certificate have the meaning given to them in the Opinion. I hereby certify that:

3 The Memorandum and Articles of Association of the Company as registered on 14 October, 1997 remain in full force and effect and are unamended.

4 The authorised share capital of the Company is US$50,000 divided into 50,000 shares of US$1.00 par value each. The issued share capital of the Company is 1,000 shares of US$1.00 each, which have been issued and are fully paid up.

I confirm that you may continue to rely on this Certificate as being true and correct on the day that you issue the Opinion unless I shall have previously notified you personally to the contrary.

Signature:
	Director

Exhibit 10.1.S

EXHIBIT B-6

Conyers Dill & Pearman

BARRISTERS & ATTORNEYS

ROMASCO PLACE, WICKHAMS CAY 1, P.O. BOX 3140. ROAD TOWN. TORTOLA. BRITISH VIRGIN ISLANDS

TELEPHONE: (284) 852 1000 FACSIMILE: (264) 852 1001 E-MAIL: INFO@COP.BM

INTERNET: WWW.CDP.BM

March 17, 2004

To the addressees listed on Schedule I	DIRECT LINE:
	E-MAIL:	xgeldridge@adp.bm
	OUR REF:	AGE/ssx/951465/45527
	YOUR REF:

Dear Sirs:

Re: AES International Holdings II, Ltd. (the “Company”)

We have acted as special legal counsel in the British Virgin Islands to The AES Corporation (“AES”) in connection with the Third Amended and Restated Credit and Reimbursement Agreement (the “Credit Agreement”) dated as of March 17, 2004 among AES, the Subsidiary Guarantors listed therein, the Banks listed on the signatures pages thereof, Citigroup Global Markets Inc., as Lead Arranger and Book Runner, Banc Of America Securities LLC, as Lead Arranger and Book Runner and as Co-Syndication Agent (for the Term Loan Facility (as defined in the Credit Agreement)), Deutsche Bank Securities Inc. as Lead Arranger and Book Runner (for the Term Loan Facility), Union Bank Of California, N.A., as Co-Syndication Agent € for the Term Loan Facility) and as Lead Arranger and Book Runner and as Syndication Agent (for the Revolving Credit Facility (as defined in the Credit Agreement)), Lehman Commercial Paper Inc., as Co-Documentation Agent (Term Loan Facility), UBS Securities LLC, as Co- Documentation Agent (Term Loan Facility), Société Générale, as Co-Documentation Agent (Revolving Credit Facility), Credit Lyonnais New York Branch, as Co-Documentation Agent (Revolving Credit Facility), Citicorp USA, Inc., as Administrative Agent for the Bank Parties and Citibank, N A., as Collateral Agent for the Bank Parties. This opinion is being rendered to you at the request of the Obligors (as defined in the Credit Agreement) pursuant to Section 3.01(c) of the Credit Agreement.

For the purposes of giving this opinion, we have examined facsimile or electronic copies of the following documents:

(i) the Charge and Assignment of Shares (“Charge Over Shares”) dated December 12, 2002, between the Company, the Wilmington Trust Company, as corporate trustee and Bruce L. Bisson, as the individual trustee;

(ii) the Collateral Trust Agreement (“Collateral Trust Agreement”) dated December 12, 2002, by and among AES, the Grantors (as therein defined) (including the Company), the Wilmington Trust Company, as corporate trustee and Bruce L. Bisson, as the individual trustee;

BERMUDA ANGUILLA BRITISH VIRGIN ISLANDS CAYMAN ISLANDS HONG KONG LONDON SINGAPORE

March 17, 2004
Page 2

(iii) an amending agreement dated July 29, 2003 by and among AES, the Grantors (as defined in the Collateral Trust Agreement) (including the Company), the Wilmington Trust Company, as corporate trustee and Bruce L. Bisson, as the individual trustee, amending the terms of the Collateral Trust Agreement; and

(iv) an amending agreement dated March 17, 2004 by and among AES, the Grantors (as defined in the Collateral Trust Agreement) (including the Company), the Wilmington Trust Company, as corporate trustee and Bruce L. Bisson, as the individual trustee, amending the terms of the Collateral Trust Agreement.

The documents listed in items (i) through (iii) above are herein sometimes collectively referred to as the “Documents”.

We have also reviewed the memorandum of association and the articles of association of the Company, as obtained from the Registrar of Companies on March 10, 2004, minutes of a meeting of its directors held on December 10, 2002, minutes of a meeting of its directors held on July 28, 2003, minutes of a meeting of its directors held on March 12, 2004 (collectively, the “Minutes”), and such other documents and made such enquiries as to questions of law as we have deemed necessary in order to render the opinion set forth below.

We have assumed:

(a) the genuineness and authenticity of all signatures and the conformity to the originals of all copies (whether or not certified) examined by us and the authenticity and completeness of the originals from which such copies were taken;

(b) that where a document has been examined by us in draft form, it will be or has been executed in substantively the form of that draft, and where a number of drafts of a document have been examined by us all changes thereto have been marked or otherwise drawn to our attention;

(c) the capacity, power and authority of each of the parties to the Documents, other than the Company, to enter into and perform its respective obligations under the Documents;

(d) the due execution of the Documents by each of the parties thereto, other than the Company, and the delivery thereof by each of the parties thereto;

(e) the accuracy and completeness of all factual representations made in the Documents and other documents reviewed by us;

(f) that the resolutions contained in the Minutes remain in full force and effect and have not been rescinded or amended;

March 17, 2004
Page 3

(g) that there is no provision of the law of any jurisdiction, other than the British Virgin Islands, which would have any implication in relation to the opinions expressed herein;

(h) the validity and binding effect under the laws of the Cayman Islands and the State of Delaware (the “Foreign Laws”) of the Documents which are expressed to be governed by such Foreign Laws in accordance with their respective terms; and

(i) the validity and binding effect under the Foreign Laws of the submission by the Company pursuant to the Documents to the non-exclusive jurisdiction of the courts of the Cayman Islands and the State of Delaware (the “Foreign Courts”).

The obligations of the Company under the Documents:

(a) will be subject to the laws from time to time in effect relating to bankruptcy, insolvency, liquidation, possessory liens, rights of set off, reorganisation, merger, consolidation, amalgamation, moratorium or any other laws or legal procedures, whether of a similar nature or otherwise, generally affecting the rights of creditors;

(b) will be subject to statutory limitation of the time within which proceedings may be brought;

(c) will be subject to general principles of equity and, as such, specific performance and injunctive relief, being equitable remedies, may not be available; and

(d) may not be given effect to by a British Virgin Islands court, whether or not it was applying the Foreign Laws, if and to the extent they constitute the payment of an amount which is in the nature of a penalty and not in the nature of liquidated damages.

Notwithstanding any contractual submission to the jurisdiction of specific courts, a British Virgin Islands court has inherent discretion to stay or allow proceedings in the British Virgin Islands courts.

We express no opinion as to the enforceability of any provision of the Documents which provides for the payment of a specified rate of interest on the amount of a judgment after the date of judgment or which purports to fetter the statutory powers of the Company.

We have made no investigation of and express no opinion in relation to the laws of any jurisdiction other than the British Virgin Islands. This opinion is to be governed by and construed in accordance with the laws of the British Virgin Islands and is limited to and is given on the basis of the current law and practice in the British Virgin Islands. This opinion is issued solely for your benefit and is not to be relied upon by any other person, firm or entity or in respect of any other matter.

March 17, 2004
Page 4

On the basis of and subject to the foregoing, we are of the opinion that:

1. The Company is duly incorporated and existing under the laws of the British Virgin Islands in good standing (meaning solely that it has not failed to make any filing with any British Virgin Islands governmental authority or to pay any British Virgin Islands government fee or tax which would make it liable to be struck off the Register of Companies and thereby cease to exist under the laws of the British Virgin Islands).

2. The Company has the necessary corporate power and authority to enter into and perform its obligations under the Documents. The execution and delivery of the Documents by the Company and the performance by the Company of its obligations thereunder will not violate the memorandum of association or articles of association of the Company nor any applicable law, regulation, order or decree in the British Virgin Islands.

3. The Company has taken all corporate action required to authorise its execution, delivery and performance of the Documents. The Documents have been duly executed and delivered by or on behalf of the Company, and constitute the valid and binding obligations of the Company in accordance with the terms thereof.

4. No order, consent, approval, licence, authorisation or validation of or exemption by any government or public body or authority of the British Virgin Islands or any sub-division thereof is required to authorise or is required in connection with the execution, delivery, performance and enforcement of the Documents.

5. It is not necessary or desirable to ensure the enforceability in the British Virgin Islands of the Documents that they be registered in any register kept by, or filed with, any governmental authority or regulatory body in the British Virgin Islands. However, to the extent that any of the Documents creates a charge over assets of the Company, it may be desirable to ensure the priority in the British Virgin Islands of the charge that it be registered in the Register of Mortgages, Charges and other Encumbrances of the Company at its registered office in accordance with Section 70A of the International Business Companies Act (Cap. 291) (the “Act”) and that a copy of such register be filed at the office of the Registrar of Companies pursuant to Section 111A of the Act. On registration, to the extent that British Virgin Islands law governs the priority of a charge, such charge will have priority in the British Virgin Islands over any unregistered charges, and over any subsequently registered charges, in respect of the assets which are the subject of the charge. A registration fee of $50.00 will be payable in respect of the registration.

While there is no exhaustive definition of a charge under British Virgin Islands law, a charge normally has the following characteristics:

(i) it is a proprietary interest granted by way of security which entitles the chargee to resort to the charged property only for the purposes of satisfying some liability due to the chargee (whether from the chargor or a third party); and

March 17, 2004
Page 5

(ii) the charger retains an equity of redemption to have the property restored to him when the liability has been discharged.

However, as the Documents are governed by the Foreign Laws, the question of whether they would possess these particular characteristics would be determined under the Foreign Laws. Assuming that each of the Documents possesses such characteristics, each of the Documents creates a valid and binding security interest in accordance with the terms thereof.

6. The Documents will not be subject to ad valorem stamp duty in the British Virgin Islands.

7. The choice of the Foreign Laws as the governing law of the Documents is a valid choice of law and would be recognised and given effect to in any action brought before a court of competent jurisdiction in the British Virgin Islands, except for those laws (i) which such court considers to be procedural in nature, (ii) which are revenue or penal laws or (iii) the application of which would be inconsistent with public policy, as such term is interpreted under the laws of the British Virgin Islands. The submission in the Documents to the non-exclusive jurisdiction of the Foreign Courts is valid and binding upon the Company.

8. The courts of the British Virgin Islands would recognise as a valid judgment, a final and conclusive judgment in personam obtained in the Foreign Courts against the Company based upon the Documents under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) and would give a judgment based thereon provided that (a) such courts had proper jurisdiction over the parties subject to such judgment, (b) such courts did not contravene the rules of natural justice of the British Virgin Islands, (c) such judgment was not obtained by fraud, (d) the enforcement of the judgment would not be contrary to the public policy of the British Virgin Islands, (e) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the British Virgin Islands and (f) there is due compliance with the correct procedures under the laws of the British Virgin Islands.

Yours faithfully

/s/ CONYERS DILL & PEARMAN

CONYERS DILL & PEARMAN

SCHEDULE I

The Banks, Citicorp USA, Inc., as Administrative Agent and

Citibank, N.A., as Collateral Agent

c/o Citicorp USA, Inc., as Administrative Agent

388 Greenwich Street, 21st Floor

New York, NY 10013

Attention: Stuart Glen

Wilmington Trust Company, as Corporate Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

Bruce L. Bisson, as Individual Trustee

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Trust Division

Exhibit 10.1.T

EXHIBIT B-7

SHEARMAN & STERLING LLP

FAX: 213-848-7179 TELEX: 667290 WUI www.shearman.com WRITER’S DIRECT NUMBER:	599 LEXINGTON AVENUE NEW YORK, N.Y. 10022-6069 212 848-4000 March 17, 2004	ABU DHABI BEIJING BRUSSELS DÜSSELDORF FRANKFURT HONG KONG LONDON MANNHEIM MENLO PARK MUNICH NEW YORK PARIS ROME SAN FRANCISCO SINGAPORE
To the Banks, BankBoston, N.A., Nassau Branch, the Agent referred to below and the Collateral Agent, referred to below		TOKYO TORONTO WASHINGTON, D.C.

c/o Citicorp USA, Inc.

388 Greenwich Street, 21^st Floor

New York, NY 10013

The AES Corporation

Ladies and Gentlemen:

We have acted as special New York counsel to Citicorp USA, Inc., individually and as Administrative Agent for the Bank Parties, and to Citibank, N.A., individually and as Collateral Agent for the Bank Parties, in connection with the preparation, negotiation, execution and delivery of the Third Amended and Restated Credit and Reimbursement Agreement (including without limitation, the Subsidiary Guaranty in Article IX thereto) dated as of March 17, 2004 (the “Credit and Reimbursement Agreement”) among The AES Corporation, a Delaware corporation (the “Borrower”), the Subsidiary Guarantors party thereto, the Banks party thereto (the “Banks”), Citicorp USA, Inc., as Administrative Agent (the “Agent”) for the Bank Parties and Citibank, N.A., as Collateral Agent (the “Collateral Agent”) for the Bank Parties. Unless otherwise defined herein, terms defined in the Credit and Reimbursement Agreement are used herein as therein defined. This opinion is being delivered to you pursuant to Section 3.01 (d) of the Credit and Reimbursement Agreement.

In that connection, we have examined (a) the Existing Bank Credit Agreement, (b) a counterpart of the Credit and Reimbursement Agreement executed by each of the Loan Parties, (c) the Notes executed by the Borrower and delivered on the date hereof (the “Closing Date Notes”), (d) the Security Agreement and (e) to the extent relevant to our opinions expressed below, the other documents delivered by the Loan Parties pursuant to Section 3.01 of the Credit and Reimbursement Agreement, including (A) the opinion of Vincent Mathis, Assistant General Counsel of the Borrower, (B) the opinion of Davis, Polk & Wardwell, special New York counsel for the Borrower (the “New York Opinion”), (C) the opinions of local counsel for the Borrower as to certain Subsidiaries of the Borrower, (D) the opinion of Conyers Dill & Pearman, special British Virgin Islands counsel for the Borrower, (E) the opinion of Maples & Calder, special Cayman Islands counsel for the Borrower, (F) the opinion of Morris, Nichols, Arsht & Tunnell, special Delaware counsel for the Borrower (the “Delaware Opinion”) and (G) all certificates,

Shearman & Sterling LLP is a limited liability partnership organized in the United States under

the laws of the State of Delaware, which laws limit the personal liability of partners.

March 17, 2004

Page 2

resolutions and other similar corporate documents furnished by the Loan Parties. The documents listed in items (b) through (d) are referred to herein as the “Transaction Documents”.

In our examination of the Transaction Documents and the other Financing Documents, we have assumed, without independent investigation (a) the due execution and delivery of the Transaction Documents (other than the Closing Date Notes) and the other Financing Documents by all parties thereto and of the Closing Date Notes by the Borrower, (b) the genuineness of all signatures, (c) the authenticity of the originals of the documents submitted to us and (d) the conformity to originals of any documents submitted to us as copies.

In addition, we have assumed, without independent investigation, that (i) each of the Loan Parties is duly organized and validly existing under the laws of the jurisdiction of its organization and has full power and authority (corporate and otherwise) to execute, deliver and perform each of the Transaction Documents to which it is a party and (ii) the execution, delivery and performance by each of the Loan Parties of each of the Transaction Documents to which it is a party has been duly authorized by all necessary corporate or other organizational action and does not (A) contravene the certificate of incorporation (or certificate of formation, as applicable), charter, bylaws, memorandum and articles of association (or other organizational documents, as applicable) or other constituent documents of such party, (B) conflict with, constitute a default under or result in the breach of any agreement, judgment, injunction, order, decree, document or instrument binding on such Loan Party or (C) violate or require any governmental or regulatory authorization or other action under any provision of law, rule or regulation applicable to the Loan Parties other than New York law or United States Federal law applicable to borrowers or pledgors generally. We have also assumed that the Credit and Reimbursement Agreement is the legal, valid and binding obligation of each Bank Party, enforceable against such Bank Party, as the case may be, in accordance with its terms.

Based upon the foregoing examination and assumptions and upon such other investigation as we have deemed necessary and subject to the qualifications set forth below, we are of the following opinions:

1. Each of the Credit and Reimbursement Agreement and the Closing Date Notes is the legal, valid and binding obligation of each Loan Party party thereto, enforceable against each such Loan Party in accordance with its terms.

2. The Security Agreement is the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, and, to the extent that the Borrower has rights in the “Collateral” referred to in the Security Agreement (as to which we express no opinion), continues to create a valid security interest enforceable against the Borrower with respect to such Security Agreement Collateral as security for the payment of the Secured Obligations (as defined in the Collateral Trust Agreement). We express no opinion as to matters of perfection or priority of such security interest, and refer you to the New York Opinion and the Delaware Opinion with regard to such matters to the extent covered therein.

March 17, 2004

Page 3

Our opinions above are subject to the following qualifications:

(i) Our opinions above are subject to the effect of any applicable bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar law affecting creditors’ rights generally.

(ii) Our opinions above are also subject to the effect of general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). Further, pursuant to such equitable principles, any provisions of the Transaction Documents which provide that the grant of a security interest shall not be affected by changes in or amendments to the Transaction Documents might be enforceable only to the extent that such changes or amendments were not so material as to constitute a new contract among the parties.

(iii) We express no opinion as to the creation of any security interest in Collateral that is excluded from Article 9 of the New York Uniform Commercial Code under § 9-109(c) and (d) thereof.

(iv) We express no opinion as to enforceability of indemnification provisions in the Transaction Documents to the extent that enforcement thereof is contrary to public policy regarding the exculpation of criminal violations, intentional harm and acts of gross negligence or recklessness.

(v) Our opinion in paragraph 2 above is also subject to the effect of applicable law that may limit the enforceability or render ineffective certain of the provisions of the Security Agreement, although the inclusion of such provisions does not affect the validity of the Security Agreement as a whole, and there exist legally adequate remedies for a realization of the principle benefits afforded thereby.

(vi) Our opinions expressed above are limited to the law of the State of New York and the Federal law of the United States, and we do not express any opinion herein concerning any other law. Without limiting the generality of the foregoing, we express no opinion as to the effect of the law of any jurisdiction other than the State of New York wherein any Bank Party may be located or wherein enforcement of the Credit and Reimbursement Agreement or any other Transaction Document may be sought that limits the rates of interest legally chargeable or collectible.

A copy of this opinion letter may be delivered by any of you to any Person that becomes a Bank Party in accordance with the provisions of the Credit and Reimbursement Agreement. Any such Bank Party may rely on the opinions expressed above as if this opinion letter were addressed and delivered to such Bank Party on the date hereof.

March 17, 2004

Page 4

This opinion letter speaks only as of the date hereof We expressly disclaim any responsibility to advise you or any other Bank Party who is permitted to rely on any opinion expressed herein as specified in the next preceding paragraph of any development or circumstance of any kind including any change of law or fact that may occur after the date of this opinion letter even though such development may affect the legal analysis, a legal conclusion or any other matter set forth in or relating to this opinion letter. Accordingly, any Bank Party relying on this opinion letter at any time should seek advice of its counsel as to the proper application of this opinion letter at such time.

Very truly yours,

MEO:gi:mar

Exhibit 10.1.U

EXHIBIT C-1 to the

Third Amended and Restated Credit

and Reimbursement Agreement

FORM OF REVOLVING CREDIT LOAN FACILITY ASSIGNMENT AND

ASSUMPTION AGREEMENT

AGREEMENT dated as of                 , 200     among [ASSIGNOR] (the “Assignor”), [ASSIGNEE] (the “Assignee”), each Revolving Fronting Bank and, as required pursuant to the terms of the Credit Agreement (as defined below), THE AES CORPORATION (the “Borrower”), and CITICORP USA, Inc., as Administrative Agent (the “Agent”).

W I T N E S S E T H

WHEREAS, this Assignment and Assumption Agreement (the “Agreement”) relates to the Third Amended and Restated Credit and Reimbursement Agreement (the “Credit and Reimbursement Agreement”) dated as of March 17, 2004 among the Borrower, the Subsidiary Guarantors party thereto, the Banks party thereto, the Agent and Citibank, N.A., as Collateral Agent; and

WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit and Reimbursement Agreement in respect of a portion of its Revolving Credit Loan Commitment thereunder in an amount equal to $             (the “Assigned Amount”), together with a corresponding portion of its outstanding Revolving Credit Loans and participating interests in outstanding Revolving Letter of Credit Liabilities, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms;

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows:

1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit and Reimbursement Agreement.

2. Assignment. The Assignor hereby assigns and sells to the Assignee all or a proportionate part of all of the rights of the Assignor under the Credit and Reimbursement Agreement and the other Financing Documents to the extent of the Assigned Amount, in each case in an amount not less than $1,000,000 (or such lesser amount as may be agreed to by the Borrower and the Agent) (except in the case of an assignment which will result in a group of Banks which are managed by the Assignor holding a Revolving Credit Loan Commitment of not less than $1,000,000), and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit and Reimbursement Agreement and the other Financing Documents to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Revolving Credit Loans made by the Assignor outstanding at the date hereof and the

Revolving Credit Loan Facility Assignment and Assumption Agreement

corresponding portion of participating interests purchased by the Assignor in Revolving Letter of Credit Liabilities outstanding on the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, each Revolving Fronting Bank and, as required pursuant to the terms of the Credit and Reimbursement Agreement, the Borrower and the Agent, and the payment of the amounts specified in Section 3 hereof required to be paid on the date hereof, (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank Party under the Credit and Reimbursement Agreement with a Revolving Credit Loan Commitment in an amount equal to the Assigned Amount and (ii) the Revolving Credit Loan Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor shall be released from its obligations under the Credit and Reimbursement Agreement to the extent such obligations have been assumed by the Assignee.

3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in lawful money of the United States of America the amount heretofore agreed between them. ¹ It is understood that commitment fees and/or letter of credit commissions accrued to the date hereof are for the account of the Assignor, and each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit and Reimbursement Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party’s interest therein and shall promptly pay the same to such other party.

4. Consent of the Revolving Fronting Banks, the Borrower and the Agent. This Agreement is conditioned upon the consent of each Revolving Fronting Bank and, as required pursuant to the terms of the Credit and Reimbursement Agreement, the Borrower and the Agent. The execution of this Agreement by each Revolving Fronting Bank and, as required pursuant to the terms of the Credit and Reimbursement Agreement, the Borrower and the Agent is evidence of this consent.

5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of any Obligor, or the validity and enforceability of the Obligations of any Obligor in respect of the Credit and Reimbursement Agreement or any other Financing Document. The Assignee acknowledges that it has, independently and without reliance on the Assignor, any other Bank Party, any Revolving Credit Loan Bank or the Agent, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower.

6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

¹ Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum.

Revolving Credit Loan Facility Assignment and Assumption Agreement

7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

Revolving Credit Loan Facility Assignment and Assumption Agreement

IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption Agreement to be executed and delivered by their duly authorized officers as of the date first above written.

[ASSIGNOR]

By:

Title:

[ASSIGNEE]

By:

Title:

[EACH REVOLVING FRONTING BANK]

By:

Title:

[CITICORP USA, Inc., as Agent

By:

Title:]²

[THE AES CORPORATION, as Borrower

By:

Title:]²

² As required pursuant to the terms of the Credit Agreement.

Revolving Credit Loan Facility Assignment and Assumption Agreement

Exhibit 10.1.V

EXHIBIT C-2 to the

Third Amended and Restated Credit

and Reimbursement Agreement

FORM OF TERM LOAN FACILITY ASSIGNMENT AND ASSUMPTION

AGREEMENT

AGREEMENT dated as of                  , 200     among [ASSIGNOR] (the “Assignor”), [ASSIGNEE] (the “Assignee”) and CITICORP USA, Inc., as Administrative Agent (the “Agent”).

W I T N E S S E T H

WHEREAS, this Assignment and Assumption Agreement (the “Agreement”) relates to the Third Amended and Restated Credit and Reimbursement Agreement (the “Credit and Reimbursement Agreement”) dated as of March 17, 2004 among The AES Corporation (the “Borrower”), the Subsidiary Guarantors party thereto, the Banks party thereto, the Agent and Citibank, N.A., as Collateral Agent; and

WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under Credit and Reimbursement Agreement in respect of all or a portion of its outstanding Term Loan in an amount equal to $                     (the “Assigned Amount”) and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms;

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows:

1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit and Reimbursement Agreement.

2. Assignment. The Assignor hereby assigns and sells to the Assignee all or a proportionate part of all of the rights of the Assignor under the Credit and Reimbursement Agreement and the other Financing Documents to the extent of the Assigned Amount, in each case in an amount not less than $1,000,000 (or such lesser amount as may be agreed to by the Borrower and the Agent) (except in the case of an assignment which will result in a group of Banks which are managed by the Assignor holding a Term Loan Commitment of not less than $1,000,000), and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit and Reimbursement Agreement and the other Financing Documents to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the Term Loan. Upon the execution and delivery hereof by the Assignor, the Assignee and the Agent, and the payment of the amounts specified in Section 3 hereof required to be paid on the date hereof, (i) the Assignee shall, as of the date

Term Loan Facility Assignment and Assumption Agreement

hereof, succeed to the rights and be obligated to perform the obligations of a Bank Party under the Credit and Reimbursement Agreement with a Term Loan in an amount equal to the Assigned Amount, and (ii) the Assignor shall be released from its obligations under the Credit and Reimbursement Agreement to the extent such obligations have been assumed by the Assignee.

3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in lawful money of the United States of America the amount heretofore agreed between them.¹ It is understood that commitment fees and/or letter of credit commissions accrued to the date hereof are for the account of the Assignor, and each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit and Reimbursement Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party’s interest therein and shall promptly pay the same to such other party.

4. Consent of the Agent. This Agreement is conditioned upon the consent of the Agent. The execution of this Agreement by the Agent is evidence of this consent.

5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of any Obligor, or the validity and enforceability of the Obligations of any Obligor in respect of the Credit and Reimbursement Agreement or any other Financing Document. The Assignee acknowledges that it has, independently and without reliance on the Assignor, any other Bank Party and the Agent, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower.

6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[SIGNATURE PAGES IMMEDIATELY FOLLOW]

¹ Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum.

Term Loan Facility Assignment and Assumption Agreement

IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption Agreement to be executed and delivered by their duly authorized officers as of the date first above written.

[ASSIGNOR]

By:

Title:

[ASSIGNEE]

By:

Title:

CITICORP USA, Inc., as Agent

By:

Title:

Term Loan Facility Assignment and Assumption Agreement

Exhibit 10.1.W

EXHIBIT C-3 to the

Third Amended and Restated Credit

and Reimbursement Agreement

FORM OF THIRD PARTY FRONTING BANK ASSIGNMENT

AND ASSUMPTION AGREEMENT

AGREEMENT dated as of                  , 200     among [ASSIGNOR] (the “Assignor”), [ASSIGNEE] (the “Assignee”), THE AES CORPORATION (the “Borrower”) and CITICORP USA, Inc., as Administrative Agent (the “Agent”).

W I T N E S S E T H

WHEREAS, this Assignment and Assumption Agreement (the “Agreement”) relates to the Third Amended and Restated Credit and Reimbursement Agreement (the “Credit and Reimbursement Agreement”) dated as of March 17, 2004 among the Borrower, the Subsidiary Guarantors party thereto, the Banks party thereto, and the Agent; and

WHEREAS, the Assignor proposes to assign to the Assignee all (and not less than all) of the rights and obligations of the Assignor under the Credit and Reimbursement Agreement (the “Assigned Amount”) and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms;

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows:

1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit and Reimbursement Agreement.

2. Assignment. The Assignor hereby assigns and sells to the Assignee all but not less than all of the rights of the Assignor under the Credit and Reimbursement Agreement and the other Financing Documents to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit and Reimbursement Agreement and the other Financing Documents to the extent of the Assigned Amount. Upon the execution and delivery hereof by the Assignor, the Assignee, the Borrower and the Agent, and the payment of the amounts specified in Section 3 hereof required to be paid on the date hereof, (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Revolving Fronting Bank under the Credit and Reimbursement Agreement with Revolving Letter of Credit Liabilities in an amount equal to the Assigned Amount and (ii) Revolving Letter of Credit Liabilities of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor shall be released from its obligations under the Credit and Reimbursement Agreement to the extent such obligations have been assumed by the Assignee.

Third Party Fronting Bank Assignment and Assumption Agreement

3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in lawful money of the United States of America the amount heretofore agreed between them.¹ It is understood that commitment fees and/or letter of credit commissions accrued to the date hereof are for the account of the Assignor, and each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit and Reimbursement Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party’s interest therein and shall promptly pay the same to such other party.

4. Consent of the Borrower and the Agent. This Agreement is conditioned upon the consent of the Borrower and the Agent. The execution of this Agreement by the Borrower and the Agent is evidence of this consent.

5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of any Obligor, or the validity and enforceability of the Obligations of any Obligor in respect of the Credit and Reimbursement Agreement or any other Financing Document. The Assignee acknowledges that it has, independently and without reliance on the Assignor, any other Bank Party or the Agent, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower.

6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[SIGNATURE PAGES IMMEDIATELY FOLLOW]

¹ Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum.

Third Party Fronting Bank Assignment and Assumption Agreement

IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption Agreement to be executed and delivered by their duly authorized officers as of the date first above written.

[ASSIGNOR]

By:

Title:

[ASSIGNEE]

By:

Title:

THE AES CORPORATION, as Borrower

By:

Title:

CITICORP USA, Inc., as Agent

By:

Title:

Third Party Fronting Bank Assignment and Assumption Agreement

Exhibit 10.1.X

EXHIBIT D to the

Third Amended and Restated

Credit and Reimbursement Agreement

FORM OF REVOLVING FRONTING BANK AGREEMENT

                 , 200  

Citicorp USA, Inc., as Agent

388 Greenwich Street, 21^st Floor

New York, New York 10013

Attention: Stuart Glen

Ladies and Gentlemen:

Reference is hereby made to the Third Amended and Restated Credit and Reimbursement Agreement dated as of March 17, 2004 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) among The AES Corporation, a Delaware corporation (the “Borrower”), the Subsidiary Guarantors party thereto, the Banks party thereto, Citibank, N.A., as Collateral Agent and Citicorp USA, Inc., as Agent. The capitalized terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined.

Section 1. Obligations Under the Credit Agreement. The undersigned hereby agrees, as of the date first above written, to be bound as a Revolving Fronting Bank by all of the terms and conditions of the Credit Agreement to the same extent as each of the other Revolving Fronting Banks thereunder and agrees to issue letters of credit in an aggregate Available Amount not to exceed $[            ] at any time outstanding pursuant to and in accordance with Section 2.03 of the Credit Agreement. The undersigned further agrees, as of the date first above written, that each reference in the Credit Agreement to a “Revolving Fronting Bank” shall also mean and be a reference to the undersigned, and each reference in any other Financing Document to a “Lender Party” shall also mean and be a reference to the undersigned in its capacity as Revolving Fronting Bank.

Section 2. Representations and Warranties. The undersigned hereby represents and warrants that it (i) is a Revolving Credit Loan Bank under the Credit Agreement or (ii) meets the definition of a “Third Party Fronting Bank”, as defined in the Credit Agreement.

Section 3. Delivery by Telecopier. Delivery of an executed counterpart of a signature page to this Revolving Fronting Bank Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Revolving Fronting Bank Agreement.

Section 4. Non-Reliance. The undersigned acknowledges that it has, independently and without reliance on any Revolving Fronting Bank, any other Bank Party and

Revolving Fronting Bank Agreement

the Agent, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower.

Section 5. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc. This Revolving Fronting Bank Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

Very truly yours,

[NAME OF REVOLVING FRONTING BANK]

By

Name:

Title:

Acknowledged on the date hereof by:

CITICORP USA, INC., as Agent

By

Name:

Title:

Revolving Fronting Bank Agreement

2

EX-10.2

Exhibit 10.2

CREDIT AGREEMENT

dated as of

March 29, 2006

among

THE AES CORPORATION,

as Borrower,

MERRILL LYNCH CAPITAL CORPORATION,

as Administrative Agent,

MERRILL LYNCH & CO.,

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

as Lead Arranger,

THE FRONTING BANKS LISTED HEREIN,

and

THE BANKS LISTED HEREIN

Cahill Gordon & Reindel LLP

80 Pine Street

New York, New York 10005

TABLE OF CONTENTS

		Page
ARTICLE I
DEFINITIONS
Section 1.01	Definitions	1
Section 1.02	Accounting Terms and Determinations	17
Section 1.03	Currency Conversions Generally	17
Section 1.04	Interest Rate Determinations	17
ARTICLE II
THE CREDITS
Section 2.01	Credit-Linked Deposit Accounts	18
Section 2.02	Loans	22
Section 2.03	[Intentionally Omitted]	23
Section 2.04	Requests for Borrowings	23
Section 2.05	Letters of Credit	24
Section 2.06	[Intentionally Omitted]	28
Section 2.07	Interest Elections	28
Section 2.08	Termination and Reduction of the Funding Amounts	29
Section 2.09	Repayment of Loans; Evidence of Debt	30
Section 2.10	Prepayment of Loans	31
Section 2.11	Fees	31
Section 2.12	Interest	33
Section 2.13	[Intentionally Omitted]	34
Section 2.14	[Intentionally Omitted]	34
Section 2.15	Break Funding Payments	34
Section 2.16	[Intentionally Omitted]	35
Section 2.17	Payments Generally; Pro Rata Treatment; Sharing of Set-offs	35
Section 2.18	Mitigation Obligations	37
Section 2.19	Increase in Credit Facility	37
ARTICLE III
CONDITIONS
Section 3.01	Closing	39
Section 3.02	Extension of Credit	40

i

		Page
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01	Corporate Existence and Power	41
Section 4.02	Corporate and Governmental Authorization and Filings; No Contravention	41
Section 4.03	Compliance with Laws	42
Section 4.04	Binding Effect	42
Section 4.05	Financial Information	42
Section 4.06	Litigation	42
Section 4.07	Compliance with ERISA	42
Section 4.08	Environmental Matters	43
Section 4.09	Taxes	43
Section 4.10	Material AES Entities	44
Section 4.11	Not an Investment Company	44
Section 4.12	[Intentionally Omitted]	44
Section 4.13	Full Disclosure	44
Section 4.14	[Intentionally Omitted]	45
Section 4.15	Solvency	45
ARTICLE V
COVENANTS
Section 5.01	Information	45
Section 5.02	Payment of Obligations	48
Section 5.03	Maintenance of Property; Insurance	48
Section 5.04	Conduct of Business and Maintenance of Existence	48
Section 5.05	Compliance with Laws	49
Section 5.06	Inspection of Property, Books and Records	49
Section 5.07	Limitation on Secured Debt	49
Section 5.08	Consolidations and Mergers	50
Section 5.09	Restrictions on Sale Leasebacks	50
Section 5.10	Use of Proceeds	51
Section 5.11	Further Assurances	51
ARTICLE VI
DEFAULTS
Section 6.01	Events of Default	51
Section 6.02	Notice of Default	53

ii

		Page
ARTICLE VII
THE ADMINISTRATIVE AGENT
Section 7.01	Appointment and Authorization	54
Section 7.02	Administrative Agent and Affiliates	54
Section 7.03	Consultation with Experts	55
Section 7.04	Liability of Agent	55
Section 7.05	Indemnification	55
Section 7.06	Credit Decision	56
Section 7.07	Successor Administrative Agent	56
Section 7.08	Administrative Agent May File Proofs of Claim	56
Section 7.09	Agents’ Fee	57
Section 7.10	Delivery of Information	57
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
Section 8.01	Basis for Determining Interest Rate Inadequate or Unfair	59
Section 8.02	Illegality	59
Section 8.03	Increased Cost and Reduced Return	60
Section 8.04	Taxes	61
Section 8.05	Base Rate Loans Substituted for Affected Eurodollar Loans	64
ARTICLE IX
MISCELLANEOUS
Section 9.01	Notices	64
Section 9.02	No Waivers	65
Section 9.03	Expenses; Indemnification	65
Section 9.04	[Reserved]	66
Section 9.05	Amendments and Waivers	66
Section 9.06	Successors and Assigns	66
Section 9.07	No Margin Stock	69
Section 9.08	Governing Law; Submission to Jurisdiction	70
Section 9.09	[Reserved]	70
Section 9.10	Counterparts; Integration; Effectiveness	70
Section 9.11	Confidentiality	70
Section 9.12	WAIVER OF JURY TRIAL	71
Section 9.13	Severability; Modification to Conform to Law	71
Section 9.14	Judgment Currency	71
Section 9.15	Fronting Banks	72
Section 9.16	Replacement of Banks	72

iii

Appendix I	—	Funding Amounts
Schedule I	—	Excluded AES Entities
Exhibit A	—	Form of Note
Exhibit B-1	—	Form of Opinion of the Assistant General Counsel of Borrower
Exhibit B-2	—	Form of Opinion of Shearman & Sterling, Special Counsel for the Borrower
Exhibit C-1	—	Form of Loan Facility Assignment and Assumption Agreement
Exhibit C-2	—	Form of Fronting Bank Assignment and Assumption Agreement
Exhibit D	—	Form of Fronting Bank Agreement
Exhibit E	—	Form of Request for Loan
Exhibit F	—	Form of Interest Election Request

iv

CREDIT AGREEMENT

CREDIT AGREEMENT dated as of March 29, 2006 (this “Agreement”) among THE AES CORPORATION, a Delaware corporation (the “ Borrower ”), the BANKS listed on the signature pages hereof, MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Lead Arranger, MERRILL LYNCH CAPITAL CORPORATION, as Administrative Agent for the Banks, and the FRONTING BANKS party hereto.

PRELIMINARY STATEMENT:

The Borrower has requested that the Banks provide Loans to the Borrower and that the Fronting Banks provide to the Borrower Letters of Credit (and the Banks to provide funding with respect thereto) to support certain liabilities of the Borrower and its Subsidiaries, including to finance the construction of a coal-fired generation plant in Bulgaria, in an aggregate principal or face amount not exceeding $500,000,000.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definitions.

The following terms, as used herein, have the following meanings:

“Additional Credit-Linked Deposits” has the meaning set forth in Section 2.19(d).

“Adjusted LIBO Rate” means, for any Interest Period, a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher  ¹/100^th of 1%) by dividing (i) the applicable LIBOR by (ii) 1.00 minus the Reserve Percentage.

“Administrative Agent” means Merrill Lynch Capital Corporation, in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity.

“Administrative Questionnaire” means, with respect to each Bank, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Bank.

“AES” means The AES Corporation, a Delaware corporation, and its successors.

“AES Business” means a Power Supply Business or other business owned, operated or managed (including on a joint basis with others), directly or indirectly, by the Borrower.

“AES BVI II” means AES International Holdings II, Ltd., a company organized under the laws of the British Virgin Islands.

“AES Management Group” means (i) individuals who are members of the board of directors or officers of the Borrower or the president of any Material AES Entity; (ii) their respective spouses, children, grandchildren, siblings and parents; (iii) trusts established for the sole or principal benefit of Persons described in clauses (i) and (ii) above; (iv) heirs, executors, administrators and personal or legal representatives of Persons described in clauses (i) and (ii) above; and (v) any corporation or other Person that is controlled by, and a majority of the equity interests in which are directly owned by, Persons described in clauses (i) and (ii) above.

“Affiliate” means, with respect to any Person, (i) any Person that directly, or indirectly through one or more intermediaries, controls such Person (a “ Controlling Person ”), or (ii) any Person which is controlled by or is under common control with a Controlling Person or (iii) as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. As used herein, the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Agreement” has the meaning specified in the recital of the parties to this Agreement.

“Applicable Margin” means a rate per annum equal to the sum of (i) the Fixed Rate Treasury Spread for the applicable Determination Date minus (ii) the Buy Side Swap Spread for such Determination Date plus (iii) 0.25%. In no event will the Applicable Margin with respect to Eurodollar Loans be less than 175 basis points. The Applicable Margin in respect of Base Rate Loans shall be 100 basis points lower than for the Eurodollar Loans and in no event will be less than 75 basis points.

“Applicable Percentage” means, with respect to any Bank, the percentage of the total Funding Amounts represented by such Bank’s Funding Amount. If the Funding Amounts have been reduced to zero, the Applicable Percentages shall be determined based upon the Funding Amounts most recently in effect, giving effect to any assignments.

“Applicable Margin Fee” has the meaning set forth in Section 2.11(a).

“Assignee” has the meaning set forth in Section 9.06(c).

“Assignment and Assumption” means an assignment and assumption agreement substantially in the form of Exhibit C-1 or C-2 hereto, as applicable.

“Assumption Agreement” has the meaning set forth in Section 2.19(d).

2

“Attributable Debt” means the present value (discounted at the rate of 9.375% per annum compounded monthly) of the obligations for rental payments required to be paid during the remaining term of any lease of more than 12 months.

“Automatic Acceleration Event” means the occurrence, with respect to the Borrower, of any of the Events of Default listed in clauses (g) and (h) of Section 6.01.

“Availability Period” means the period from and including the Closing Date to but excluding the earlier of the fifth Business Day preceding Maturity Date and the date of termination of the Funding Amounts.

“Bank” means each lender listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c) and their respective successors.

“Base Rate” means, for any day, a rate per annum equal to the higher of (i) the rate of interest publicly announced by the Administrative Agent from time to time as its base rate for such day and (ii) the sum of  ¹/2 of 1% plus the Federal Funds Rate for such day.

“Base Rate Borrowing” means a Borrowing consisting of Base Rate Loans.

“Base Rate Loan” means a Loan that bears interest at the Base Rate plus the Applicable Margin.

“Benefit Arrangement” means, at any time, an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group.

“Borrower” has the meaning specified in the recital of the parties to this Agreement.

“Borrowing” means a borrowing hereunder consisting of Loans (i) made to the Borrower at the same time by the Banks pursuant to Section 2.02(a) or (ii) deemed made to the Borrower at the same time by the Banks pursuant to Section 2.02(b) and 2.05(f).

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan or in calculating the EURIBOR Rate, the term “ Business Day ” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

“Buy Side Swap Spread” for any Determination Date means the average of the bid column swap spreads between United States Treasury securities and London interbank offered rate borrowings as quoted on page 18 of the Bloomberg Screen IRSB (or such other page and place as may replace such page on such service for displaying the information referred to

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therein) with respect to each series of Comparable Treasury Securities, as determined by the Administrative Agent as of 11:00 a.m. (New York City time) on such Determination Date.

“Capital Commitment” means any contractual commitment or obligation under an equity contribution or other agreement the primary purpose of which is for the Borrower to provide to an AES Business a portion of the capital required to finance construction projects, the acquisition of additional assets or capital improvements being undertaken by such AES Business.

“Capital Stock” means, with respect to any Person, any and all shares, interests, participants or other equivalents (however designated, whether voting or non-voting) of, or interests in (however designated), the equity of such Person, including, without limitation, all common stock and preferred stock and partnership and joint venture interests of such Person

“Closing Date” means the date on or after the Effective Date on which the Administrative Agent shall have received the fees and documents specified in or pursuant to Section 3.01.

“Code” means the Internal Revenue Code of 1986, as amended, or any successor statute.

“Commitment Increase” has the meaning set forth in Section 2.19(a).

“Comparison Notes” means, as of any Determination Date, Borrower’s 9.375% Senior Notes due 2010 issued and outstanding on the date of this Agreement and Borrower’s 8.875% Senior Notes due 2011 issued and outstanding on the date of this Agreement; provided that (i) if on such Determination Date, either, but not both, of such series of notes is no longer outstanding, “Comparison Notes” shall mean the series of notes still outstanding and (ii) if on such Determination Date, both such series of notes are no longer outstanding, “Comparison Notes” shall mean the issued and outstanding notes or debentures of Borrower selected by Administrative Agent in consultation with the Borrower.

“Comparison Treasury Securities” means, (i) with respect to the Borrower’s 9.375% Senior Notes due 2010, the United States Treasury Security with a 3.875% coupon maturing September 15, 2010 (CUSIP 912828EG1) and (ii) with respect to the Borrower’s 8.875% Senior Notes due 2011, the United States Treasury Security with a 4.500% coupon maturing February 28, 2011 (CUSIP 912828EX4); provided that if, on any date of determination, neither of such series of notes of the Borrower is outstanding, “Comparison Treasury Securities” shall mean the United States Treasury Security with a maturity most nearly equal to that of the Comparison Notes outstanding at such time, as determined by the Administrative Agent.

“Conduit Lender” means any special purpose corporation organized and administered by any Bank for the purpose of funding Credit-Linked Deposits hereunder otherwise required to be made by such Bank and designated by such Bank in a written instrument, subject to the consent of the Administrative Agent and the Borrower (which, in each

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case, shall not be unreasonably withheld or delayed); provided that the designation by any Bank of a Conduit Lender shall not relieve the designating Bank of any of its obligations to fund a Credit-Linked Deposit under the Agreement if, for any reason, its Conduit Lender fails to fund any such Credit-Linked Deposit, and the designating Bank (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Lender, and provided further that no Conduit Lender shall (i) be entitled to receive any greater amount pursuant to Section 8.03, 8.04 or 9.03 than the designating Bank would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (ii) be deemed to have any Funding Amount hereunder.

“Consolidated Subsidiary” means, at any date with respect to any Person, any Subsidiary of such Person or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date.

“Consolidated Net Assets” means the aggregate amount of assets (less reserves and other deductible items) after deducting current liabilities, as shown on the consolidated balance sheet of the Borrower and its Subsidiaries contained in the latest annual report to the stockholders of the Borrower and prepared in accordance with GAAP.

“Controlling Person” has the meaning set forth in the definition of “Affiliate” herein.

“Credit-Linked Deposit” means, with respect to each Bank at any time, amounts actually on deposit in the Credit-Linked Deposit Account to the credit of such Bank’s Credit-Linked Sub-Account at such time.

“Credit-Linked Deposit Account” means the “AES Credit-Linked Deposit Account” established by the Administrative Agent pursuant to Section 2.01(a).

“Credit-Linked Sub-Account” has the meaning set forth in Section 2.01(a).

“Credit Party” has the meaning set forth in Section 8.03(a).

“Debt” of any Person means at any date, without duplication, (i) all Obligations 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 to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business; (iv) all Obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles; (v) all Obligations (whether contingent or non-contingent) of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit, surety or performance bond or similar instrument; (vi) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person; (vii) all Debt of others Guaranteed by such Person and (viii) all

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Redeemable Stock of such Person valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends. For purposes hereof, contingent obligations of the type described in clause (v) of this definition with respect to letters of credit not issued hereunder shall not be treated as “Debt” hereunder to the extent that such obligations are cash collateralized or to the extent that the issuer of any such letter of credit is entitled to draw under a Letter of Credit issued hereunder which by its terms requires that L/C Drawings under such letter of credit be applied only to reimburse such issuer for amounts paid by such issuer under such letter of credit. The obligations of the Borrower under any Capital Commitment or under any agreement, in the form of indemnity or contingent equity contribution agreement or otherwise, pursuant to which the Borrower agrees to protect any Person, in whole or in part, from tax liabilities, environmental liabilities, political risks, including currency convertibility and transferability risk and changes in law, or construction cost overruns shall not constitute Debt.

“Default” means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.

“Derivatives Obligations” of any Person means all obligations of such Person in respect of any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, credit derivative transaction, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions; provided that Derivatives Obligations shall not include any obligations of such Person in relation to an equity forward contract, equity or equity index swap or equity or equity index option pertaining, linked or indexed to the common stock of such Person or any affiliate thereof. For purposes of determining the aggregate amount of Derivative Obligations on any date, the Derivative Obligations of the applicable Person in respect of any Hedge Agreement shall be the maximum aggregate amount (after giving effect to any netting agreements to the extent such netting agreements are with the same Person to whom any such Derivative Obligations are owed or with Affiliates of such Person) that the applicable Person would be required to pay if such Hedge Agreement were terminated at such time.

“Determination Date” means, for any Interest Period, the second Business Day prior to the first day of such Interest Period.

“Disclosed Matters” means matters disclosed in any SEC Filings made prior to March 29, 2006 or in written materials sent by or on behalf of the Borrower to all of the Banks prior to March 29, 2006.

“Dollars” means United States of America dollars.

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“Effective Date” means the date this Agreement becomes effective in accordance with Section 9.10.

“Eligible Assignee” means any commercial bank or financial institution (including, without limitation, any fund that regularly invests in loans similar to the Loans or investments similar to the Funding Amounts) as approved (which approval shall be required only so long as no Event of Default has occurred and is continuing at the time of an assignment) by the Borrower (such approval not to be unreasonably withheld or delayed); provided , however , that neither the Borrower nor any Subsidiary of the Borrower shall qualify as an Eligible Assignee under this definition.

“Environmental Laws” means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment, including, without limitation, ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute.

“ERISA Group” means the Borrower, its Subsidiaries and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code.

“EURIBOR” means, for any Interest Period, the rate appearing on Page 248 of the Moneyline Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to deposits in Euro by reference to the Banking Federation of the European Union Settlement Rates for deposits in Euro) at approximately 10:00 A.M., London time, two Business Days prior to the commencement of such Interest Period, as the rate for deposits in Euro with a maturity comparable to such Interest Period or, if for any reason such rate is not available, the rate at which Euro deposits for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in same day funds to first-class banks in the European interbank market at approximately 10:00 A.M., London time, two Business Days prior to the commencement of such Interest Period.

“EURIBOR Differential Rate” has the meaning set forth in Section 2.11(a)(iv).

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“Eurodollar Borrowing” means a Borrowing consisting of Eurodollar Loans

“Eurodollar Default Rate” has the meaning set forth in Section 2.12(b).

“Eurodollar Loan” means a Loan which bears interest at the Adjusted LIBO Rate plus the Applicable Margin.

“Event of Default” has the meaning set forth in Section 6.01.

“Excluded AES Business” means any AES Business located in Brazil or Argentina; provided that the Borrower may by written notice to the Administrative Agent make an election not to treat one or more AES Businesses in Brazil or Argentina as an “Excluded AES Business”. Once the Borrower elects not to treat an AES Business as an “Excluded AES Business” it may not thereafter change or revoke such election with respect to such AES Business without the consent of the Required Banks.

“Excluded AES Entity” means any Person set forth on Schedule I, as such Schedule I may be updated pursuant to Section 5.01(j) whose assets consist only of any of the Excluded AES Businesses and direct or indirect investments therein.

“Existing Credit Agreement” means that certain Third Amended and Restated Credit and Reimbursement Agreement dated as of March 17, 2004, as amended, among the Borrower, the subsidiary guarantors listed therein, Citicorp USA, Inc., as the administrative agent, and the banks party thereto, as further amended, modified, amended and restated, refinanced, replaced or supplemented from time to time. If the Existing Credit Agreement ceases to exist, all terms defined herein by reference to the Existing Credit Agreement shall have the meanings set forth in the Existing Credit Agreement immediately prior to such cessation.

“Extension of Credit” means (i) a Borrowing pursuant to Section 2.02(a) or (ii) an issuance of a Letter of Credit pursuant to Section 2.05.

“Facilities” means the Loans and Letters of Credit under this Agreement.

“Federal Funds Rate” means, for any day, the rate per annum (rounded upward, if necessary, to the nearest  ¹/100^th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Merrill Lynch Bank USA on such day on such transactions as determined by the Administrative Agent.

“Fee Payment Date” has the meaning set forth in Section 2.11(a)(iii).

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“Fixed Rate Treasury Spread” for any Determination Date means the excess, if any, of (a) the average of the yields to maturity on the Determination Date on each series of the Comparison Notes received by the Administrative Agent from the Reference Dealer (based on bid price) over (b) the average of the yields to maturity on the Determination Date on each series of the Comparable Treasury Securities, as determined by the Administrative Agent as of 11:00 a.m. (New York City time) on such Determination Date.

“Fixed Exchange Rate” has the meaning set forth in Section 2.05(a).

“Fronting Bank” means (a) Merrill Lynch Bank USA, in its capacity as an issuer of Letters of Credit hereunder, (b) any commercial bank designated by the Administrative Agent (and reasonably acceptable to the Borrower) with a publicly monitored credit rating of at least A2 issued by Moody’s or at least A issued by S&P and (c) and any other Person approved by the Administrative Agent and the Borrower that shall agree to issue Letters of Credit hereunder.

“Fronting Bank Agreement” means an agreement, in substantially the form of Exhibit D hereto.

“Funded Debt” means indebtedness for borrowed money having a maturity of, or by its terms extendible or renewable for, a period of more than 12 months after the determination of the amount thereof.

“Funding Amount” means, with respect to each Bank, the amount that such Bank is required hereby to maintain as its Credit-Linked Deposit, as such amount may be (a) reduced or terminated from time to time pursuant to Section 2.08, (b) reduced or increased from time to time pursuant to assignments by or to such Bank pursuant to Section 9.06(c) or (c) increased pursuant to Section 2.19. The initial amount of each Bank’s Funding Amount is set forth on Appendix I, or in the Assignment and Assumption or the Assumption Agreement pursuant to which such Bank shall have assumed its Funding Amount, as applicable. The initial aggregate amount of the Banks’ Funding Amounts is $500,000,000.

“GAAP” has the meaning set forth in Section 1.02.

“Governmental Authority” means the government of the United States of America, or of any other nation, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government

“Guarantee” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership

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arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business or, for the avoidance of doubt, obligations of the Borrower to provide capital to an AES Business under a Capital Commitment. The term “Guarantee” used as a verb has a corresponding meaning.

“Hazardous Substances” means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics.

“Hedge Agreement” means any contract, instrument or agreement in respect of Derivative Obligations.

“Increase Commitment Date” has the meaning set forth in Section 2.19(b).

“Increase Date” has the meaning set forth in Section 2.19(a).

“Indemnitee” has the meaning set forth in Section 9.03(b).

“Interest Election Request” means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.07.

“Interest Period” means: (a) with respect to any Loan or Borrowing, initially, the period commencing on the date of such Loan or Borrowing and ending on the numerically corresponding day in the calendar month that is one month thereafter and (b) with respect to the Credit-Linked Deposits, initially, the period commencing on the Closing Date and ending on the numerically corresponding day in the calendar month that is one month thereafter, and, in each case (a) and (b), thereafter, each period commencing on the last day of the preceding Interest Period applicable thereto and ending on the numerically corresponding day in the calendar month that is one month thereafter; provided, that (i) a single Interest Period shall at all times apply to all the Credit-Linked Deposits, (ii) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the immediately preceding Business Day, and (iii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period.

“L/C Disbursement” means a payment made by a Fronting Bank pursuant to a Letter of Credit.

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“L/C Drawing” means a drawing effected under any Letter of Credit.

“L/C Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all L/C Disbursements that have not yet been reimbursed (other than by a Borrowing) by or on behalf of the Borrower at such time. The L/C Exposure of any Bank at any time shall be its Applicable Percentage of the total L/C Exposure at such time.

“Lead Arranger” means Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated.

“Letter of Credit” means any letter of credit issued pursuant to this Agreement.

“Lending Office” means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Lending Office by notice to the Borrower and the Administrative Agent.

“LIBOR” means, with respect to any Eurodollar Loan or Credit-Linked Deposit, for any Interest Period, the average (rounded upward, if necessary, to the next higher  ¹/16^th of 1%) of the respective rates per annum at which deposits in dollars are offered to the Administrative Agent in the London interbank market at approximately 11:00 A.M. (London time) two business days before the first day of such Interest Period in an amount approximately equal to the principal amount of such Eurodollar Loan or Credit-Linked Deposit and for a period of time comparable to such Interest Period.

“LIBOR Maintenance Fee” has the meaning set forth in Section 2.11(a)(ii).

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. For the purposes of this Agreement, the Borrower or any of its Subsidiaries shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.

“Loan” means a loan made or deemed to be made by the Banks to the Borrower in accordance with Sections 2.02 and 2.05(f).

“Maritza Letters of Credit” means any Letter of Credit issued to support, directly or indirectly, certain liabilities of Borrower and its Subsidiaries to finance the construction of an approximately $1.4 billion coal-fired generation plant in Bulgaria, called “Maritza”.

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“Material Adverse Effect” means a material adverse effect on (i) the business, consolidated results of operations, consolidated financial condition or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower to perform its material obligations under this Agreement or (iii) the rights of and remedies available to any Bank or Fronting Bank under this Agreement.

“Material AES Entity” means any Person in which the Borrower has a direct or indirect equity Investment if such Person’s contribution to Parent Operating Cash Flow for the four most recently completed fiscal quarters of the Borrower constitutes 15% or more of Parent Operating Cash Flow for such period.

“Material Debt” means, with respect to the Borrower, Debt (other than the Loans and the Reimbursement Obligations) of the Borrower arising in one transaction, in an aggregate principal amount exceeding $50,000,000.

“Material Hedge Agreement” means, with respect to any Person, a Hedge Agreement entered into by such Person in respect of which the Derivative Obligations of such Person exceed $50,000,000.

“Material Obligation” means any obligation or liability in an amount equal to or in excess of $50,000,000.

“Material Plan” means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $50,000,000.

“Maturity Date” means the fourth anniversary of the Closing Date.

“Moody’s” means Moody’s Investors Services, Inc.

“Multiemployer Plan” means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period.

“Note” means a promissory note of the Borrower to the order of any Bank, in substantially the form of Exhibit A hereto, evidencing the indebtedness of the Borrower to such Bank resulting from the Loans made or deemed to have been made by such Bank hereunder.

“Obligation” means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 6.01(g) or (h). Without

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limiting the generality of the foregoing, the Obligations of the Borrower under this Agreement include (i) the obligation to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, attorneys’ fees and disbursements, indemnities and other amounts payable by the Borrower under this Agreement and (ii) the obligation of the Borrower to reimburse any amount in respect of any of the foregoing that any Bank, in its sole discretion, may elect to pay or advance on behalf of the Borrower.

“Other Taxes” has the meaning set forth in Section 8.04(b).

“Parent” means, with respect to any Credit Party, any Person controlling such Credit Party.

“Parent Operating Cash Flow” has the meaning set forth in the Existing Credit Agreement.

“Participant” has the meaning set forth in Section 9.06(b).

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

“Permitted Business” means, with respect to any Person (i) a line of business which is substantially the same line of business as one or more of the principal businesses of such Person and its Subsidiaries, (ii) a line of business which is complementary or ancillary to, one or more of the businesses of such Person and its Subsidiaries, (iii) any infrastructure business, (iv) any public utility business and (v) the ownership, extraction, processing, transportation, distribution and sales of fossil fuels and derivatives thereof, but, in each case, excluding trading activities or hedging transactions, other than (x) such activities conducted in the ordinary course of business, (y) such activities conducted in a manner consistent with past practices and (z) such activities or transactions intended to enhance the performance of physical assets.

“Person” means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

“Plan” means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group.

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“Power Supply Business” means an electric power or thermal energy generation or cogeneration facility or related facilities, or an electric power transmission, distribution, fuel supply and fuel transportation facilities, or any combination thereof (all subject to relevant security, if any, under related project financing arrangements), together with its or their related power supply, thermal energy and fuel contracts as well as other contractual arrangements with customers, suppliers and contractors.

“Principal Property” means any building, structure or other facility (together with the land on which it is erected and fixtures comprising a part thereof) used primarily for manufacturing, processing, research, warehousing or distribution, owned or leased by the Borrower and having a net book value in excess of 2% of Consolidated Net Assets, other than any such building, structure or other facility or portion thereof which is a pollution control facility financed by state or local governmental obligations or which the principal executive officer, president and principal financial officer of the Borrower determine in good faith is not of material importance to the total business conducted or assets owned by the Borrower and its Subsidiaries as an entity.

“Quarterly Date” means each March 31, June 30, September 30 and December 31.

“Redeemable Stock” means any class or series of Capital Stock of any Person that by its terms or otherwise is (i) required to be redeemed prior to the first anniversary of the Maturity Date, (ii) redeemable at the option of the holder of such class or series of Capital Stock at any time prior to the first anniversary of the Maturity Date or (iii) convertible into or exchangeable for (unless solely at the option of such person) Capital Stock referred to in clause (i) or (ii) above or Debt having a scheduled maturity prior to the first anniversary of the Maturity Date; provided that any Capital Stock that would not constitute Redeemable Stock but for provisions thereof giving holders thereof the right to require such person to repurchase or redeem such Capital Stock upon the occurrence of an “asset sale” or a “change of control” occurring prior to the first anniversary of the Maturity Date shall not constitute Redeemable Stock if such Capital Stock specifically provides that such person will not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption is permitted under the terms of this Agreement

“Reference Dealer” means the third-party data source agreed to by the Administrative Agent and the Borrower prior to the date hereof or such other third-party data source agreed to by the Administrative Agent and the Borrower; provided that if at any time no such third-party data source is agreed to by the Administrative Agent and the Borrower, the “Reference Dealer” shall mean Merrill Lynch, Pierce, Fenner & Smith Inc.

“Register” has the meaning set forth in Section 9.06(f).

“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.

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“Reimbursement Obligations” means at any date the obligations then outstanding of the Borrower to reimburse the Banks for L/C Drawings under Letters of Credit.

“Related Fund” means with respect to any Bank that is a fund that invests in bank loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Bank or by an Affiliate of such investment advisor.

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

“Request for Loan” means an executed request for a Loan substantially in the form of Exhibit E hereto with all blanks completed by the Borrower.

“Required Banks” means at any time the Banks having at least a majority of the aggregate Total Exposure at such time.

“Reserve Percentage” means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of “Eurocurrency liabilities” (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Eurodollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). The Adjusted LIBO Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Percentage.

“Responsible Officer” means any duly authorized officer of the Borrower or any of its Subsidiaries.

“Return on Deposits” has the meaning set forth in Section 2.01(d).

“S&P” means Standard & Poor’s Ratings Services, a Division of The McGraw-Hill Companies, Inc.

“SEC Filings” means public filings made by the Borrower with the Securities and Exchange Commission on Form 8-K, Form 10-Q or Form 10-K, and any filed amendments to any of the foregoing.

“Significant AES Entity” means (i) any Material AES Entity, (ii) AES BVI II and (iii) any other Person (other than any Excluded AES Entity) in which the Borrower has a direct or indirect equity Investment if (A) such Person’s contribution to Parent Operating Cash Flow for the four most recently completed fiscal quarters of the Borrower constitutes 10% or more of Parent Operating Cash Flow for such period, or (B) on any date of determination, the Borrower’s direct or indirect interest in the total assets of such Person if such Person is a

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Consolidated Subsidiary or in the net assets of such Person in all other cases is at least equal to 10% of the consolidated assets of the Borrower and its Consolidated Subsidiaries, taken as a whole, on such date of determination.

“Solvent” and “Solvency” mean, with respect to any Person on a particular date, that on such date (i) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (ii) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (iv) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Subsidiary” means, with respect to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person.

“Taxes” has the meaning set forth in Section 8.04(a).

“Total Exposure” means at any time, as to any Bank, the sum of its Applicable Percentage of the outstanding principal amount of the Loans and its Applicable Percentage of the L/C Exposure at such time.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans constituting such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Base Rate

“Unfunded Liabilities” means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA.

“United States” means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions.

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Section 1.02 Accounting Terms and Determinations.

Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower’s independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks (“ GAAP ”); provided that, if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Banks wish to amend Article V for such purpose), then the Borrower’s compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks.

Section 1.03 Currency Conversions Generally.

In connection with any conversion of Dollars to Euros or from Euros to Dollars required under this Agreement, the Administrative Agent shall make such conversion as follows: (i) Euros shall be converted to Dollars based on the rate of exchange quoted by the Administrative Agent in New York, at 4 P.M. (London time) on the date of determination, for the Bid-Side EUR/USD exchange rate as published by the WM Company & Reuters PLC found on Reuters page WMRSPOTO5 and (ii) Dollars shall be converted to Euros based on the rate of exchange quoted by the Administrative Agent in New York, at 4 P.M. (London time) on the date of determination, for the Ask-Side EUR/USD exchange rate as published by the WM Company & Reuters PLC found on Reuters page WMRSPOTO5 plus $.0010 per Euro.

In calculating the Total Exposure or L/C Exposure, amounts shall be calculated in Dollars using the exchange rate that was applicable at the time of the initial conversion from Dollars to Euros in respect of Maritza Letters of Credit or Loans with respect thereto.

Section 1.04 Interest Rate Determinations.

With respect to each Interest Period, the Administrative Agent shall deliver a notice to the Borrower within three Business Days following the beginning of such Interest Period, which notice shall contain the Administrative Agent’s determination (in accordance with the terms hereof) of LIBOR, the Adjusted LIBO Rate, the Applicable Margin and, if applicable, the Base Rate and EURIBOR, in each case with respect to such Interest Period. All such determinations shall be conclusive absent manifest error.

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ARTICLE II

THE CREDITS

Section 2.01 Credit-Linked Deposit Accounts.

(a) Establishment of Credit-Linked Deposit Account and Credit-Linked Sub-Accounts. On or prior to the Closing Date, the Administrative Agent shall establish a Credit-Linked Deposit Account in the name of the Administrative Agent at Merrill Lynch Bank USA with the title “AES Credit-Linked Deposit Account”. The Administrative Agent shall maintain records enabling it to determine at any time the amount of the interest of each Bank in the Credit-Linked Deposit Account (the interest of each Bank in the Credit-Linked Deposit Account, as evidenced by such records, being referred to as such Bank’s “ Credit-Linked Sub-Account ”). The Administrative Agent shall establish such additional Credit-Linked Sub-Accounts for assignee Banks as shall be required pursuant to Section 9.06(c). No Person (other than the Administrative Agent) shall have the right to make any withdrawal from the Credit-Linked Deposit Account or to exercise any other right or power with respect thereto. Without limiting the generality of the foregoing, each party hereto acknowledges and agrees that the Credit-Linked Deposits are and (subject to the last paragraph of Section 6.01) will at all times be solely the property of the Banks, that the Credit-Linked Deposits shall be used solely in accordance with this Agreement and that no amount on deposit at any time in the Credit-Linked Deposit Account shall be the property of the Borrower, constitute collateral for any Obligations of the Borrower under this Agreement or otherwise be available in any manner to satisfy any Obligations of the Borrower under this Agreement. Each Bank agrees that its right, title and interest in and to the Credit-Linked Deposit Account shall be limited to the right to require amounts in its Credit-Linked Sub-Account to be applied as provided in paragraph (c) below and that it will have no right to require the return of its Credit-Linked Deposit other than as expressly provided in such paragraph (c) (each Bank hereby acknowledging that its Credit-Linked Deposit constitutes payment for its participations in Loans made or deemed to be made hereunder and Letters of Credit issued or to be issued hereunder and that each Fronting Bank will be issuing, amending, renewing and extending Letters of Credit in reliance on the availability of such Bank’s Credit-Linked Deposit to discharge such Bank’s obligations in accordance with Section 2.05(f)). The funding of the Credit-Linked Deposits and the agreements with respect thereto set forth in this Agreement constitute arrangements solely among the Administrative Agent, the Fronting Banks and the Banks with respect to the funding and reimbursement obligations of the Banks under this Agreement, and do not, except as and when specifically set forth herein, constitute loans, extensions of credit or other financial accommodations to the Borrower. Except as specifically set forth herein, the Borrower shall not have any responsibility or liability to the Banks, the Administrative Agent or any other Person in respect of the establishment, maintenance, administration or misappropriation of the Credit-Linked Deposit Account (or any

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Credit-Linked Sub-Account) or with respect to the investment of amounts held therein, including pursuant to paragraph (d) below, or the duties and responsibilities of the Administrative Agent with respect to the foregoing contemplated by paragraph (e) below.

(b) Deposits in Credit-Linked Deposit Account. The following amounts will be deposited in the Credit-Linked Deposit Account at the following times:

(i) On the Closing Date, each Bank shall deposit in the Credit-Linked Deposit Account an amount in Dollars equal to such Bank’s Funding Amount. Thereafter, the Credit-Linked Deposits shall be available, on the terms and subject to the conditions set forth herein, for application pursuant to Section 2.05(f) to reimburse such Bank’s Applicable Percentage of L/C Disbursements that are not reimbursed by the Borrower.

(ii) On any date prior to the Maturity Date on which the Administrative Agent or any Fronting Bank receives any reimbursement payment from the Borrower in respect of an L/C Disbursement or a Loan, with respect to which amounts were withdrawn from the Credit-Linked Deposit Account to reimburse or pay such L/C Disbursement or fund such Loan, subject to clause (iii) below, the Administrative Agent shall deposit in the Credit-Linked Deposit Account, and credit to the Credit-Linked Sub-Accounts of the Banks, the portion of such reimbursement or other payment to be deposited therein, in accordance with Section 2.05(f) or 2.10(a), as the case may be.

(iii) If, at any time when any amount is required to be deposited in the Credit-Linked Deposit Account under clause (ii) above, the sum of such amount and the aggregate amount of the Credit-Linked Deposits at such time would exceed the higher of the total aggregate Funding Amounts and the Total Exposure, then such excess shall not be deposited in the Credit-Linked Deposit Account and the Administrative Agent shall instead pay to each Bank its Applicable Percentage of such excess.

(iv) Concurrently with the effectiveness of any assignment by any Bank of all or any portion of its Funding Amount, the Administrative Agent shall transfer into the Credit-Linked Sub-Account of the assignee the corresponding portion of the amount on deposit in the assignor’s Credit-Linked Sub-Account in accordance with Section 9.06(c).

(c) Withdrawals From and Closing of Credit-Linked Deposit Account. Amounts on deposit in the Credit-Linked Deposit Account shall be withdrawn and distributed (or transferred, in the case of clause (v) below) as follows:

(i) On each date on which any Fronting Bank is to be reimbursed by the Banks pursuant to Section 2.05(f) for any L/C Disbursement, the Administrative Agent shall withdraw from the Credit-Linked Deposit Account the amount of such unreimbursed L/C Disbursement (and debit the Credit-Linked Sub-Account of each Bank in the amount of such Bank’s Applicable Percentage of such unreimbursed L/C

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Disbursement) and make such amount available to such Fronting Bank in accordance with Section 2.05(f).

(ii) Concurrently with each voluntary reduction of the Funding Amounts pursuant to and in accordance with Section 2.08(b), the Administrative Agent shall withdraw from the Credit-Linked Deposit Account and pay to each Bank such Bank’s Applicable Percentage of the amount of such reduction (provided that, after giving effect thereto, the aggregate amount of the Credit-Linked Deposits is not less than the greater of the Total Exposure or Funding Amounts).

(iii) Concurrently with any reduction of the total aggregate Funding Amounts to zero pursuant to and in accordance with Section 2.08(b) or Article VI, the Administrative Agent shall withdraw from the Credit-Linked Deposit Account and pay to each Bank such Bank’s Applicable Percentage of the excess of the aggregate amount of the Credit-Linked Deposits at such time over the L/C Exposure at such time.

(iv) Concurrently with the effectiveness of any assignment by any Bank of all or any portion of its Funding Amount, the corresponding portion of the assignor’s Credit-Linked Sub-Account shall be transferred from the assignor’s Credit-Linked Sub-Account to the assignee’s Credit-Linked Sub-Account in accordance with Section 9.06(c) and, if required by Section 9.06(c), the Administrative Agent shall close such assignor’s Credit-Linked Sub-Account.

(v) Upon the reduction in accordance with the terms hereof of each of the Funding Amounts and the L/C Exposure to zero, the Administrative Agent shall withdraw from the Credit-Linked Deposit Account and pay to each Bank the entire remaining amount of such Bank’s Credit-Linked Deposit, and shall close the Credit-Linked Deposit Account.

(vi) In accordance with 2.02(c) upon the making of a Loan.

Each Bank irrevocably and unconditionally agrees that its Credit-Linked Deposit may be applied or withdrawn from time to time as set forth in this paragraph (c).

(d) Deposit Earnings. Each of the Administrative Agent, each Fronting Bank and each Bank hereby acknowledges and agrees that each Bank is funding its Credit-Linked Deposit to the Administrative Agent for application in the manner contemplated by Sections 2.05(f) and that the Administrative Agent and the Borrower have mutually agreed to invest the Credit-Linked Deposits on deposit in the Credit-Linked Deposit Account so as to earn a return (the “ Return on Deposits ”) (subject to Section 8.01) for the Banks equal at any time to (i) for Dollar denominated Credit-Linked Deposits, (w) the Adjusted LIBO Rate in effect for the Credit-Linked Deposits at such time minus (x) 15 basis points or (ii) for Euro denominated deposits, (y) the EURIBOR in effect for the Credit-Linked Deposits at such time minus (z) 15 basis points; provided that, in the event that the Borrower shall revoke any notice of prepayment

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and termination pursuant to Section 2.10(b), the Administrative Agent shall use commercially reasonable efforts to invest the Credit-Linked Deposits that are affected thereby in a manner that is consistent with its policies relating to such deposits. Such interest will be paid to the Banks by the Administrative Agent in arrears on each day on which fees are due and payable to the Banks under Section 2.11(a) (and amounts earned in Euros shall be converted to Dollars by the Administrative Agent (in accordance with Section 1.03) any time fees are payable pursuant to Section 2.11(a)). All such interest shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day) and shall be calculated based on the daily amounts of the Credit-Linked Deposits of the Banks during the applicable period. The applicable Adjusted LIBO Rate or EURIBOR shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

(e) Sufficiency of Deposits to Provide for Total Exposure. Notwithstanding any other provision of this Agreement, including Sections 2.01, 2.02 and 2.05(a), no Loan shall be made pursuant to Section 2.02(a) and no Letter of Credit shall be issued, if after giving effect thereto the L/C Exposure would exceed the aggregate amount of the Credit-Linked Deposits.

(f) Satisfaction of Bank Funding Obligations. The Borrower and each Fronting Bank acknowledge and agree that, notwithstanding any other provision contained herein (but without limiting the obligations of any Bank under Section 9.03(c)), the deposit by each Bank in the Credit-Linked Deposit Account on the Closing Date of funds equal to its Funding Amount will fully discharge the obligation of such Bank to fund Loans by such Bank pursuant to Section 2.02(a) and to reimburse such Bank’s Applicable Percentage of L/C Disbursements that are not reimbursed by the Borrower pursuant to Section 2.05(f), and that no other or further payments shall be required to be made by any Bank in respect of any such funding or reimbursement obligations.

(g) Security. Each Bank grants to the Administrative Agent for the benefit of the Fronting Banks a security interest in such Bank’s Credit-Linked Deposit, its Credit-Linked Sub-Account and all of its rights, title and interest to and under the Credit-Linked Deposit Account to secure the obligations of such Bank under Sections 2.05(f) . The Administrative Agent hereby grants a security interest for the benefit of the Fronting Banks in all its rights title and interest to and under the Credit-Linked Deposit Account and confirms the grant by the Banks made above to secure the obligations of the Banks under Section 2.05(f). To the extent that there are multiple Fronting Banks, such Fronting banks shall share ratably in such security interest in proportion to the outstanding Obligations owed to such Fronting Banks.

(h) Fronting Bank Insecure. If the Administrative Agent or any Fronting Bank is enjoined from taking any action referred to in paragraph (i) of Section 2.01(c), or if the Administrative Agent or any Fronting Bank reasonably determines that, by operation of law, it may reasonably be precluded from taking any such action, or if the Borrower or any Bank challenges in any legal proceeding any of the acknowledgements, agreements or characterizations set forth in any of the fifth, sixth or seventh sentences of Section 2.01(a), then,

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in any such case (and so long as such event or condition shall be continuing), and notwithstanding anything contained herein to the contrary, no Fronting Bank shall be required to or to issue, renew or extend any Letter of Credit.

Section 2.02 Loans.

(a) Requested Loans. Subject to the terms and conditions set forth herein, the Banks shall, from time to time during the Availability Period at the request of the Borrower, make one or more Dollar denominated Loans to the Borrower in an aggregate principal amount that will not result in (i) the aggregate amount of the Total Exposures exceeding the aggregate amount of the Funding Amounts or (ii) the L/C Exposure exceeding the balance of the Credit-Linked Deposit Account (excluding any portion of the Credit-Linked Deposit Account attributable to interest). Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Loans. Loans shall constitute utilization of the Funding Amounts.

(b) Deemed Loans. The Banks shall, from time to time during the Availability Period, if the Borrower fails to reimburse any L/C Disbursement when required by the provisions of 2.05(f), be deemed to have made a Dollar denominated Loan to the Borrower in the aggregate principal amount of the unreimbursed L/C Disbursement. In the case of a Maritza Letter of Credit, the amount of such corresponding Loan shall equal the unreimbursed L/C Disbursement measured in Euros not reimbursed by the Borrower multiplied by the Fixed Exchange Rate.

(c) Withdrawal Authorization. In consideration and in furtherance of the foregoing, each Bank hereby absolutely and unconditionally authorizes and directs the Administrative Agent to withdraw from the Credit-Linked Deposit Account (and debit such Bank’s Credit-Linked Sub-Account in the amount of) such Bank’s Applicable Percentage of the principal amount of any such Loan pursuant to clause (a) or (b) above (it being understood and agreed that each Bank’s obligations in respect of funding Loans shall be payable solely from, and limited to, such Bank’s Credit-Linked Deposit). In the case of a Borrowing pursuant to Section 2.02(a), the Administrative Agent will make Loans available to the Borrower by promptly transferring by wire transfer the amounts so withdrawn by 3:00 p.m. New York City time, on the requested date of such Loan, to an account of the Borrower designated by the Borrower in the applicable Request for Loan.

(d) Type of Loans. Subject to Article VIII, (i) each Borrowing pursuant to Section 2.02(a) shall be constituted entirely of Base Rate Loans or of Eurodollar Loans as the Borrower may request in accordance herewith and (ii) each Borrowing deemed to have been made pursuant to Section 2.02(b) shall be constituted entirely of Eurodollar Loans. If the provisions of Article VIII prohibit the making of Eurodollar Loans, each Borrowing made or deemed to be made hereunder shall be constituted entirely of Base Rate Loans.

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(e) Minimum Amounts; Limitation on Number of Borrowings. Each Borrowing shall be in an aggregate amount of $1,000,000 or a larger multiple of $1,000,000; provided that a Borrowing deemed to be made pursuant to Section 2.02(b) may be in an aggregate amount that is required to finance the reimbursement of an L/C Disbursement as contemplated by Section 2.05(f). Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of five Eurodollar Borrowings outstanding that were made pursuant to Section 2.02(a).

Section 2.03 [Intentionally Omitted].

Section 2.04 Requests for Borrowings.

(a) Notice by the Borrower. To request a Borrowing pursuant to Section 2.02(a), the Borrower shall notify the Administrative Agent of such request by telephone not later than 11:00 a.m., New York City time, on the day of the proposed Borrowing. Each such telephonic request for a Loan shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a Request for Loan signed by the Borrower. In connection with a deemed Loan made pursuant to Section 2.02(b), the Borrower shall be deemed to have furnished a timely, duly completed Request for Loan.

(b) Content of Request for Loans. Each telephonic request for a Loan and written Request for Loan shall specify the following information in compliance with Section 2.02:

(i) the aggregate amount of the requested Borrowing;

(ii) the date of such Borrowing, which shall be a Business Day;

(iii) whether such Borrowing is to be an Base Rate Borrowing or a Eurodollar Borrowing; and

(iv) the location and number of the Borrower’s account to which funds are to be disbursed.

(c) Notice by the Administrative Agent to the Lenders. Promptly following receipt of a Request for Loan in accordance with this Section, the Administrative Agent shall advise each Bank of the details thereof and of the amount of such Bank’s Loan to be made as part of the requested Borrowing.

(d) Failure to Elect. If no election as to the Type of a Borrowing is specified, then the requested Borrowing shall be a Base Rate Borrowing.

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Section 2.05 Letters of Credit.

(a) General. Subject to the terms and conditions set forth herein, the Borrower may request any Fronting Bank to issue, and such Fronting Bank shall issue, at any time and from time to time during the period commencing on the Closing Date and ending on the date that is five Business Days prior to the Maturity Date, Letters of Credit for its own account in such form as is acceptable to each of the Administrative Agent and such Fronting Bank in its reasonable determination (including, without limitation, “auto-renewal” letters of credit); provided that such Fronting Bank shall not be under any obligation to issue any Letter of Credit if the issuance of such Letter of Credit would violate one or more policies of such Fronting Bank generally applicable to the issuance of letters of credit. All Letters of Credit shall be denominated in Dollars except for any Maritza Letter of Credit, which shall be denominated in Euros. All Letters of Credit issued hereunder by the Fronting Banks shall be issued for the account of the Borrower as the named account party thereon, provided that Letters of Credit may, in addition to showing the Borrower as account party, show any Subsidiary of the Borrower as a favoree under such Letter of Credit. Letters of Credit issued hereunder shall constitute utilization of the Funding Amounts. Concurrently with the issuance of a Maritza Letter of Credit, a corresponding amount equal to the face amount of such Maritza Letter of Credit held in the Credit-Linked Deposit Account will be converted by the Administrative Agent (in accordance with Section 1.03) into Euros at the then prevailing exchange rate (the “ Fixed Exchange Rate ”). To the extent a Maritza Letter of Credit is reduced or returned by the beneficiary thereunder, or drawn and reimbursed by the Borrower pursuant to the provisions hereof, a corresponding amount of Euros in the Credit-Linked Deposit Account will be converted to Dollars by the Administrative Agent (in accordance with Section 1.03) at the then prevailing exchange rate. The Administrative Agent shall provide notice to the Borrower, within two Business Days of such reduction, return or reimbursement, as applicable, of the Dollar amount resulting from such conversion as well as a calculation of the product of such amount of Euros multiplied by the Fixed Exchange Rate. To the extent such Dollar amount is less then the product of such amount of Euros multiplied by the Fixed Exchange Rate, the Borrower shall deposit, within two Business Days of such notice from the Administrative Agent, Dollars into the Credit-Linked Deposit Account equal to such deficit. To the extent such product is greater than such Dollar amount, within two Business Days of such reduction, return or reimbursement as applicable, the Administrative Agent shall withdraw such excess from the Credit-Linked Deposit Account and pay such excess to the Borrower.

(b) Notice of Issuance, Amendment, Renewal or Extension. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the applicable Fronting Bank) to the applicable Fronting Bank and the Administrative Agent (other than the Letters of Credit requested prior to the date hereof, not later than 11:00 a.m. on the fourth Business Day preceding the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be

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a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (d) of this Section), whether or not such Letter of Credit is to be a Maritza Letter of Credit, the amount of such Letter of Credit (which shall be denominated in Euros in the case of a Maritza Letter of Credit), the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the applicable Fronting Bank, the Borrower also shall submit a letter of credit application on such Fronting Bank’s standard form in connection with any request for a Letter of Credit. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, any Fronting Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. Each Fronting Bank shall promptly notify the Administrative Agent of any Letters of Credit issued, amended, renewed or extended by it hereunder and shall deliver a report (in form and substance reasonably acceptable to the Administrative Agent) within five Business Days following the end of each month after the Closing Date detailing its letter of credit activity under this Agreement.

(c) Limitations on Amounts. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the aggregate Total Exposure shall not exceed the total Funding Amounts and (ii) the L/C Exposure shall not exceed the balance of the Credit-Linked Deposit Account (excluding any portion of the Credit-Linked Deposit Account attributable to interest).

(d) Expiration Date. Each Letter of Credit (other than a Maritza Letter of Credit) shall expire (or provide that the applicable Fronting Bank shall have the option to refuse to renew such Letter of Credit) at or prior to the close of business on the earlier of (i) the date twelve months after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, twelve months after the then-current expiration date of such Letter of Credit, so long as such renewal or extension occurs no earlier than three months prior to such then-current expiration date) and (ii) the date that is five Business Days prior to the Maturity Date. Each Maritza Letter of Credit shall expire at or prior to the close of business on the date that is five Business Days prior to the Maturity Date.

(e) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) by any Fronting Bank, and without any further action on the part of such Fronting Bank or the Banks, such Fronting Bank hereby grants to each Bank, and each Bank hereby acquires from such Fronting Bank, a participation in such Letter of Credit equal to such Bank’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. Each Bank acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or, subject to Section 2.01(f), reduction or termination of the Funding Amounts.

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In consideration and in furtherance of the foregoing, each Bank hereby absolutely and unconditionally authorizes and directs the Administrative Agent to withdraw from the Credit-Linked Deposit Account (and debit such Bank’s Credit-Linked Sub-Account in the amount of) such Bank’s Applicable Percentage of each L/C Disbursement made by any Fronting Bank and not reimbursed by the Borrower on the date due as provided in paragraph (f) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason (it being understood and agreed that each Bank’s obligations in respect of participations in Letters of Credit shall be payable solely from, and limited to, such Bank’s Credit-Linked Deposit).

(f) Reimbursement. (i) If any Fronting Bank shall make any L/C Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such Fronting Bank in respect of such L/C Disbursement by paying to the Administrative Agent an amount equal to such L/C Disbursement in the currency in which the applicable Letter of Credit is denominated on the first Business Day (other than with respect to any Maritza Letter of Credit which shall be governed by the provisions set forth in clause (ii) of this subsection (f)) after such drawing. If the Borrower fails to make such payment within a Business Day of when due, the Administrative Agent shall reimburse the applicable Fronting Bank for such L/C Disbursement with funds from the Credit-Linked Deposits and the obligations of the Borrower to reimburse such Fronting Bank shall be converted into a Loan payable to the Administrative Agent for the account of the Banks in accordance with Section 2.02.

(ii) Notwithstanding any provision herein to the contrary, if any Fronting Bank shall receive a demand for payment in accordance with Section 2.05(h) hereof with respect to any Maritza Letter of Credit, such Fronting Bank shall notify the Administrative Agent and the Borrower within one Business Day of receipt of such notice (which notice sets forth the date of payment). The Borrower must notify the Administrative Agent and such Fronting Bank whether or not it will reimburse such Fronting Bank within one Business Day after it receives such notice. If the Borrower elects to reimburse such Fronting Bank, the Borrower shall be obligated to reimburse such Fronting Bank on the same Business Day that such Fronting Bank notified the Borrower as the date of payment.

(iii) Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this subsection (f), the Administrative Agent shall distribute such payment to the applicable Fronting Bank or, to the extent that amounts have been withdrawn (and credited to each Bank’s Credit-Linked Sub-Account in the amount of such Bank’s Applicable Percentage of such deposit) from the Credit-Linked Deposit Account to make any payment pursuant to this paragraph to reimburse such Fronting Bank, then such payment shall be deposited in the Credit-Linked Deposit Account.

If any unreimbursed L/C Disbursement resulting in a withdrawal from the Credit-Linked Deposits Accounts as provided in the preceding paragraph shall be subsequently reimbursed or the Loan deemed issued in respect of such unreimbursed L/C Disbursement is repaid other than on the last day of any Interest Period for Credit-Linked Deposits, the

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Administrative Agent shall invest the amount so reimbursed in overnight or short-term cash equivalent investments until the end of such Interest Period and the Borrower shall pay to the Administrative Agent, upon the Administrative Agent’s request therefor, the amount, if any, by which the interest accrued on a like amount of the Credit-Linked Deposits at the Adjusted LIBO Rate shall exceed the interest earned through the investment of the amount so reimbursed for the period from the date of such reimbursement through the end of such Interest Period, as determined by the Administrative Agent (such determination to be conclusive absent manifest error) and set forth in the request for payment delivered to the Borrower. In the event the Borrower shall fail to pay any amount due under this paragraph, the interest payable by the Administrative Agent to the Banks on their Credit-Linked Deposits under Section 2.01(d) shall be correspondingly reduced and the Banks shall without further act succeed, ratably in accordance with their Applicable Percentages, to the rights of the Administrative Agent with respect to such amount.

(g) Obligations Absolute. The Borrower’s obligation to reimburse L/C Disbursements as provided in paragraph (f) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by any Fronting Bank under a Letter of Credit against presentation of a draft or other document that does not comply strictly with the terms of such Letter of Credit, and (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the Borrower’s obligations hereunder.

Neither the Administrative Agent, the Banks, the Fronting Banks, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit by any Fronting Bank or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of such Fronting Bank; provided that the foregoing shall not be construed to excuse such Fronting Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by such Fronting Bank’s gross negligence or willful misconduct when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that:

(i) a Fronting Bank may accept documents that appear on their face to be in substantial compliance with the terms of a Letter of Credit without responsibility for

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further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Letter of Credit;

(ii) a Fronting Bank shall have the right, in its sole discretion, to decline to accept such documents and to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit; and

(iii) this sentence shall establish the standard of care to be exercised by any Fronting Bank when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof (and the parties hereto hereby waive, to the extent permitted by applicable law, any standard of care inconsistent with the foregoing).

(h) Disbursement Procedures. Each Fronting Bank shall, within a reasonable time following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Each Fronting Bank shall promptly after such examination notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether such Fronting Bank has made or will make an L/C Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Fronting Bank and the Banks with respect to any such L/C Disbursement.

(i) Interim Interest. If any Fronting Bank shall make any L/C Disbursement, then, unless the Borrower shall reimburse (including through a Borrowing or a deemed Borrowing of Loans) such L/C Disbursement in full on the date such L/C Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such L/C Disbursement is made to but excluding the date that the Borrower reimburses such L/C Disbursement, as provided in Section 2.12(c). Interest accrued pursuant to this paragraph shall be for the account of such Fronting Bank, except that interest accrued on and after the date of payment from the Credit-Linked Deposit of any Bank to reimburse such Fronting Bank shall be for the account of such Bank to the extent of such payment.

Section 2.06 [Intentionally Omitted].

Section 2.07 Interest Elections.

(a) Elections by the Borrower. The Loans constituting each Borrowing initially shall be (i) of the Type specified in the applicable Request for Loan in the case of Loans made pursuant to Section 2.02(a) and (ii) Eurodollar Loans in the case of Loans deemed made pursuant to Section 2.02(b). Thereafter, the Borrower may elect to convert such Borrowing to a Borrowing of a different Type or to continue such Borrowing as a Borrowing of the same Type.

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(b) Notice of Elections. To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by 11:00 a.m., New York City time, on the day of the proposed election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request substantially in the form of Exhibit F hereto and signed by the Borrower.

(c) Content of Interest Election Requests. Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clause (iii) of this paragraph shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; and

(iii) whether the resulting Borrowing is to be an Base Rate Borrowing or a Eurodollar Borrowing.

(d) Notice by the Administrative Agent to the Lenders. Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Bank of the details thereof and of such Bank’s portion of each resulting Borrowing.

(e) Failure to Elect; Events of Default. If the Borrower fails to deliver a timely and complete Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period therefor, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to a Base Rate Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Banks, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to a Base Rate Borrowing at the end of the applicable Interest Period thereof.

Section 2.08 Termination and Reduction of the Funding Amounts.

(a) Scheduled Termination. Unless previously terminated, the Funding Amounts shall be reduced to zero on the Maturity Date.

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(b) Voluntary Termination or Reduction. The Borrower may at any time terminate, or from time to time reduce, the Funding Amounts; provided that (i) each reduction of the Funding Amounts pursuant to this Section shall be in an amount that is $1,000,000 or a larger multiple of $1,000,000 (or, if less, the entire remaining aggregate amount of the Funding Amounts) and (ii) the Borrower shall not terminate or reduce the Funding Amounts if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.10, the Total Exposure of all of the Banks would exceed the total Funding Amounts.

(c) Notice of Voluntary Termination or Reduction. The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Funding Amounts under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the affected Banks of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Funding Amounts delivered by the Borrower may state that such notice is conditioned upon the issuance of securities or the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied.

Section 2.09 Repayment of Loans; Evidence of Debt.

(a) Repayment. The Borrower hereby unconditionally promises to pay the to the Administrative Agent for account of the Banks the outstanding principal amount of the Loans on the Maturity Date.

(b) Maintenance of Records by Banks. Each Bank shall maintain in accordance with its usual practice records evidencing the indebtedness of the Borrower to such Bank resulting from each Loan made or deemed made by such Bank, including the amounts of principal and interest payable and paid to such Bank from time to time hereunder.

(c) Manner of Payment. Prior to any repayment or prepayment of any Borrowings hereunder (including, without limitation, prepayments pursuant to Section 2.10), the Borrower shall select the Borrowings to be paid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection in accordance with Section 2.10(b). If the Borrower fails to make a timely selection of the specific Borrowings to be repaid or prepaid, such payment shall be applied ratably to all outstanding Loans.

(d) Maintenance of Records by the Administrative Agent. The Administrative Agent shall maintain records in which it shall record (i) the amount of each Loan made hereunder and Type thereof, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Bank hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for account of the Bank’s and each Bank’s share thereof.

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(e) Effect of Entries. The entries made in the records maintained pursuant to paragraph (b) or (d) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Bank or the Administrative Agent to maintain such records or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.

(f) Promissory Notes. Any Bank may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Bank a promissory note payable to such Bank (or, if requested by such Bank, to such Bank and its registered assigns) and in substantially the same form as Exhibit A.

Section 2.10 Prepayment of Loans.

(a) Optional Prepayments. The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part subject to the requirements of this Section 2.10.

(b) Notices, Etc. The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder, under Section 2.10(a), not later than 11:00 a.m. New York City time, three Business Days before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Funding Amounts as contemplated by Section 2.08, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.08. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the relevant Banks of the contents thereof. Each partial prepayment of any Borrowing shall be in an aggregate amount of $1,000,000 or multiple of $1,000,000 in excess thereof, except as necessary to fully repay such Borrowing. Each prepayment of a Borrowing shall be applied ratably to the Banks included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.12.

Section 2.11 Fees.

(a) (i) The Borrower agrees to pay to the Administrative Agent for the account of each Bank a fee (the “ Applicable Margin Fee ”) accruing at a rate per annum equal to the Applicable Margin (subject to the last sentence of clause (iii) below) on the daily amount of the Credit-Linked Deposit of such Bank during the period from and including the date hereof to but excluding the date on which each of the Funding Amounts of all of the Banks and the L/C Exposure have been reduced to zero.

(ii) In addition, the Borrower agrees to pay to the Administrative Agent for the account of each Bank an additional fee (the “ LIBOR Maintenance Fee ”), accruing at the rate of 0.15% per annum, on the daily amount of the Credit-Linked Deposit of such Bank during

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the period from and including the date hereof to but excluding the date on which each of the Funding Amounts of all of the Banks and the L/C Exposure have been reduced to zero.

(iii) On each Fee Payment Date (as defined below), any difference between the Adjusted LIBO Rate and the sum of the Return on Deposits and the LIBOR Maintenance Fee for the applicable period resulting from Euro denominated Credit-Linked Deposits which earn a return based on EURIBOR (as determined by the Administrative Agent and communicated to the Borrower in the invoice referred to in clause (iv) below) shall be considered the “ EURIBOR Differential Rate ”. If the sum of the Return of Deposits and the LIBOR Maintenance Fee is less than the Adjusted LIBO Rate, then the Borrower agrees to pay to the Administrative Agent for the account of each Bank a fee accruing at a rate per annum equal to the EURIBOR Differential Rate on the daily amount of the Credit-Linked Deposit of such Bank during such period. If the sum of the Return on Deposits and the LIBOR Maintenance Fee is greater than the Adjusted LIBO Rate, then the Applicable Margin (for purposes of clause (i) above only) shall be reduced by the amount of the EURIBOR Differential Rate.

(iv) The fees payable under this Section 2.11(a) accrued to but excluding the last day of each Interest Period for Credit-Linked Deposits shall be invoiced to the Borrower by the Administrative Agent within three Business Days following the last day of each such Interest Period and shall be payable on the second Business Day following the date of such invoice, and on the date on which each of the Funding Amounts of all of the Banks and the L/C Exposure have been reduced to zero (each such payment date, a “ Fee Payment Date ”). All such fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). All amounts payable under this Section 2.11(a) with respect to the daily amount of the Credit-Linked Deposit of a Bank shall be calculated based on the actual amount of Dollars comprising such Credit-Linked Deposit and the Dollar-equivalent of the actual amount of Euros comprising such Credit-Linked Deposit (calculated by the Administrative Agent using the Fixed Exchange Rate applicable to such Euros).

(b) The Borrower agrees to pay to each Fronting Bank a fronting fee, which shall accrue at the rate of 0.125% per annum or such other rate or rates per annum separately agreed upon between the Borrower and the applicable Fronting Bank, on the average daily amount of the L/C Exposure (excluding any portion thereof attributable to unreimbursed L/C Disbursements) during the period from and including the Closing Date to but excluding the date on which each of the Funding Amounts of all of the Banks and the L/C Exposure have been reduced to zero, as well as such Fronting Bank’s standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Fronting fees accrued to but excluding each Quarterly Date shall be payable on such Quarterly Date; provided that all such accrued fees shall be payable on the date on which the Funding Amounts of all of the Banks are reduced to zero and any such fees accruing after the such date shall be payable on demand. Any other fees payable to any Fronting Bank pursuant to this

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paragraph shall be payable within 10 days after demand. All fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(c) The Borrower agrees to pay to the Administrative Agent for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent.

(d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the applicable Fronting Bank, in the case of fees payable to it) for distribution, in the case of fees payable under Section 2.11(a), to the Banks entitled thereto. Fees paid shall not be refundable under any circumstances.

Section 2.12 Interest.

(a) Loans. The Loans constituting each (i) LIBOR Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBO Rate plus the Applicable Margin and (ii) Base Rate Borrowing shall bear interest at the Base Rate plus the Applicable Margin.

(b) Default Interest. Upon the occurrence and during the continuance of an Event of Default described in Section 6.01(a) or an Event of Default described in Section 6.01(g) or 6.01(h) with respect to the Borrower, the Borrower shall pay interest on (x) (i) the outstanding principal amount of each Base Rate Loan owing to each Bank, payable on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Base Rate Loan pursuant to Section 2.12(a) above and (ii) to the fullest extent permitted by law, the amount of any interest that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, at a rate per annum equal to 2% per annum above the rate per annum required to be paid on the Base Rate Loans on which such interest has accrued pursuant to Section 2.12(a) above, (y)(i) the outstanding principal amount of each Eurodollar Loan owing to each Bank payable on demand, at a rate per annum equal at all times to a rate per annum equal to the higher of (i) the sum of 2% plus the Applicable Margin applicable to such Loan plus the Adjusted LIBO Rate applicable to such Eurodollar Loan and (ii) the sum of 2% plus the Applicable Margin applicable to such Loan plus the quotient obtained (rounded upward, if necessary, to the next higher  ¹/100th of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher  ¹/ 16th of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Business Days, then for such other period of time not longer than three months as the Administrative Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to the Reference Dealers are offered to the Reference Dealers in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the relevant rate applicable to Base Rate Loans) (the “ Eurodollar Default Rate ”) and (ii) to the fullest extent permitted by law, the amount of any interest that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, at a rate per

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annum equal to the Eurodollar Default Rate for the Eurodollar Loans on which such interest has accrued pursuant to Section 2.12(a) above and (z) in the case of a Credit-Linked Deposit, the rate of fees payable by Borrower shall be increased by 2% from the date the Required Banks shall so elect until such Event of Default has been cured or waived by the Required Banks, provided that accrual at the rate provided for hereunder shall commence automatically upon occurrence of an Event of Default of the type specified in clauses (a) or (h) of Section 8.01.

(c) Payment of Interest. Accrued interest on each Loan shall be payable in arrears on the last day of each Interest Period for such Loan and upon termination of the Funding Amounts; provided that (i) interest accrued pursuant to paragraph (b) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of a Loan prior to the Maturity Date), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Borrowing prior to the end of the Interest Period therefor, accrued interest on such Borrowing shall be payable on the effective date of such conversion.

(d) Computation. All interest hereunder shall be computed on the basis of a year of 360 days (or 365 or 366 days, as the case may be, in the case of Base Rate Loans based on the Base Rate) and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Adjusted LIBO Rate or Base Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

Section 2.13 [Intentionally Omitted].

Section 2.14 [Intentionally Omitted].

Section 2.15 Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan or the reduction of any Credit-Linked Deposit other than on the last day of any Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto, (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 9.16 or (e) the revocation of any notice of prepayment pursuant to Section 2.10(b), then, in any such event, the Borrower shall compensate (within 15 days following a demand therefore) each applicable Bank, each applicable Fronting Bank, or the Administrative Agent, as applicable, for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan or a Credit-Linked Deposit, such loss, cost or expense to any applicable Bank, each applicable Fronting Bank or the Administrative Agent may, at the option of such party, be deemed to include an amount determined by such Bank, each applicable Fronting Bank or the Administrative Agent, as the case may be, to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan or on such

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Credit-Linked Deposit had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan or such Credit-Linked Deposit, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Bank or such Fronting Bank, as the case may be, would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the Eurodollar market. A certificate of any Bank setting forth any amount or amounts that such Bank is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. In the event the Borrower shall fail to pay any amount due to any Fronting Bank under this Section, the interest payable by the Administrative Agent to the Banks on their Credit-Linked Deposits under Section 2.01(d) shall be correspondingly reduced and the Banks shall without further act succeed, ratably in accordance with their Applicable Percentages, to the rights of such Fronting Bank respect to such amount.

Section 2.16 [Intentionally Omitted].

Section 2.17 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a) Payments by the Borrower. The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of L/C Disbursements, or under Section 2.15, 8.03 or 8.04, or otherwise) or under any Note (except to the extent otherwise provided therein) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices referred to in Section 9.01 except as otherwise expressly provided in this Agreement or any Note and except payments to be made directly to any Fronting Bank as expressly provided herein and payments pursuant to Sections 2.15, 8.03, and 8.04, which shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for account of any other Person to the appropriate recipient (or will deposit such payments in the Credit-Linked Deposit Account, as applicable) promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder or under any other Note (except to the extent otherwise provided therein) shall be made in Dollars.

(b) Application of Insufficient Payments. If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, to pay interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of

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interest and fees then due to such parties, and (ii) second, to pay principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.

(c) Sharing of Payments by Banks. If any Bank shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in L/C Disbursements resulting in such Bank receiving payment of a greater proportion of the aggregate amount of its Loans and participations in L/C Disbursements and accrued interest thereon then due than the proportion received by any other Bank, then the Bank receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in L/C Disbursements of other Banks to the extent necessary so that the benefit of all such payments shall be shared by the Banks ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in L/C Disbursements; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Bank as consideration for the assignment of or sale of a participation in any of its Loans or participations in L/C Disbursements to any assignee or participant, other than to any Subsidiary or Affiliate of the Borrower (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Bank acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Bank were a direct creditor of the Borrower in the amount of such participation.

(d) Presumptions of Payment. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for account of the Banks or the Fronting Banks hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Banks or the Fronting Banks, as the case may be (or, to the extent provided herein, deposit in the Credit-Linked Deposit Account) the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Banks or the Fronting Banks, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Bank or such Fronting Bank (or, if such amount shall have been deposited in the Credit-Linked Deposit Account, each Bank authorizes the Administrative Agent to withdraw such amount from the Credit-Linked Deposit Account), and to pay interest thereon, for each day from and including the date such amount is distributed to it or deposited in the Credit-Linked Deposit Account and credited to its Credit-Linked Sub-Account to but excluding the date of payment to or recovery by the Administrative Agent, at the Federal Funds Rate.

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(e) Certain Deductions by the Administrative Agent. If any Bank shall fail to make any payment required to be made by it pursuant to Section 2.17(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for account of such Bank to satisfy such Bank’s obligations under such Sections until all such unsatisfied obligations are fully paid.

Section 2.18 Mitigation Obligations.

If any Bank requests compensation under Section 8.03, or if the Borrower is required to pay any additional amount to any Bank or any Governmental Authority for account of any Bank pursuant to Section 8.04, then such Bank shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates (or, in the case of Section 8.04(c), change the composition of the underlying obligations or securities in which the Credit-Linked Deposits are invested), if, in the judgment of such Bank, such designation, assignment or change (i) would eliminate or reduce amounts payable pursuant to Section 8.03 or 8.04, as the case may be, in the future and (ii) would not subject such Bank to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Bank. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Bank in connection with any such designation or assignment.

Section 2.19 Increase in Credit Facility.

(a) The Borrower may, at any time and from time to time prior to the Maturity Date, by notice to the Administrative Agent, request one or more increases in the Funding Amounts (each, a “ Commitment Increase ”) in an aggregate amount up to $100,000,000, to be effective as of a date that is at least 90 days prior to the scheduled Maturity Date then in effect (each, a “ Increase Date ”) as specified in the related notice to the Administrative Agent; provided, however, that on the date of any request by the Borrower for a Commitment Increase and on the related Increase Date, the applicable conditions set forth in Section 3.02 and in clause (d) of this Section 2.19 shall be satisfied, provided that no Bank shall have any obligation to participate in any Commitment Increase.

(b) The Administrative Agent shall promptly notify the Banks of any request by the Borrower for a Commitment Increase, which notice shall include (i) the proposed amount of such requested Commitment Increase, (ii) the proposed Increase Date and (iii) the date by which Banks wishing to participate in the Commitment Increase must commit to an increase in the amount of their respective Funding Amounts (the “ Increase Commitment Date ”). Each Bank that desires to participate in the requested Commitment Increase shall, in its sole discretion, give written notice to the Administrative Agent on or prior to the applicable Increase Commitment Date of the amount by which it desires to increase its Funding Amount.

(c) The Borrower may extend offers to one or more Eligible Assignees to participate in any portion of the requested Commitment Increase; provided, however, that the

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Funding Amount of each such Eligible Assignee shall be in an amount equal to at least $1,000,000. Promptly following the applicable Increase Commitment Date, the Administrative Agent shall notify the Borrower as to the amount, if any, by which the Banks and any Eligible Assignees are willing to participate in the requested Commitment Increase. In all cases (including if the aggregate amount by which the Banks and any Eligible Assignees are willing to participate in the requested Commitment Increase on any such Increase Date exceeds the amount of the requested Commitment Increase), the requested Commitment Increase shall be allocated among the Banks and any Eligible Assignees willing to participate therein in such amounts as are agreed between the Borrower and the Administrative Agent.

(d) On the applicable Increase Date, each Eligible Assignee that accepts an offer to participate in a requested Commitment Increase in accordance with Section 2.19(c) shall become a Bank party to this Agreement as of the applicable Increase Date and the Funding Amount of each Bank participating in such Commitment Increase shall be increased by the amount allocated to such Bank pursuant to the last sentence of Section 2.19(c)) as of such Increase Date; provided, however, that the Administrative Agent shall have received on or before the applicable Increase Date the following, each dated such date:

(i) (A) certified copies of resolutions of the Board of Directors (or a committee thereof) of the Borrower approving the applicable Commitment Increase and the corresponding modifications to this Agreement and (B) an opinion of counsel for Borrower (which may be an opinion of in-house counsel), each in form and substance reasonably satisfactory to the Administrative Agent;

(ii) an assumption agreement from each Eligible Assignee, if any, in form and substance satisfactory to the Borrower and the Administrative Agent (each an “ Assumption Agreement ”), duly executed by such Eligible Assignee, the Administrative Agent and the Borrower; and

(iii) confirmation from each Bank of the increase in the amount of its Funding Amount in a writing satisfactory to the Borrower and the Administrative Agent.

On the applicable Increase Date, upon fulfillment of the conditions set forth in the immediately preceding sentence of this Section 2.19(d) and the conditions set forth in Section 3.02, (x) the Administrative Agent shall notify the existing Banks and any new Banks participating in such Commitment Increase and the Borrower, on or before 11:00 A.M. (New York City time), by telecopier or telex, of the occurrence of the applicable Commitment Increase to be effected on the related Increase Date, (y) each participating Bank shall remit its additional Funding Amount (the “ Additional Credit-Linked Deposits ”) to the Administrative Agent for deposit into the Credit-Linked Deposit Account and (z) the Administrative Agent shall record in the Register maintained by the Administrative Agent pursuant to Section 9.06(f) the relevant information with respect to each existing Bank and each new Bank participating in such Commitment Increase on such date.

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ARTICLE III

CONDITIONS

Section 3.01 Closing.

The closing hereunder shall occur when all the following conditions have been satisfied:

(a) The Borrower shall have paid all accrued fees of the Administrative Agent, the Lead Arranger and the Banks and all accrued expenses of the Administrative Agent (including, without limitation, all fees and expenses of counsel to the Administrative Agent payable pursuant to Section 9.03);

(b) The Agent shall have received (i) an opinion of the Assistant General Counsel of the Borrower, substantially in the form of Exhibit B-1 hereto and (ii) Shearman & Sterling, LLP, special counsel for the Borrower, substantially in the form of Exhibit B-2, each dated as of the Closing Date and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request;

(c) The Administrative Agent shall have received evidence, satisfactory to it, in the form of pro forma calculations, that the issuance of, and L/C Drawings under, the Letters of Credit under this Agreement and the making of Borrowings under this Agreement are permitted under the terms of the Debt of the Borrower outstanding on the Closing Date;

(d) The Administrative Agent shall have received copies of the resolutions of the Board of Directors of the Borrower authorizing the execution, delivery and performance by the Borrower of this Agreement, certified by a duly authorized officer of the Borrower (which certificate shall state that such resolutions are in full force and effect on the Closing Date);

(e) The Administrative Agent shall have received certified copies of all approvals, authorizations or consents of, or notices to or registrations with, any governmental body or agency required for the Borrower, if necessary, to enter into this Agreement to which it is a party;

(f) The Administrative Agent shall have received a certificate of a duly authorized officer of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement and the other documents to be delivered by the Borrower;

(g) The Administrative Agent shall have received a certificate signed by a duly authorized officer of the Borrower dated the Closing Date, to the effect that: (i) the representations and warranties contained in Article IV hereof are true and correct in all material respects (or to the extent qualified by materiality, true and correct) on and as of the Closing Date

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as though made on and as of such date; (ii) no Default has occurred and is continuing or would result from the issuance of the Letters of Credit requested by the Borrower to be issued on such date and the Borrowings requested by the Borrower to be made on such date, and (iii) confirming compliance as to the matters set forth in Section 4.15;

(h) The Administrative Agent shall have received a certificate signed by a duly authorized officer of the Borrower to the effect that the execution, delivery and performance by the Borrower of this Agreement is within the Borrower’s corporate or other organizational powers, have been duly authorized by all necessary corporate or other organizational action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation (or certificate of formation, as applicable) or by-laws (or other organizational documents, as applicable) of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries that could reasonably be expected to result in a Material Adverse Effect or result in the creation or imposition of any Lien on any asset of the Borrower;

(i) The Administrative Agent shall have received all documents it may reasonably request relating to the existence of the Borrower, the corporate or other organizational authority for and the validity of this Agreement, and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent.

The Administrative Agent shall promptly notify the Borrower and the Banks of the Closing Date, and such notice shall be conclusive and binding on all parties hereto.

Section 3.02 Extension of Credit.

The obligation of each Bank to make a Loan on the occasion of each Borrowing under Section 2.02(a) and the obligation of any Fronting Bank to issue a Letter of Credit on the occasion of each request therefor by the Borrower shall in each case be subject to the satisfaction of the following conditions:

(a) the fact that, immediately after such Extension of Credit, after giving effect to all direct and indirect applications of the proceeds of such Extension of Credit made substantially simultaneously with the extension thereof, (i) the aggregate Total Exposure of the Banks will not exceed the total Funding Amounts and (ii) the L/C Exposure will not exceed the balance of the Credit-Linked Deposit Account (excluding any portion of the Credit-Linked Deposit Account attributable to interest);

(b) the fact that the making of such Borrowings or issuance of such Letters of Credit under this Agreement (as well as any potential L/C Drawings thereunder or deemed Loans made in respect thereof) are permitted under the terms of the Debt of the Borrower outstanding as of the date of such Extension of Credit;

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(c) the fact that, immediately before and after such Extension of Credit, no Default or Event of Default shall have occurred and be continuing;

(d) the fact that the representations and warranties of the Borrower contained in this Agreement shall be true and correct in all material respects (or to the extent qualified by materiality, true and correct) on and as of the date of such Extension of Credit;

(e) for each issuance of a Letter of Credit, the Borrower shall have provided the information required by Section 2.05(b);

(f) for each Borrowing pursuant to Section 2.02(a), the Borrower shall have provided a duly completed Request for Loan.

Each Extension of Credit hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Extension of Credit as to the facts specified in clauses (a) through (f) of this Section.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants that:

Section 4.01 Corporate Existence and Power.

Borrower is a corporation (or limited liability company, as applicable) duly incorporated (or formed, as applicable), validly existing and in good standing under the laws of the jurisdiction of its incorporation (or formation) and has all corporate or other organizational powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted.

Section 4.02 Corporate and Governmental Authorization and Filings; No Contravention.

The execution, delivery and performance by the Borrower of this Agreement are within the Borrower’s corporate or other organizational powers, have been duly authorized by all necessary corporate or other organizational action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries that could reasonably be expected to result in a Material Adverse Effect or result in the creation or imposition of any Lien on any asset of the Borrower.

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Section 4.03 Compliance with Laws.

The Borrower is and each of its Subsidiaries are in compliance with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder) except for any non-compliance that could not reasonably be expected to have a Material Adverse Effect.

Section 4.04 Binding Effect.

This Agreement constitutes a valid and binding agreement of the Borrower enforceable in accordance with its terms.

Section 4.05 Financial Information.

(a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 2004 and the related consolidated statements of operations and cash flows for the fiscal year then ended, reported on by Deloitte & Touche and set forth in the Borrower’s Annual Report on Form 10-K, a copy of which has been delivered to each of the Banks, fairly present in all material respects, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year.

(b) Except for Disclosed Matters, since December 31, 2004 there has been no material adverse change in the business, financial position, results of operations or prospects of the Borrower and its Consolidated Subsidiaries, considered as a whole.

Section 4.06 Litigation.

Except for Disclosed Matters, there is no action, suit, investigation, litigation or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could have a Material Adverse Effect or which in any manner draws into question the legality, validity or enforceability of this Agreement, and there shall have been no change in the status of, or in the financial effect on the Borrower or its Subsidiaries from the actions, suits, investigations, litigations or proceedings set forth in the Disclosed Matters that could reasonably be expected to have a Material Adverse Effect.

Section 4.07 Compliance with ERISA.

Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all material respects with the currently applicable provisions of ERISA and the Code with respect to each Plan. No member of the ERISA Group has (a) sought a waiver of the

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minimum funding standard under Section 412 of the Code in respect of any Plan; (b) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Code or (c) incurred any liability in excess of $100,000 under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA.

Section 4.08 Environmental Matters.

(a) In the ordinary course of its business, each of the Borrower and its Subsidiaries conducts an ongoing review of the effect of Environmental Laws on the business, operations and properties of the Borrower or such Subsidiary, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required for investigation, to achieve or maintain compliance with environmental protection standards imposed by Environmental Laws or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat, any costs or liabilities in connection with off-site disposal of wastes or Hazardous Substances by the Borrower or its Subsidiaries, and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of this review, the Borrower has reasonably concluded that such associated liabilities and costs, including the costs of compliance with Environmental Laws, are unlikely to have a Material Adverse Effect.

(b) There are no facts, circumstances or conditions that are reasonably likely to result in liabilities arising under Environmental Laws that could have a material adverse effect on the business, financial conditions, results of operations or prospects of the Borrower and its Consolidated Subsidiaries, considered as a whole.

Section 4.09 Taxes.

United States Federal income tax returns of the Borrower and its Subsidiaries and any other material tax returns filed by them have been examined and closed (other than for the limited purposes of net operating loss carry-forwards) through the fiscal year ended December 31, 1999, there are no ongoing or pending tax audits or examinations, and no deficiencies or other claims for unpaid taxes are proposed in respect of any taxes due from the Borrower, its Subsidiaries or any Material AES Entity that could have a Material Adverse Effect. The Borrower, its Subsidiaries and all Material AES Entities have filed all United States Federal income tax returns and the Borrower, its Subsidiaries and all Material AES Entities have filed all other material tax returns which are required to be filed by them, all such United States Federal income tax returns and all such other material returns are true, correct and complete in all material respects and all taxes due as indicated on such returns or pursuant to any assessment received by the Borrower or any Subsidiary or any Material AES Entity have been paid, other

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than any such taxes that are being diligently contested in good faith through appropriate proceedings and for which adequate reserves have been established in accordance with generally accepted accounting principals. The charges, accruals and reserves on the books of the Borrower, its Subsidiaries and all Material AES Entities in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate.

Section 4.10 Material AES Entities.

Each Material AES Entity is a corporation (or limited liability company, as applicable) duly incorporated (or formed, as applicable), validly existing and (other than any Material AES Entity that is not incorporated under the laws of the United States or any political subdivision thereof) in good standing under the laws of its jurisdiction of incorporation (or jurisdiction of formation, as applicable). Each Material AES Entity has all corporate or other organizational powers and all material governmental licenses, authorization, consents and approvals required to carry on its business as proposed to be conducted and has all governmental licenses, authorizations, consents and approvals required to have been obtained prior to the date hereof and which are material to the operation of its business as proposed to be conducted, except to the extent that the failure to obtain any such license, authorization, consent or approval, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

Section 4.11 Not an Investment Company.

None of the Borrower nor any of its Subsidiaries is an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

Section 4.12 [Intentionally Omitted].

Section 4.13 Full Disclosure.

All information heretofore furnished by the Borrower to the Administrative Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by the Borrower to the Administrative Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified in the light of the circumstances under which such information was provided (as modified or supplemented by other information so furnished, when taken together as a whole and with the Disclosed Matters); provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based on assumptions believed to be reasonable at the time, it being recognized by the Banks that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. The Borrower has disclosed to the Banks, in the Disclosed Matters or otherwise in writing, any and all facts specific to the Borrower and its Subsidiaries and known as of the date hereof to a Responsible Officer of the Borrower that could reasonably be expected to

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result in a Material Adverse Effect, which materially and adversely affect or may affect (to the extent any Borrower can now reasonably foresee), the business, operations or financial condition of the Borrower and its Consolidated Subsidiaries, taken as a whole, or the ability of the Borrower to perform its obligations under this Agreement.

Section 4.14 [Intentionally Omitted]

Section 4.15 Solvency.

The Borrower is, individually, and together with its Subsidiaries, taken as a whole, Solvent as of the date hereof.

ARTICLE V

COVENANTS

Until the Funding Amounts have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all L/C Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Banks that:

Section 5.01 Information.

The Borrower will deliver to each of the Banks (it being understood that delivery to the Administrative Agent and the posting by the Administrative Agent of each of the following items on an electronic website, in accordance with Section 7.11, shall constitute delivery to each of the Banks, and the Administrative Agent hereby agrees to post on an electronic website or otherwise distribute to the Banks any such item delivered by the Borrower to the Administrative Agent):

(a) as soon as available and in any event within 15 days after the Borrower files an annual report on Form 10-K with the Securities and Exchange Commission, a consolidated and consolidating balance sheet of the Borrower as of the end of such fiscal year, an unconsolidated balance sheet of the Borrower as of the end of such fiscal year, the related consolidated, consolidating and unconsolidated (as applicable) statements of operations for such fiscal year and the related consolidated and unconsolidated statements of cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, said consolidated financial statements to be reported on, in a manner acceptable to the Securities and Exchange Commission, by Deloitte & Touche or other independent public accountants of nationally recognized standing and such consolidating and unconsolidated financial statements to be certified as to fairness of presentation, generally accepted accounting principles (other than failure to consolidate) and consistency by the chief executive officer, president, chief financial officer or chief accounting officer of the Borrower;

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(b) as soon as available and in any event within 15 days after the Borrower files a quarterly report on Form 10-Q with the Securities and Exchange Commission, a consolidated balance sheet of the Borrower as of the end of such quarter and an unconsolidated balance sheet of the Borrower as of the end of such fiscal quarter and the related consolidated and unconsolidated statements of operations for such quarter and for the portion of the Borrower’s fiscal year ended at the end of such quarter and the related consolidated and unconsolidated statements of cash flows for the portion of the Borrower’s fiscal year ended at the end of such quarter, setting forth in the case of such consolidated statements of operations and cash flows, in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower’s previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the chief executive officer, president, chief financial officer or chief accounting officer of the Borrower;

(c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief executive officer, president, chief financial officer or chief accounting officer of the Borrower (i) stating to the knowledge of the Borrower whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto and (ii) accompanied by a schedule setting forth in reasonable detail a description, including, where applicable, the expected and maximum dollar amounts thereof, of all material contingent liabilities not disclosed in such financial statements;

(d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements whether anything has come to their attention as a result of their audit (which was not directed primarily toward obtaining knowledge of noncompliance) to cause them to believe that the Borrower has failed to comply with the terms, covenants, provisions or conditions as they relate to accounting of financial matters addressed in Sections 5.07 to 5.09, inclusive;

(e) within five days after any officer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief executive officer, president, executive vice-president or chief financial officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto;

(f) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed;

(g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission;

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(h) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any “reportable event” (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief executive officer, president, chief financial officer or chief accounting officer of the Borrower setting forth details as to such occurrence and the action, if any, which the Borrower or the applicable member of the ERISA Group is required or proposes to take;

(i) promptly after receipt by the Borrower or any Subsidiary of the Borrower, a copy of each complaint, order, citation, notice or other written communication from any Person with respect to the existence or alleged existence of a material violation of any applicable Environmental Law or the incurrence of any liability, obligation, loss, damage, cost, expense, fine, penalty or sanction or the requirement to commence any remedial action resulting from or in connection with any air emission, water discharge, noise emission, Hazardous Substance or any other environmental, health or safety matter at, upon, under or within any of the properties now or previously owned, leased or operated by the Borrower, any of its Subsidiaries or any Material AES Entity, or due to the operations or activities of the Borrower, any Subsidiary of the Borrower, any Material AES Entity or any other Person on or in connection with any such property or any part thereof;

(j) simultaneously with the delivery of each set of financial statements referred to in clause (a) and (b) above, a revised Schedule I showing as of the last day of such quarter all the Subsidiaries of the Borrower whose assets consist only of any of the Excluded AES Business and direct or indirect investments therein; and

(k) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Bank, may reasonably request.

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Section 5.02 Payment of Obligations.

The Borrower will pay and discharge all its material obligations and liabilities and will cause each Subsidiary Guarantor (as defined in the Existing Credit Agreement) (other than AES Warrior Run Funding, L.L.C.) and Ipalco Enterprises, Inc. (in each case, for so long as each Person is a Subsidiary of the Borrower) to pay and discharge all its Material Obligations, in each case, including, without limitation, tax liabilities, except where the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Subsidiary of the Borrower to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same.

Section 5.03 Maintenance of Property; Insurance.

(a) The Borrower will keep, and will cause each of its Subsidiaries to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted.

(b) The Borrower will, and will cause each of its Subsidiaries to, maintain (either in the name of the Borrower or in such Subsidiary’s own name) with financially sound and responsible insurance companies, insurance of such types, in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against in similar circumstances in the same general area by companies of established repute engaged in the same or a similar business; and will furnish to each Bank upon request information presented in reasonable detail as to the insurance so carried.

Section 5.04 Conduct of Business and Maintenance of Existence.

The Borrower (a) will continue, and will cause each Material AES Entity to continue, to engage in a Permitted Business; (b) will continue, and will cause each Material AES Entity to continue, to operate their respective businesses on a basis substantially consistent with the policies and standards of the Borrower as in effect on the date hereof and (c) will preserve, renew and keep in full force and effect, and will cause each Material AES Entity to preserve, renew and keep in full force and effect, its respective corporate existence and its respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.04 shall prohibit the merger of a Subsidiary into the Borrower or the merger or consolidation of a Subsidiary with or into another Person if the Person surviving such consolidation or merger is a Subsidiary and if, in each case, after giving effect thereto (x) no Default shall have occurred and be continuing, (y) the Borrower shall not be liable for any Debt of such Subsidiary except to the extent it was liable for such Debt prior to giving effect to such merger and (z) the transaction is otherwise permitted by Section 5.08.

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Section 5.05 Compliance with Laws.

The Borrower will comply, and cause each of its Subsidiaries to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder) (a) except for such non-compliance as would result solely in the payment of monetary compensation by the Borrower or such Subsidiary in an amount not to exceed $15,000,000 in the aggregate and (b) except where the necessity of compliance therewith is contested in good faith by appropriate proceedings (and the pendency of such proceedings themselves shall not have a material adverse effect on the Borrower and its Subsidiaries, taken as a whole).

Section 5.06 Inspection of Property, Books and Records.

The Borrower will keep, and will cause each of its Subsidiaries to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Significant AES Entity to permit, representatives of any Bank at such Bank’s expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired.

Section 5.07 Limitation on Secured Debt.

If the Borrower shall incur, issue, assume or guarantee any indebtedness for borrowed money represented by notes, bonds, debentures or other similar evidences of indebtedness, secured by a mortgage, pledge or other lien on any Principal Property or any capital stock or indebtedness held directly by the Borrower of any Subsidiary of the Borrower, the Borrower shall secure the Obligations under this Agreement equally and ratably with (or prior to) such indebtedness, so long as such indebtedness shall be so secured, unless after giving effect thereto the aggregate amount of all such indebtedness so secured, together with all Attributable Debt in respect of sale and leaseback transactions involving Principal Properties, would not exceed 15% of the Consolidated Net Assets of the Borrower.

The foregoing restriction shall not apply to, and there shall be excluded in computing secured indebtedness for the purpose of such restriction, indebtedness secured by (a) property of any Subsidiary of the Borrower, (b) liens on property of, or on any shares of stock or debt of, any corporation existing at the time such corporation becomes a Subsidiary, (c) liens in favor of the Borrower or any Subsidiary, (d) liens in favor of U.S. or foreign governmental bodies to secure partial, progress, advance or other payments, (e) liens on property, shares of stock or debt existing at the time of acquisition thereof (including acquisition through merger or consolidation), purchase money mortgages and construction cost mortgages existing at or incurred within 180 days of the time of acquisition thereof, (f) liens existing as of the Closing

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Date, (g) liens under one or more credit facilities for indebtedness in an aggregate principal amount not to exceed $900,000,000 at any time outstanding, (h) liens incurred in connection with pollution control, industrial revenue or similar financings, and (i) any extension, renewal or replacement of any debt secured by any liens referred to in the foregoing clauses (a) through (h), inclusive.

Section 5.08 Consolidations and Mergers.

(a) When Borrower May Merge, Etc. The Borrower shall not consolidate with, merge with or into, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its property and assets (as an entirety or substantially as an entirety in one transaction or a series of related transactions) to, any Person (other than a consolidation with or merger with or into a Subsidiary or a sale, conveyance, transfer, lease or other disposition to a Subsidiary) or permit any Person to merge with, or into the Borrower unless either (x) the Borrower shall be the continuing Person or (y) the Person (if other than the Borrower) formed by such consolidation or into which the Borrower is merged or to which properties and assets of the Borrower are contributed shall be a Solvent corporation organized and validly existing under the laws of the United States of America or any state thereof or the District of Columbia and shall expressly assume all of the Obligations of the Borrower under this Agreement and the Borrower shall have delivered to the Administrative Agent (A) an opinion of counsel stating that such consolidation, merger or transfer and such assumption of Obligations complies with this provision and that all conditions precedent provided for herein relating to such transaction have been complied with and that such assumption constitutes the legal, valid and binding obligation of the Borrower or such successor enforceable against such entity in accordance with its terms, subject to customary exceptions and (B) a certificate of a Responsible Officer to the effect that immediately after giving effect to such transaction, no Event of Default or Default shall have occurred and be continuing.

(b) Successor Substituted. Upon any consolidation or merger, or any sale, conveyance, transfer, lease or other disposition of all or substantially all of the property and assets of the Borrower in accordance with Section 5.08(a) of this Agreement, the successor Person formed by such consolidation or into which the Borrower is merged or to which such sale, conveyance, transfer, lease or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Borrower under this Agreement with the same effect as if such successor Person had been named as the Borrower herein.

Section 5.09 Restrictions on Sale Leasebacks.

The Borrower shall not enter into any sale and leaseback transaction involving any Principal Property, the acquisition or completion of construction and commencement of full operation of which has occurred more than 180 days prior thereto, unless (a) the Borrower could incur a lien on such property under the restrictions described in Section 5.07 hereof in an amount equal to the Attributable Debt with respect to the sale and leaseback transaction without equally and ratably securing these Facilities or (b) the Borrower, within 180 days after the sale or

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transfer by the Borrower, applies to the retirement of its Funded Debt an amount equal to the greater of (i) the net proceeds of the sale of the Principal Property sold and leased pursuant to such arrangement or (ii) the fair market value of the Principal Property so sold and leased as determined by the board of directors of the Borrower; provided that the amount to be applied to the retirement of Funded Debt of the Borrower shall be reduced by (A) cancellation of any Letter of Credit issued hereunder or prepayment of any Loan under this Agreement (so long as there is a concurrent permanent reduction of Funding Amounts), and (B) the principal amount of Funded Debt, other than under this Agreement, voluntarily prepaid by the Borrower within 180 days after such sale or transfer; provided further that no retirement referred to in this clause (b) may be effected by payment at maturity or any mandatory prepayment provision.

Section 5.10 Use of Proceeds.

The proceeds of the Loans made or deemed made and the Letters of Credit issued under this Agreement will be used by the Borrower for working capital and other general corporate purposes. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any “margin stock” within the meaning of Regulation U.

Section 5.11 Further Assurances.

Promptly upon request by the Administrative Agent, or any Bank through the Administrative Agent, correct, and cause the Borrower promptly to correct, any material defect or error that may be discovered in this Agreement or any Note or in the execution or acknowledgment thereof that affect the validity or enforceability thereof.

ARTICLE VI

DEFAULTS

Section 6.01 Events of Default.

If one or more of the following events (“Events of Default”) shall have occurred and be continuing:

(a) the Borrower shall fail to pay when due any principal of any Loan, or shall fail to pay within three days of the date when due any interest, fees or other amounts payable under this Agreement;

(b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.07 to 5.09, inclusive;

(c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 20 days

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after written notice thereof has been given to the Borrower by the Administrative Agent at the request of any Bank;

(d) any representation, warranty, certification or statement made by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made);

(e) the Borrower shall fail to make any payment in respect of any Material Debt or Material Hedge Agreement when due or within any applicable grace period;

(f) any event or condition shall occur which (i) results in the acceleration of the maturity of any Material Debt of the Borrower or the early termination of a Material Hedge Agreement of the Borrower by the Borrower’s counterparty; or (ii) results in the termination of any commitment to provide financing in an amount in excess of $50,000,000 to the Borrower;

(g) the Borrower or any Significant AES Entity shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing;

(h) an involuntary case or other proceeding shall be commenced against the Borrower or any Significant AES Entity seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Significant AES Entity under the federal bankruptcy laws as now or hereafter in effect;

(i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $15,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default,

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within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $15,000,000;

(j) a judgment or order for the payment of money in excess of $25,000,000 shall be rendered against the Borrower and such judgment or order shall continue unsatisfied and unstayed for a period of 10 days; or

(k) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) other than a member of the AES Management Group shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 32.5% or more of the outstanding shares of common stock of the Borrower; during any period of twelve consecutive calendar months, individuals who were directors of the Borrower on the first day of such period (or who were appointed or nominated for election as directors of the Borrower by at least a majority of the individuals who were directors on the first day of such period) shall cease to constitute a majority of the board of directors of the Borrower,

then, and in every such event, the Administrative Agent shall (i) if requested by the Required Banks, by notice to the Borrower terminate the Funding Amounts and they shall thereupon terminate and (ii) if requested by the Required Banks, by notice to the Borrower declare the Notes, all interest thereon, and all other amounts payable under this Agreement and the Notes, all such interest thereon and all such other amounts shall thereupon become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any Automatic Acceleration Event, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Funding Amounts shall thereupon terminate and the Notes, all interest thereon, and all other amounts payable under this Agreement shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

Section 6.02 Notice of Default.

The Administrative Agent shall give notice to the Borrower under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof.

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ARTICLE VII

THE ADMINISTRATIVE AGENT

Section 7.01 Appointment and Authorization.

Each Bank (on behalf of itself and its Affiliates) irrevocably appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the Notes as are delegated to the Administrative Agent by the terms hereof and thereof, together with all such powers and discretion as are reasonably incidental thereto. In addition, each Fronting Bank (on behalf of itself and its Affiliates) irrevocably appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Administrative Agent by the terms hereof and thereof, together with all such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes) the Administrative Agent shall not be required to exercise any discretion or to take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Banks (or any Fronting Bank, as applicable), and such instructions shall be binding upon all Banks, the Fronting Banks and all the holders of Notes; provided, however, that the Administrative Agent shall be required to take any action that exposes the Administrative Agent to personal liability or that is contrary to this Agreement or applicable law. Without limiting any of the foregoing in this Section 7.01, the Administrative Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6. The Administrative Agent agrees to give each Bank prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement.

Section 7.02 Administrative Agent and Affiliates.

Merrill Lynch Capital Corporation and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Borrower and its Affiliates as though Merrill Lynch Capital Corporation were not the Administrative Agent hereunder and without notice to or consent of the Banks. The Banks acknowledge that, pursuant to such activities, Merrill Lynch Capital Corporation or its Affiliates may receive information regarding the Borrower or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Borrower or such Affiliate) and acknowledge that the Administrative Agent shall not be under any obligation to provide such information to them. With respect to its Loans or any Letters of Credit, Merrill Lynch Capital Corporation shall have the same rights and powers under this Agreement or any other instrument as any other Bank and may exercise such rights and powers as though it were not the Administrative Agent, and the terms “Bank” and “Banks” include Merrill Lynch Bank USA in its individual capacity.

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Section 7.03 Consultation with Experts.

The Administrative Agent may execute any of their respective duties under this Agreement by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel, independent public accountants and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.

Section 7.04 Liability of Agent.

Neither the Administrative Agent nor any of its Affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection with this Agreement or any Note (a) with the consent or at the request of the Required Banks, (b) in its capacity as Administrative Agent for the Fronting Banks, with the consent or at the request of a Fronting Bank or (c) in the absence of its own gross negligence or willful misconduct. Neither the Administrative Agent nor any of its Affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made by the Borrower in connection with this Agreement or any Extension of Credit hereunder, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with this Agreement or any other instrument; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Administrative Agent or (iv) the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other instrument or writing furnished in connection therewith. The Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement or other writing (which may be a bank wire, telex, facsimile transmission or similar writing) believed by it to be genuine or to be signed by the proper party or parties.

Section 7.05 Indemnification.

Each Bank shall, ratably (determined as provided below) indemnify the Administrative Agent, the Fronting Banks, each of their respective Affiliates and the respective directors, officers, agents and employees of any of them (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees’ gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees thereunder. For purposes of this Section 7.05, the Bank’s ratable share of any amount shall be determined, at any time, according to the sum of (a) the aggregate principal amount of Loans outstanding at such time and owing to the respective Bank; and (b) the aggregate L/C Exposure outstanding at such time and owing to the respective Bank.

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Section 7.06 Credit Decision.

Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent, any Fronting Bank, or any other Bank and based on the financial statements referred to in Section 4.05 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent, or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement.

Section 7.07 Successor Administrative Agent.

The Administrative Agent may resign at any time by giving notice thereof to the Banks and the Borrower. Upon any such resignation, the Required Banks shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent, on behalf of the Banks, shall appoint a successor Administrative Agent which shall be a commercial bank organized or licensed under the laws of the United States and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor Administrative Agent, upon the execution and filing or recording of such financing statements, or amendment, thereto, and such other instruments or notices, as may be necessary or desirable, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. If within 45 days after written notice is given of the retiring Administrative Agent’s resignation under this Section 7.07 no successor Administrative Agent shall have been appointed and shall have accepted such appointment, then on such 45^th day (i) the retiring Administrative Agent resignation shall become effective, (ii) the retiring Administrative Agent shall thereupon be discharged from its duties and obligations under this Agreement and (iii) the Required Banks shall thereafter perform all duties of the retiring Administrative Agent until such time, if any, as the Required Banks appoint a successor Administrative Agent as provided above. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent.

Section 7.08 Administrative Agent May File Proofs of Claim.

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Borrower, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Exposure shall then be due and payable as herein expressed or by declaration or otherwise and

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irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, the L/C Exposures and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Banks and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Banks and the Administrative Agent and their respective agents and counsel and all other amounts due the Banks and the Administrative Agent under this Agreement) allowed in such judicial proceeding;

(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and

(c) any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Bank to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Banks, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its respective agents and counsel, and any other amounts due the Administrative Agent under this Agreement.

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Bank any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Bank or to authorize the Administrative Agent to vote in respect of the claim of any Bank in any such proceeding.

Section 7.09 Agents’ Fee.

The Borrower shall pay to the Administrative Agent for their own account fees in the amounts and at the times previously agreed upon between the Borrower and the Administrative Agent.

Section 7.10 Delivery of Information.

(a) The Borrower hereby agrees that it will provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to this Agreement, including, without limitation, all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (i) relates to a request for a new, or a conversion of an existing, Borrowing or other Extension of Credit (including any election of an interest rate relating thereto), (ii) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (iii) provides notice of any default or

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Event of Default under this Agreement or (iv) is required to be delivered pursuant to Sections 3.01 or 3.02 to satisfy any condition precedent to the effectiveness of this Agreement and/or any Extension of Credit hereunder (all such non-excluded communications being referred to herein collectively as “ Communications ”), by transmitting the Communications in an electronic/soft medium in a format acceptable to the Administrative Agent to an e-mail address supplied by the Administrative Agent to the Borrower. In addition, the Borrower agrees to continue to provide the Communications to the Administrative Agent in the manner specified in this Agreement but only to the extent requested by the Administrative Agent.

(b) The Borrower further agrees that the Administrative Agent may make the Communications available to the other Banks by posting the Communications on Intralinks or a substantially similar electronic transmission systems (the “ Platform ”).

THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”. THE ADMINISTRATIVE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE ADMINISTRATIVE AGENT PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (COLLECTIVELY, “AGENT PARTIES”) HAVE ANY LIABILITY TO THE BORROWER, ANY BANK OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF THE BORROWER’S OR THE ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH AGENT PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

(c) The Administrative Agent agrees that the receipt of the Communications by the Administrative Agent at its e-mail address set forth in clause (a) above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of this Agreement. Each Bank agrees that notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform shall constitute effective delivery of the Communications to such Bank for purposes of this Agreement. Each Bank agrees to notify the

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Administrative Agent in writing (including by electronic communication) from time to time of such Bank’s e-mail address to which the foregoing notice may be sent by electronic transmission and that the foregoing notice may be sent to such e-mail address. Nothing herein shall prejudice the right of the Administrative Agent or any Bank to give any notice or other communication pursuant to this Agreement in any other manner specified in this Agreement.

ARTICLE VIII

CHANGE IN CIRCUMSTANCES

Section 8.01 Basis for Determining Interest Rate Inadequate or Unfair.

If on or prior to the first day of any Interest Period for any Eurodollar Borrowing or in respect of any Credit-Linked Deposit:

(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period, or

(b) the Required Banks advise the Administrative Agent that the Adjusted LIBO Rate as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of maintaining their Loans included in such Borrowing or the Credit-Linked Deposits, as the case may be, for such Interest Period;

the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Eurodollar Loans, or to continue or convert outstanding Loans as or into Eurodollar Loans, shall be suspended, (ii) each outstanding Eurodollar Loan shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto and (iii) the Credit-Linked Deposits shall be invested so as to earn a return equal to the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules and practice on interbank compensation.

Section 8.02 Illegality.

If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Lending Office) to make, maintain or fund its Loans to the

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Borrower or its Credit-Linked Deposit and such Bank shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Eurodollar Loans to the Borrower or to convert outstanding Loans into Eurodollar Loans or continue outstanding Loans as Eurodollar Loans or to make, maintain or fund its Credit-Linked Deposit, shall be suspended, provided that the making, maintenance and funding of the Credit-Linked Deposit shall not be suspended to the extent such Credit-Linked Deposit supports any L/C Exposure. Before giving any notice to the Administrative Agent pursuant to this Section 8.02, such Bank shall designate a different Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such notice is given, each Loan of such Bank then outstanding shall be converted to a Base Rate Loan either (a) on the last day of the then current Interest Period applicable to such Loan if such Bank may lawfully continue to maintain and fund such Loan as a Loan to such day or (b) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan as a Loan to such day. Interest and principal on any such Base Rate Loan shall be payable on the same dates as, and on a pro rata basis with, the interest and principal payable on the related Loans of the other Banks.

Section 8.03 Increased Cost and Reduced Return.

(a) If on or after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Lending Office) or any Fronting Bank (any Bank (or its Applicable Lending Office) and any Fronting Bank being referred to in this Section 8.03 as a “ Credit Party ”) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Loan any such requirement included in an applicable Reserve Percentage), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Credit Party or shall impose on any of the Administrative Agent, any Fronting Bank, or any Credit-Linked Deposit, the Credit-Liked Deposit Account or any Credit-Linked Sub Account or on the London interbank market any other condition affecting its Loans, its Note or Notes, Letter of Credit or any Credit-Linked Deposit, the Credit-Linked Deposit Account or any Credit-Linked Sub Account, or its obligation to make Loans or to issue Letters of Credit or to participate therein and the result of any of the foregoing is to increase the cost to such Credit Party of making or maintaining any Loan or issuing any Letter of Credit or participating therein, or to reduce the amount of any sum received or receivable by such Credit Party under this Agreement or under its Note or Notes with respect thereto, by an amount deemed by such Credit Party to be material, then, within 15 days after demand by such Credit Party (with a copy to the Administrative

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Agent), the Borrower shall pay to such Credit Party such additional amount or amounts as will compensate such Credit Party for such increased cost or reduction.

(b) If any Credit Party shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Credit Party (or its Parent) as a consequence of such Credit Party’s obligations hereunder to a level below that which such Credit Party (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Credit Party to be material, then from time to time, within 15 days after demand by such Credit Party (with a copy to the Administrative Agent), the Borrower shall pay to such Credit Party such additional amount or amounts as will compensate such Credit Party (or its Parent) for such reduction.

(c) Each Credit Party will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Credit Party to compensation pursuant to this Section 8.03(c) and will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Credit Party, be otherwise disadvantageous to such Credit Party. A certificate of any Credit Party claiming compensation under this Section 8.03(c) and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods.

Section 8.04 Taxes.

(a) Any and all payments by the Borrower to or for the account of any Bank (which for purposes of this Section 8.04, shall include a Fronting Bank and its Assignees), the Administrative Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank, the Administrative Agent, taxes imposed on its income (including branch profit taxes), franchise and similar taxes and other taxes imposed on it that, in any such case, would not have been imposed but for a material connection between such Bank, the Administrative Agent and the jurisdiction imposing such taxes (other than a material connection arising by reason of this Agreement or any Note or the receipt of payments made hereunder or thereunder or the exercise of any rights by a Bank, the Administrative Agent hereunder or thereunder) (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “ Taxes ”). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Bank or the Administrative Agent (i) the sum

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payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank, the Administrative Agent receives an amount equal to the sum it would have received had no such deductions been made; (ii) the Borrower shall make such deductions; (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt or other satisfactory documentation evidencing payment thereof.

(b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, or charges or similar levies which arise from any payment made by it hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note (hereinafter referred to as “ Other Taxes ”).

(c) The Borrower agrees to indemnify each Bank and the Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Administrative Agent including with respect to any and all payments of interest on the Credit-Linked Deposits to the Banks, any and all payments of fees to the Banks and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 15 days from the date such Bank or the Administrative Agent makes demand therefor.

(d) Each Bank that is organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement in the case of a Bank listed on the signature pages hereof or on or prior to the date on which it becomes a Bank in the case of each other Bank and in the case any Bank changes jurisdiction of its Lending Office and from time to time thereafter as requested in writing by the Borrower (but only so long thereafter as such Bank remains lawfully able to do so), shall deliver to the Borrower and the Administrative Agent such certificates, documents or other evidence, as required by the Code or Treasury Regulations issued pursuant thereto, including Internal Revenue Service Form W-8BEN, Form W-8 IMY or Form W-8ECI and any other certificate or statement of exemption specified by the Borrower and required by Treasury Regulation Section 1.1441-4(a) or Section 1.1441-6(c) or any subsequent version thereof, properly completed and duly executed by such Bank establishing that any payment under this Agreement is (i) not subject to withholding under the Code because such payment is effectively connected with the conduct by such Bank of a trade or business in the United States, or (ii) fully or partially exempt from United States tax under a provision of an applicable tax treaty, or (iii) not subject to withholding under the portfolio interest exception under Section 881(c) of the Code (and, if such Bank delivers a Form W-8BEN claiming the benefits of exemption from United States withholding tax under Section 881(c), a certificate representing that such Bank is not a “bank” for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a controlled foreign corporation

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related to the Borrower (within the meaning of Section 864(d)(4) of the Code). Unless the Borrower and the Administrative Agent have received forms or other documents reasonably satisfactory to them indicating that payments hereunder are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Borrower or the Administrative Agent shall withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Bank organized under the laws of a jurisdiction outside the United States. If a Bank is unable to deliver one of these forms or if the forms provided by a Bank at the time such Bank first becomes a party to this Agreement or at the time a Bank changes its Lending Office (other than at the request of the Borrower) or designates a Conduit Lender that indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Bank provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such appropriate forms; provided, however, that (i) that should a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes and (ii) if at the effective date of a transfer pursuant to which a Bank becomes a party to this Agreement, the Bank assignor was entitled to payments under Section 8.04(a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Bank assignee on such date.

(e) If the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank shall use reasonable effort (consistent with internal policy and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Bank, is not otherwise disadvantageous to such Bank.

(f) Each Bank and the Administrative Agent agrees that it will promptly (within 30 days) after receiving notice thereof from any taxing authority, notify the Borrower of the assertion of any liability by such taxing authority with respect to Taxes or Other Taxes; provided that the failure to give such notice shall not relieve the Borrower of its obligations under this Section 8.04 except to the extent that the Borrower has been prejudiced by such failure and except that the Borrower shall not be liable for penalties, interest or expenses accruing after such 30 day period until such time as it receives the notice contemplated above, after which time it shall be liable for interest, penalties and expenses accruing after such receipt.

(g) If any Bank or the Administrative Agent shall receive a credit or refund from a taxing authority (as a result of any error in the imposition of Taxes or Other Taxes by such taxing authority) with respect to and actually resulting from an amount of such Taxes or Other Taxes paid by the Borrower pursuant to subsection (a) or (c) above, such Bank or the

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Administrative Agent shall promptly pay to the Borrower the amount so received (without interest thereon, whether or not received).

(h) Without prejudice to the survival of any other agreement contained herein, the agreements, covenants and obligations contained in this Section 8.04 shall survive the payment in full of the principal of and interest on all Loans, Notes and other advances made hereunder.

Section 8.05 Base Rate Loans Substituted for Affected Eurodollar Loans.

If (a) the obligation of any Bank to make, or to continue or to convert outstanding Loans as or to, Eurodollar Loans to the Borrower has been suspended pursuant to Section 8.02 or

(b) any Bank has demanded compensation under Section 8.03 or 8.04 with respect to its Eurodollar Loans to the Borrower and the Borrower shall, by at least five Business Days’ prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section 8.05 shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, all Loans to the Borrower which would otherwise be made by such Bank as (or continued or converted to) Loans shall be made instead as Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Loans of the other Banks). If such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, the principal amount of each such Base Rate Loan shall be converted into a Eurodollar Loan on the first day of the next succeeding Interest Period applicable to the related Eurodollar Loans of the other Banks.

ARTICLE IX

MISCELLANEOUS

Section 9.01 Notices.

All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (a) in the case of the Borrower or any Fronting Bank, at its address or telex or facsimile transmission number set forth on the signature pages hereof; (b) (i) in the case of the Administrative Agent with respect to credit matters, to Merrill Lynch Capital Corporation, 250 Vesey Street, 22^nd Floor, New York, New York, 10080, Attention: Carol J.E. Feeley, Phone: (212) 449-8414, Facsimile (212) 738-1186 and (ii) in the case of the Administrative Agent with respect to operational matters, to Merrill Lynch Capital, 222 N. LaSalle, 15^th Floor, Chicago, Illinois 60601, Attention: Jennifer L. Wesner, Phone: (312) 750-6232, Facsimile (312) 499-3336; (c) in the case of any Bank, at its address or telex or facsimile transmission number set forth in its Administrative Questionnaire or (d) in the case of any other party, at such other address or telex or facsimile transmission number as such party may hereafter specify for the purpose by notice to the Administrative Agent, the Fronting Banks and the Borrower. Each such notice,

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request or other communication shall be effective (x) if given by telex, when such telex is transmitted to the telex number specified in or pursuant to this Section 9.01 and the appropriate answerback is received; (y) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (z) if given by any other means, when delivered at the address specified in or pursuant to this Section 9.01; provided that notices to the Administrative Agent, or a Fronting Bank under Article 2 or Article 8 shall not be effective until received.

Section 9.02 No Waivers.

No failure or delay by the Administrative Agent, any Bank or any Fronting Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 9.03 Expenses; Indemnification.

(a) The Borrower shall pay (i) all out-of-pocket expenses of the Administrative Agent, including, without limitation, reasonable fees and disbursements of outside counsel for the Administrative Agent in connection with the preparation and administration of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder, and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Administrative Agent, each Fronting Bank and each Bank, including (without duplication) the fees and disbursements of outside counsel and the allocated cost of inside counsel, in connection with such Event of Default and collection, bankruptcy, insolvency, workout, restructuring and other enforcement proceedings resulting therefrom.

(b) The Borrower agrees to indemnify the Administrative Agent, each Bank, each Fronting Bank, their respective Affiliates and the respective directors, officers, agents and employees of the foregoing (each, an “ Indemnitee ”) and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans or the issuance of any Letter of Credit hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee’s own gross negligence or willful misconduct as determined by a court of competent jurisdiction.

(c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent or any Fronting Bank under paragraph (a) or (b) of this Section, each Bank severally agrees to pay to the Administrative Agent or the applicable Fronting Bank, as the case may be, such Bank’s Applicable Percentage (determined as of the time that the

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applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent or the applicable Fronting Bank in its capacity as such.

Section 9.04 [Reserved].

Section 9.05 Amendments and Waivers.

Any provision of this Agreement or any Note may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent); provided that (a) no such amendment or waiver shall, unless signed by all the Banks, (i) waive any of the conditions specified in Section 3.01 or 3.02 (with respect to the Extensions of Credit made on the Closing Date); (ii) change the number of Banks or the percentage of (x) the aggregate unpaid principal amount of the Loans or (y) the aggregate L/C Exposure that, in each case, shall be required for the Banks or any of them to take any action hereunder; or (iii) amend Section 2.17(c) or this Section 9.05; (b) no such amendment or waiver shall, unless signed by the Required Banks and each Bank and Fronting Bank if such Bank or Fronting Bank, as applicable, is directly adversely affected by such amendment or waiver, (i) in the case of any Bank, increase the Funding Amount of such Bank; (ii) reduce the principal of, or interest on, the Notes held by such Bank or Loans outstanding to such Bank or any fees or other amounts payable to such Bank; (iii) reduce the principal of or rate of interest on any Loan or Reimbursement Obligation or any fees hereunder, (iv) change the right of any Bank to pro rata sharing of payments pursuant to the terms hereof, (v) postpone the date fixed for any payment of principal of or interest on any Loan or Reimbursement Obligation or any fees hereunder or (vi) postpone the final maturity of the Loans or the expiry date for the Letters of Credit; and (c) no such amendment or waiver shall, unless signed by each of the Fronting Banks and the Required Banks, amend, waive or delete the provisions of Section 3.02; provided, further, that consent of the Required Banks shall not be needed for an amendment of this Agreement made under the terms of Section 2.19; provided, further, that no such amendment or waiver shall, unless signed by each of the Fronting Banks, affect the rights and obligations of the Fronting Banks under this Agreement.

Section 9.06 Successors and Assigns.

(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except the Borrower may not assign or otherwise transfer any of its rights and obligations under this Agreement without the prior written consent of all of the Banks.

(b) Any Bank other than a Conduit Lender may, without notice to or consent of the Borrower and Agent, at any time grant to one or more banks or other institutions (each, a “ Participant ”) participating interests in its Funding Amounts or any or all of its Loans or

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participating interests in its L/C Exposure. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower, the Fronting Banks and the Administrative Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower, the Fronting Banks and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank’s rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clauses (a) (i), (ii) and (iii) and clause (b) of Section 9.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b).

(c) Any Bank other than a Conduit Lender may at any time assign to one or more banks or other institutions (each, an “ Assignee ”) all, or a proportionate part of all, in each case in an amount not less than $1,000,000 (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent) (except in the case of an assignment which will result in a group of Banks which are managed by the same Bank holding a Funding Amount (as the case may be) of not less than $1,000,000), of its rights and obligations under this Agreement, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption in substantially the form of Exhibit C-1 hereto, executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Administrative Agent and the Borrower (which shall not be unreasonably withheld or delayed but which shall not be required if (1) an Event of Default shall have occurred and is continuing and (2) in the case of assignments by a Bank to a Related Fund of such Bank); provided that if an Assignee is an Affiliate of such transferor Bank, no such consents shall be required; and provided, further that under no circumstances may the Borrower or any of its Affiliates be an “Assignee” hereunder. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank to this Agreement and shall have all the rights and obligations of a Bank as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee. In connection with any such assignment, the transferor Bank or Assignee shall pay to the Administrative Agent an administrative fee for processing such assignment in the amount of $3,500. If the Assignee is not incorporated under the laws of the United States of America or a

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state thereof, it shall deliver to the Borrower and the Administrative Agent certification as to exemption from, or reduction in, deduction or withholding of any United States federal income taxes as required by Section 8.04. Notwithstanding the foregoing, any Conduit Lender may assign at any time to its designating Bank hereunder without the consent of the Borrower or the Administrative Agent any or all of the Loans or Funding Amounts it may have funded hereunder and pursuant to its designation agreement and without regard to the limitations set forth in the first sentence of this Section 9.06(c). In connection with each assignment of Funding Amounts, the Credit-Linked Deposit of the assignor Bank shall not be released, but shall instead be purchased by the relevant assignee and continue to be held for application (to the extent not already applied) in accordance with Article II to satisfy such assignee’s obligations in respect of L/C Exposure and Loans. Each Bank agrees that immediately prior to each assignment by a Bank (i) the Administrative Agent shall establish a new Credit-Linked Sub-Account in the name of the assignee, (ii) unless otherwise consented to by the Administrative Agent, a corresponding portion of the Credit-Linked Deposit credited to the Credit-Linked Sub-Account of the assignor Bank shall be purchased by the assignee and shall be transferred from the assignor’s Credit-Linked Sub-Account to the assignee’s Credit-Linked Sub-Account and (iii) if after giving effect to such assignment, the Funding Amount of the assignor Bank shall be zero, the Administrative Agent shall close the Credit-Linked Sub-Account of such assignor Bank.

(d) Any Bank may at any time assign all or any portion of its rights under this Agreement to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. In the case of any Bank that is a fund that invests in bank loans, such Bank may, without the consent of the Borrower or the Administrative Agent, assign or pledge all or any portion of its rights under this Agreement, including the Loans and Notes or any other instrument evidencing its rights as a Bank under this Agreement, to any holder of, trustee for, or any other representative of holders of, obligations owed or securities issued, by such fund, as security for such obligations or securities; provided that unless and until such holder, trustee or representative actually becomes a Bank in compliance with the other provisions of this Section 9.06, (i) no such pledge shall release the pledging Bank from any of its obligations under this Agreement and (ii) such holder, trustee or representative shall not be entitled to exercise any of the rights of a Bank under this Agreement even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.

(e) Each of the Borrower, the Administrative Agent and each Bank hereby confirms that it will not institute against a Conduit Lender or join any other Person in instituting against a Conduit Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Conduit Lender; provided, however, that each Bank designating any Conduit Lender hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage or expense arising out of its inability to institute such a proceeding against such Conduit Lender during such period of forbearance.

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(f) The Administrative Agent shall maintain at its address referred to in Section 9.01, a copy of each Assignment and Assumption delivered to and accepted by it and a register for the recordation of the names and addresses of the Banks, the Funding Amounts of, the amount of the Letter of Credit issued by, the principal amount of the Reimbursement Obligations owing to, and the principal amount of the Loans owing to, each Bank and Fronting Bank from time to time (the “ Register ”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent, the Fronting Banks and the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower, any Fronting Bank or any Bank at any reasonable time and from time to time upon reasonable prior notice.

(g) Any Fronting Bank may at any time assign to one or more banks or other institutions (each, a “ Fronting Bank Assignee ”) meeting the definition of a “Fronting Bank” contained herein, all of its rights and obligations under this Agreement and such Fronting Bank Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption in substantially the form of Exhibit C-2 hereto executed by such Fronting Bank Assignee and such transferor Fronting Bank, with (and subject to) the subscribed consent of the Administrative Agent and the Borrower (which shall not be unreasonably withheld or delayed); provided that under no circumstances may the Borrower or any of its Affiliates be an “Fronting Bank Assignee” hereunder. Upon execution and delivery of such instrument and a Fronting Bank Agreement and payment by such Fronting Bank Assignee to such transferor Fronting Bank of an amount equal to the purchase price agreed between such transferor Fronting Bank and such Fronting Bank Assignee, such Fronting Bank Assignee shall be a Fronting Bank to this Agreement and shall have all the rights and obligations of a Fronting Bank as set forth in such instrument of assumption, and the transferor Fronting Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. In connection with any such assignment, the transferor Fronting Bank or Fronting Bank Assignee shall pay to the Administrative Agent an administrative fee for processing such assignment in the amount of $3,500. If the Fronting Bank Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Administrative Agent certification as to exemption from, or reduction in, deduction or withholding of any United States federal income taxes as required by Section 8.04.

Section 9.07 No Margin Stock.

Each of the Banks and the Fronting Banks represents to the Administrative Agent and each of the other Banks and Fronting Banks that it in good faith is not relying upon any “margin stock” (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement.

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Section 9.08 Governing Law; Submission to Jurisdiction.

This Agreement shall be governed by and construed in accordance with the laws of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.

Section 9.09 [Reserved].

Section 9.10 Counterparts; Integration; Effectiveness.

This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective upon receipt by the Administrative Agent of counterparts hereof signed by each of (a) the Borrower, (b) the Administrative Agent, (c) each Bank with a Funding Amount pursuant to the terms hereof and (d) the Fronting Bank issuing the Letters of Credit to be issued on the Closing Date.

Section 9.11 Confidentiality.

The Administrative Agent, each Fronting Bank and each Bank agrees to keep confidential all non-public information provided to it by the Borrower pursuant to this Agreement that is designated by the Borrower as confidential; provided that nothing herein shall prevent the Administrative Agent, any Fronting Bank or any Bank from disclosing any such information (a) to the Administrative Agent, any other Fronting Bank, any other Bank or any affiliate of any Bank or any Fronting Bank; (b) to any (i) actual or prospective transferee or (ii) Derivatives Obligations counterparty (or such contractual counterparty’s professional advisor), in each case that agrees to comply with the provisions of this Section 9.11; (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates; (d) upon the request or demand of any governmental authority; (e) in response to any order of any court or other governmental authority or as may otherwise be required pursuant to any requirement of law; (f) if required to do so in connection with any litigation or similar proceeding; (g) that has been publicly disclosed; (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Bank’s or Fronting Bank’s investment portfolio in connection with ratings issued with respect to such Bank or Fronting Bank, as applicable; (i) to any direct or indirect contractual counterparty in any swap, hedge or similar agreement (or to any such contractual counterparty’s professional advisor), so long as such contractual counterparty

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(or such professional advisor) agrees to be bound by the provisions of this Section 9.11; or, in connection with the exercise of any remedy hereunder. Notwithstanding any other provision in this Agreement, the Borrower, the Administrative Agent, each Fronting Bank and each Bank hereby agree that each of the Borrower, the Administrative Agent, each Fronting Bank and each Bank (and each of the officers, directors, employees, accountants, attorneys and other advisors of the Administrative Agent, each Fronting Bank and each Bank) may disclose to any and all persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of the transaction and all materials of any kind (including opinions and other tax analyses) that are provided to each of them relating to such U.S. tax treatment and U.S. tax structure.

Section 9.12 WAIVER OF JURY TRIAL.

EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT, THE FRONTING BANKS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

Section 9.13 Severability; Modification to Conform to Law.

It is the intention of the parties that this Agreement be enforceable to the fullest extent permissible under applicable law, but that the unenforceability (or modification to conform to such law) of any provision or provisions hereof shall not render unenforceable, or impair, the remainder hereof. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, this Agreement shall, as to such jurisdiction, be deemed amended to modify or delete, as necessary, the offending provision or provisions and to alter the bounds thereof in order to render it or them valid and enforceable to the maximum extent permitted by applicable law, without in any manner affecting the validity or enforceability of such provision or provisions in any other jurisdiction or the remaining provisions hereof in any jurisdiction.

Section 9.14 Judgment Currency.

If for the purposes of enforcing the obligations of the Borrower hereunder it is necessary to convert a sum due from such Person in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent, the Fronting Banks and the Banks could purchase Dollars with such currency at or about 11:00 A.M. (New York City time) on the Business Day preceding that on which final judgment is given. The obligations in respect of any sum due to the Administrative Agent, the Fronting Banks and the Banks hereunder shall, notwithstanding any adjudication expressed in a currency other than Dollars, be discharged only to the extent that on the Business Day following receipt by the Administrative Agent, the Fronting Banks and the Banks of any sum adjudged to be so due in such other currency the Administrative Agent, the Fronting Banks and the Banks may in

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accordance with normal banking procedures purchase Dollars with such other currency; if the amount of Dollars so purchased is less than the sum originally due to the Administrative Agent, the Fronting Banks and the Banks in Dollars, the Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such adjudication, to indemnify the Administrative Agent, the Fronting Banks and the Banks against such loss, and if the amount of Dollars so purchased exceeds the sum originally due to the Administrative Agent, the Fronting Banks and the Banks, it shall remit such excess to the Borrower.

Section 9.15 Fronting Banks.

(a) Each Fronting Bank shall execute and deliver to the Administrative Agent a Fronting Bank Agreement in substantially the form of Exhibit D hereto prior to issuing any letters of credit at the request or for the benefit of the Borrower. Upon execution and delivery by a Fronting Bank to the Administrative Agent of a Fronting Bank Agreement, such Fronting Bank, shall become a party to this Agreement and shall have all the rights and obligations of a Fronting Bank as set forth herein. If the Fronting Bank is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Administrative Agent certification as to exemption from, or reduction in, deduction or withholding of any United States federal income taxes as required by Section 8.04.

(b) Any Fronting Bank may be released from its obligations hereunder as a Fronting Bank upon (x) (i) the mutual agreement of such Fronting Bank and the Borrower and (ii) notice to the Administrative Agent or (y) in accordance with Section 9.06(g).

Section 9.16 Replacement of Banks. If any Required Lender requests compensation under Section 8.03, or if the Borrower is required to pay any additional amount to any Bank or any Governmental Authority for account of any Bank pursuant to Section 8.04, or if any Bank defaults in its obligation to fund Loans hereunder, or if any Bank does not consent to a proposed amendment, modification or waiver of this Agreement or any Note requested by the Borrower which requires the consent of all of the Banks to become effective, then the Borrower may, at its sole expense and effort (including with respect to the processing and recordation fee referred to in Section 9.06(c)), upon notice to such Bank and the Administrative Agent, require such Bank to transfer and assign, without recourse (in accordance with and subject to the restrictions contained in Section 9.06), all of its interests, rights and obligations under this Agreement to an assignee reasonably acceptable to the Borrower, such acceptance not to be unreasonably withheld or delayed, that shall assume such assigned obligations (which assignee may be another Bank, if a Bank accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Funding Amount is being assigned, the Fronting Bank), which consent or consents, as the case may be, shall not unreasonably be withheld, (ii) such Bank shall have received payment of an amount equal to the outstanding principal of its Loans, unreimbursed LC Disbursements owing to it and its Credit-Linked Deposit, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts), (iii) in the case of any such assignment

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resulting from a claim for compensation under Section 8.03 or payments required to be made pursuant to Section 8.04, such assignment will result in a reduction in such compensation or payments and (iv) such assignment shall not conflict with any law, rule, or regulation or order of any court or other Governmental Authority having jurisdiction. In connection with any such replacement, if the replaced Bank does not execute and deliver to the Administrative Agent a duly completed Assignment and Assumption reflecting such replacement within five Business Days of the date on which the replacement Bank executes and delivers such Assignment and Acceptance to the replaced Bank, then such replaced Bank shall be deemed to have executed and delivered such Assignment and Assumption. A Bank shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Bank or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

[SIGNATURE PAGES IMMEDIATELY FOLLOW]

73

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

THE AES CORPORATION, as Borrower
By
Title:
Address:	4300 Wilson Boulevard
	Arlington, VA 22203
Fax:	(703) 528-4510

BANKS:

[Please Type or Print Name of Bank]

By

AGENTS:

MERRILL LYNCH CAPITAL CORPORATION,

as Administrative Agent

By

Title:

MERRILL LYNCH BANK USA,

as Fronting Bank

By

Title:

Address:

Fax:

Created by 10KWizard            www.10KWizard.comSource: AES CORP, 8-K, April 03, 2006

Exhibit 10.2.A

Appendix I

Funding Amounts

Name of Bank	Funding Amount
Merrill Lynch Capital Corporation	$	471,500,000
Merrill Lynch Capital Services	$	75,000,000
Aladdin Investments	$	20,000,000
Invesco Limited	$	18,500,000
American Express	$	15,000,000
Total	$	600,000,000

Exhibit 10.2.B

SCHEDULE 1

Excluded AES Entities

BRAZIL

AES South American Holdings, Ltd.

AES Americas Participacoes, Ltda.

AES Brazilian Holdings, Ltd.

AES Bridge I, Ltd.

AES Bridge II, Ltd.

AES Cayman Guaiba, Ltd.

AES Cayman I

AES Cayman II

AES Cayman Pampas, Ltd.

AES Cemig Empreendimentos II, Ltd.

AES Cemig Empreendimentos, Inc.

AES Communications Rio de Janeiro S.A.

AES Com Sul Ltda.

AES Coral Reef, LLC

AES Elpa S.A.

AES Energia, Ltda.

AES Energia I, Ltd.

AES Energia II, Ltd.

AES Florestal Ltda.

AES Forca Ltd.

AES Forca II, Ltd.

AES Forca Empreendimentos Ltda.

AES Guaiba II Empreendimentos Ltda.

AES Holdings Brasil, Ltda.

AES IHB Cayman, Ltd.

AES Infoenergy Ltda.

AES Intercon II, Ltd.

AES Interenergy, Ltd.

AES International Holdings III, Ltd.

AES Minas PCH Ltda.

AES Network

AES Santa Branca I, Ltd.

AES Santa Branca II, Ltd.

AES Sul, SA

AES Tiete Holdings Ltd.

AES Tiete Holdings II, Ltd.

AES Tiete Empreendimentos S.A.

AES Tiete Participacoes S.A.

AES Trade I, Ltd.

AES Trade II, Ltd.

AES Trading Ltda.

AES Transgas Empreendimentos S.A.

AES Transgas I, Ltd.

AES Transgas II, Ltd.

AES Treasure Cove, Ltd.

AES Uruguaiana Empreedimentos S.A.

AES Uruguaiana, Inc.

Asteroid I, Ltd.

Brasiliana Energia S.A.

Cayman Energy Traders

Companhia de Gas de Minas Gerais, S.A.

Companhia Energetica de Minas Gerais, S.A.

AES Tiete S.A.

Eletroger Ltda.

Eletropaulo Comercial Exportadora, Ltda.

Eletropaulo Metropolitana Electricidade de Sao Paulo S.A.

Eletropaulo Telecomunicacoes, Ltda.

Energia Paulista Participacoes, S.A.

Metropolitana Overseas II, Ltd.

Pleasantville Participacoes Ltda.

Southern Electric Brazil Participacoes, Ltda.

ARGENTINA

AES Alicura Holdings, S.C.A.

AES Andes Energy, Inc.

AES Argentina Investments, Ltd.

AES Argentina Operations, Ltd.

AES Argentina Inc.

AES Asociados S.A.

AES Caracoles I

AES Caracoles II

AES Caracoles III, L.P.

AES Caracoles S.R.L.

AES Chaparron I, Ltd.

AES Chaparron II, Ltd.

AES Development de Argentina S.A.

AES Energy, Ltd.

AES Ocean Springs, Ltd.

AES Operadora S.A.

AES Parana Gas S.A.

AES Parana Holdings, Ltd.

AES Parana I Limited Partnership

AES Parana II Limited Partnership

AES Parana IHC, Ltd.

AES Parana Generation Holdings, Ltd.

AES Parana Operations S.R.L.

AES Parana Propiedades S.A.

AES Parana S.C.A.

AES Rio Diamate, Inc.

AES San Nicolas Holding Espana, S.L.

AES San Nicolas, Inc.

AES South Point, Ltd.

AESEBA S.A.

Asociados de Electricidad, S.A.

B.A. Services S.R.L.

Camille, Ltd.

Central Dique, S.A.

Central Termica San Nicolas S.A.

CMS Generation San Nicolas Company

Compania de Inversiones en Electricidad, S.A.

Empresa Distribuidora de Energia Norte S.A.

Empresa Distribuidora de Energia Sur S.A.

Empresa Distribuidora La Plata, S.A.

Gasoducto GasAndes Argentina S.A.

Gener Argentina S.A.

AES Alicura, S.A.

Hidroeletrica Rio Juramento, S.A.

2

Inter Andes, S.A.

Inversora AES Americas Holding Espana Espana, S.L.

Inverorsa de San Nicolas S.A.

Inversora AES Americas, S.A.

La Plata II, Ltd.

La Plata III, Ltd.

La Plata Partners L.P.

Luz del Plata S.A.

AES Panama Energy, S.A.

Shazia S:R.L.

TermoAndes S.A.

Wildwood Funding, Ltd.

Wildwood I, Ltd.

Wildwood II, Ltd.

3

Exhibit 10.2.C

EXHIBIT A to the

Credit Agreement

FORM OF NOTE

New York, New York             , 2006

For value received, The AES Corporation, a Delaware corporation (the “Borrower”), promises to pay to                      (the “Bank”) or its registered assigns, for the account of its Lending Office (as defined in the Credit Agreement referred to below), the unpaid principal amount of each Loan (as defined in the Credit Agreement referred to below) made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the dates and in the amounts specified in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other same day funds at the place of payment specified in the Credit Agreement.

All Loans made by the Bank, the respective types thereof and all repayments of the principal thereof shall be recorded by the Bank and, if the Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make (or any error in making) any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement.

This Note is one of the Notes referred to in the Credit Agreement dated as of March 29, 2006 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) among the Borrower, the Bank and certain other banks party thereto and Merrill Lynch Capital Corporation, as the Administrative Agent for the Banks. Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for, in certain circumstances, the prepayment hereof and the acceleration of the maturity hereof.

This Note is assignable to one or more Persons as provided in the Credit Agreement and the Borrower agrees to issue from time to time replacement Notes in the form hereof to facilitate such assignments.

Note

This Note shall be governed by, and construed in accordance with, the laws of the State of New York.

THE AES CORPORATION

By:

Name:

Title:

Note

-2-

LOANS AND PAYMENTS OF PRINCIPAL

Date Amount of Loan Type of Loan Amount of Principal Repaid Notation Made By

Note

Exhibit 10.2.D

March 29, 2006 To the Persons Listed on Schedule I hereto Ladies and Gentlemen: I am the Vice President and Deputy General Counsel of The AES Corporation (the “Company”), a corporation organized and existing under the laws of the State of Delaware, and have acted as counsel for the Company in connection with the Credit Agreement dated as of March     , 2006 (the “Credit Agreement”; capitalized terms used herein but not defined shall be used herein as defined in the Credit Agreement) among the Company, the Banks party thereto and Merrill Lynch Capital Corporation, as Administrative Agent. This opinion is being furnished to you pursuant to Section 3.01 (b) (i) of the Credit Agreement. In rendering this opinion, I have examined, and relied on, subject to the assumptions and qualifications herein, an executed counterpart of the Credit Agreement and such agreements, instruments and documents and have conducted such investigations of laws I have deemed necessary or appropriate as a basis for the opinions hereafter expressed. As to questions of fact material to this opinion, I have, when relevant facts were not independently established, relied upon certificates of appropriate public officials and officers and representatives of the Company and other appropriate persons, and upon the factual representations or statements made by these persons or in the Credit Agreement. In all such examinations, I have assumed, without independent verification, the authenticity and completeness of documents purporting to be originals (whether examined in original, facsimile or copy form), the conformity to originals of documents purporting to be photostatic or facsimile copies of originals, and the genuineness of all signatures. I make no observations and give no opinion in relation to any contract, instrument or document other than the Credit Agreement (whether or not referred to in the Credit Agreement) nor have I made any enquiries of any party to the Credit Agreement, or other person or entity, other than the Company. This opinion is strictly limited to the matters stated in it and is not to be read as extending by implication to any other matter or any other

1300 Wilson Boulevard Arlington, Virginia 22203 Phone: (703) 522-1315 Fax: (703) 528-4510

contract, instrument or document executed in connection with the Credit Agreement or the transactions contemplated by it or otherwise.

On the basis of the foregoing, and having regard for such legal considerations as I deem relevant, I am of the opinion that:

1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and has all corporate or other organizational powers and, to my knowledge, all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted.

2. The execution, delivery and performance by the Company of the Credit Agreement are within its corporate powers, have been duly authorized by all necessary corporate action, and require no action by or in respect of, or filing with, any governmental body, agency or official and do not (a) contravene, or constitute a default under, any provision of (i) the certificate of incorporation or by-laws of the Company or (ii) to my knowledge, (A) any law or regulation applicable to the Company or (B) any judgment, injunction, order or decree binding upon the Company or (C) any agreement or instrument evidencing or governing any Debt of the Company in the amount of $25,000,000 or more (“Specified Debt”) or (b) result in or require the creation or imposition of any lien on any asset of the Company under any agreement or instrument evidencing or governing any Specified Debt.

3. The Company has duly executed and delivered the Credit Agreement.

4. Except for Disclosed Matters, there is no action, suit, investigation of which the Company has notice, litigation or proceeding pending against, or to my knowledge threatened against, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could have a Material Adverse Effect, or which in any manner draws into question the legality, validity or enforceability of the Credit Agreement.

I am a member of the Bar of the District of Columbia; however, this opinion relates solely to the General Corporation Law of the State of Delaware and the federal laws of the United States as at the date and time of its issue. I have made no investigation of, and neither express nor imply any opinion with respect to the laws of any state or jurisdiction other than the General Corporation Law of the State of Delaware and the federal laws of the United States.

2

This opinion may be relied upon solely by each of the addresses hereto, and may not be relied upon by any other person, nor used, circulated, quoted or otherwise referred to for any other purpose, without my prior written consent, except that any Person that becomes a Bank, Fronting Bank or Administrative Agent in accordance with the provisions of the Credit Agreement may rely upon this opinion as if it were specifically addressed and delivered to such Person on the date hereof.

Very truly yours,

/s/ Vincent W. Mathis

Vincent W. Mathis

Vice President and Deputy General Counsel

3

Schedule 1

The Banks party to the Credit Agreement

Merrill Lynch Capital Corporation, as Administrative Agent

4 World Financial Center

250 Vesey Street

New York, NY 10080

4

Exhibit 10.2.E

SHEARMAN & STERLING LLP

599 LEXINGTON AVENUE | NEW YORK | NY | 10022-6069

WWW.SHEARMAN.COM | T +1.212.848.4000 | F +1.212.848.7179

March 29, 2006

To the Persons listed in Schedule A

The AES Corporation

Ladies and Gentlemen:

We have acted as counsel to The AES Corporation, a Delaware corporation (the “Company”), in connection with the preparation, execution and delivery of the Credit Agreement, dated as of March 29, 2006 (the “Agreement”), among the Company and each of you. This opinion is furnished to you pursuant to Section 3.01(b)(ii) of the Agreement. Unless otherwise defined herein, terms defined in the Agreement are used herein as therein defined.

In that connection, we have reviewed an original or copy of the Agreement.

We have also reviewed the following:

(i) The originals or copies of the indentures and credit agreement that are listed in Schedule B.

(ii) Originals or copies of such other records of the Company, certificates of public officials and of officers of the Company and agreements and other documents as we have deemed necessary as a basis for the opinions expressed below.

In our review of the Agreement and other documents, we have assumed:

(A) The genuineness of all signatures.

(B) The authenticity of the originals of the documents submitted to us.

(C) The conformity to authentic originals of any documents submitted to us as copies.

(D) As to matters of fact, the truthfulness of the representations made in the Agreement and in certificates of public officials and officers of the Company.

ABU DHABI | BEIJING | BRUSSELS | DÜSSELDORF | FRANKFURT | HONG KONG | LONDON | MANNHEIM | MENLO PARK

MUNICH | NEW YORK | PARIS | ROME | SAN FRANCISCO | SĀO PAULO | SINGAPORE | TOKYO | TORONTO | WASHINGTON, DC

SHEARMAN & STERLING LLP IS A LIMITED LIABILITY PARTNERSHIP ORGANIZED IN THE UNITED STATES UNDER THE LAWS OF THE STATE OF DELAWARE, WHICH LAWS LIMIT THE PERSONAL LIABILITY OF PARTNERS.

(E) That the Agreement is the legal, valid and binding obligation of each party thereto, other than the Company, enforceable against each such party in accordance with its terms.

(F) That:

(1) The Company is an entity duly organized and validly existing under the laws of the jurisdiction of its organization.

(2) The Company has full power to execute, deliver and perform, and has duly executed and delivered, the Agreement.

(3) The execution, delivery and performance by the Company of the Agreement have been duly authorized by all necessary action (corporate or otherwise) and do not:

(a) except with respect to Generally Applicable Law, violate any law, rule or regulation applicable to it; or

(b) result in any conflict with or breach of any agreement or document binding on it (other than the documents specified in Schedule B) of which any addressee hereof has knowledge, has received notice or has reason to know.

(4) Except with respect to Generally Applicable Law, no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or (to the extent the same is required under any agreement or document binding on it of which an addressee hereof has knowledge, has received notice or has reason to know) any other third party is required for the due execution, delivery or performance by the Company of the Agreement or, if any such authorization, approval, action, notice or filing is required, it has been duly obtained, taken, given or made and is in full force and effect.

We have not independently established the validity of the foregoing assumptions.

“Generally Applicable Law” means the federal law of the United States of America, and the law of the State of New York (including the rules or regulations promulgated thereunder or pursuant thereto), that a New York lawyer exercising customary professional diligence would reasonably be expected to recognize as being applicable to the Company, the Agreement or the transactions governed by the Agreement and for purposes of assumption paragraph (F) above and our opinions in paragraph 1 below, the General Corporation Law of the State of Delaware. Without limiting the generality of the foregoing definition of Generally Applicable Law, the term “Generally Applicable Law” does not include any law, rule or regulation that is applicable to the Company, the Agreement or such transactions solely because such law, rule or regulation is part of a regulatory regime applicable to any party to any of the Agreement or any of its affiliates due to the specific assets or business of such party or such affiliate.

2

Based upon the foregoing and upon such other investigation as we have deemed necessary and subject to the qualifications set forth below, we are of the opinion that:

1. The execution and delivery by the Company of the Agreement do not, and the performance by the Company of its obligations thereunder and the borrowings and issuances of letters of credit thereunder will not, (a) result in a violation of the Company’s certificate of incorporation or by-laws, (b) result in a violation of Generally Applicable Law or (c) result in a breach of, a default under, or the acceleration of (or entitle any party to accelerate) the maturity of any obligation of the Company under, or result in or require the creation of any lien upon or security interest in any property of the Company pursuant to the terms of, any agreement or document listed in Schedule B.

2. No authorization, approval or other action by, and no notice to or filing with, any United States federal or New York governmental authority or regulatory body, or any third party that is a party to any of the documents listed in Schedule B, is required for the due execution, delivery or performance by the Company of the Agreement or the exercise of rights or remedies by the other parties under the Agreement.

3. The Agreement is the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

Our opinions expressed above are subject to the following qualifications:

(a) Our opinion in paragraph 3 is subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally (including without limitation all laws relating to fraudulent transfers).

(b) Our opinion in paragraph 3 is subject to the effect of general principles of equity, including without limitation concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law).

(c) Our opinions are limited to Generally Applicable Law, and we do not express any opinion herein concerning any other law.

A copy of this opinion letter may be delivered by any of you to any person that becomes a Bank, Fronting Bank or Administrative Agent in accordance with the provisions of the Agreement. Any such person may rely on the opinions expressed above as if this opinion letter were addressed and delivered to such person on the date hereof.

This opinion letter is rendered to you in connection with the transactions contemplated by the Agreement. This opinion letter may not be relied upon by you or any person entitled to rely on this opinion pursuant to the preceding paragraph for any other purpose without our prior written consent.

3

This opinion letter speaks only as of the date hereof. We expressly disclaim any responsibility to advise you of any development or circumstance of any kind, including any change of law or fact, that may occur after the date of this opinion letter that might affect the opinions expressed herein.

Very truly yours,

MEO:MLH

WEH

4

SCHEDULE A

The Banks party to the Agreement

Merrill Lynch Capital Corporation, as Administrative Agent for the Banks

4 World Financial Center

250 Vesey Street

New York, NY 10080

SCHEDULE B

1. Third Amended and Restated Credit and Reimbursement Agreement dated as of March 17, 2004, as amended by Amendment No. 1 dated as of August 10, 2004, Amendment No. 2 dated as of June 23, 2005, Amendment No. 3 dated as of August 19, 2005, Amendment No. 4 dated as of September 28, 2005, Amendment No. 5 dated as of September 30, 2005 and Amendment No. 6 dated as of October 15, 2005.

2. Senior Indenture between the Company and The First National Bank of Chicago dated as of December 8, 1998.

(a) First Supplemental Indenture dated as of December 8, 1998

(b) Second Supplemental Indenture dated as of June 11, 1999

Re: 9.50% Senior Notes due 2009

(c) Third Supplemental Indenture dated as of September 12, 2000

Re: 9.375% Senior Notes due 2010

(d) Fifth Supplemental Indenture dated as of February 9, 2001

Re: 8.875 % Senior Notes due 2011

(e) Sixth Supplemental Indenture dated as of February 22, 2001

Re: 8.375% Senior Notes due 2011

(f) Seventh Supplemental Indenture dated as of June 5, 2001

Re: 8.750% Senior Notes due 2008

(g) Ninth Supplemental Indenture dated as of April 3, 2003

Re: Amendment to Senior Indenture for all Series of Notes

(h) Tenth Supplemental Indenture dated as of February 13, 2004

Re: 7.750% Senior Notes due 2014

3. Senior Subordinated Indenture dated as of October 29, 1997

(a) First Supplemental Indenture dated as of November 21, 1997

Re: Amendment to Indenture

(b) Second Supplemental Indenture dated as of April 3, 2003

4. Junior Subordinated Indenture dated as of March 1, 1997

(a) Third Supplemental Indenture dated as of October 14, 1999 Re: 6.75% Junior Subordinated Convertible Debentures due 2029

(b) Seventh Supplemental Indenture dated as of May 17, 2000 Re: 6.0% Junior Subordinated Convertible Debentures due 2008

5. Senior Indenture between the Company and Wells Fargo Bank, Minnesota, National Association dated as of May 8, 2003.

		CAHILL GORDON & REINDEL LLP EIGHTY PINE STREET NEW YORK, N.Y. 10005-1702
FLOYD ABRAMS L. HOWARD ADAMS	ROBERT M. HALLMAN WILLIAM M. HARTNETT	TELEPHONE: (212) 701-3000 FACSIMILE: (212) 269-5420	LUIS R. PENALVER ROY L. REGOZIN	SENIOR COUNSEL WALTER C. CLIFF
ROBERT A. ALESSI	CRAIG M. HOROWITZ		DEAN RINGEL	DAVID R. HYDE
ROGER ANDRUS HELENE R. BANKS MICHAEL A. BECKER LANDIS C. BEST GARY A. BROOKS SUSAN BUCKLEY KEVIN J. BURKE JAMES J. CLARK BENJAMIN J. COHEN CHRISTOPHER T. COX W. LESLIE DUFFY ADAM M. DWORKIN RICHARD E. FARLEY	DAVID G. JANUSZEWSKI ELAI KATZ THOMAS J. KAVALER DAVID N. KELLEY LAWRENCE A. KOBRIN EDWARD P. KRUGMAN JOEL KURTZBERG GEOFFREY E. LIEBMANN MICHAEL MACRIS ANN S. MAKICH JONATHAN I. MARK GERARD M. MEISTRELL ROGER MELTZER	1990 K STREET, N.W. WASHINGTON, D.C. 20006-1181 (202) 862-8900 FAX: (202) 862-8958 AUGUSTINE HOUSE 6A AUSTIN FRIARS LONDON, ENGLAND EC2N 2HA (011) 44.20.7920.9800 FAX: (01l) 44.20.7920.9825	JAMES ROBINSON THORN ROSENTHAL JONATHAN A. SCHAFFZIN JOHN SCHUSTER MICHAEL A. SHERMAN DARREN SILVER HOWARD G. SLOANE LAURENCE T. SORKIN LEONARD A. SPIVAK SUSANNA M. SUH GERALD S. TANENBAUM JONATHAN D. THIER JOHN A. TRIPODORO	IMMANUEL KOHN WILLIAM T. LIFLAND DONALD J. MULVIHILL IRWIN SCHNEIDERMAN JOHN R. VAUGHAN GARY W. WOLF COUNSEL CORYDON B. DUNHAM JASON W. KAPLAN RAND McQUINN*
PATRICIA FARREN	MICHAEL E. MICHETTI		ROBERT USADI	*ADMITTED IN
JOAN MURTAGH FRANKEL BART FRIEDMAN CIRO A. GAMBONI WILLIAM B. GANNETT CHARLES A. GILMAN STEPHEN A. GREENE	ATHY A. MOBILIA NOAH B. NEWITZ MICHAEL J. OHLER KENNETH W. ORCE DAVID R. OWEN JOHN PAPACHRISTOS	WRITER’S DIRECT NUMBER	GEORGE WAILAND GLENN J. WALDRIP, JR. MICHAEL B. WEISS S. PENNY WINDLE DANIEL J. ZUBKOFF ADAM ZUROFSKY	DC, TX, VA ONLY

March 29, 2006

Merrill Lynch Capital Corporation,

    as Administrative Agent

250 Vesey Street, 22^nd Floor

New York, New York, 10080

Re: The AES Corporation

Credit Agreement                            

Ladies and Gentlemen:

We have acted as special New York counsel to Merrill Lynch Capital Corporation, as Administrative Agent (the “Administrative Agent”), in connection with their execution and delivery of that certain Credit Agreement, dated as of March 29, 2006 among THE AES CORPORATION, a Delaware corporation (the “Borrower”), the Administrative Agent, the BANKS listed on the signature pages thereof, MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Lead Arranger, and the FRONTING BANKS party thereto (the “Credit Agreement”).

This opinion is furnished to you at the request of the Merrill Lynch Bank USA, in its capacity as a Fronting Bank, in connection with the execution and delivery of the Credit Agreement. Unless otherwise defined herein, capitalized terms used herein shall have the meanings given to them in the Credit Agreement. “Deposit Bank” shall mean the bank with which the Credit-Linked Deposit Account is maintained.

We have examined the Credit Agreement. In rendering this opinion to you, we have assumed without inquiry:

CAHILL GORDON & REINDEL LLP

(a) (i) the genuineness of all signatures on original copies of the Credit Agreement; (ii) the conformity to the original documents of all documents submitted to us as copies and the authenticity of all documents submitted to us as originals; (iii) the due authorization, execution and delivery of the Credit Agreement by each of the parties thereto; and (iv) the validity and enforceability of the Credit Agreement against each of the parties thereto;

(b) that (i) the Credit-Linked Deposit Account exists, (ii) the Credit-Linked Deposit Account is a Deposit Account (as such term is defined in the Uniform Commercial Code as in effect in the State of New York (the “UCC”)), (iii) the Banks have rights (within the meaning of Section 9-203(b) of the UCC) in such Credit-Linked Deposit Account sufficient to grant a security interest in such Credit-Linked Deposit Account and (iv) value has been given on the date hereof within the meaning of Section 9-203(b) of the UCC; and

(c) that the Deposit Bank’s jurisdiction is the State of Utah and that the laws of the State of Utah are the same as the laws of the State of New York.

Based on the foregoing and subject to the qualifications set forth below, we are of the opinion that:

1. The Credit Agreement creates a valid security interest in the Credit- Linked Deposit Account in favor of the Administrative Agent for the benefit of the Fronting Banks. Assuming the Administrative Agent becomes the Deposit Bank’s customer with respect to the Credit-Linked Deposit Account within the meaning of Section 9-104(a)(3) of the UCC, the security interest of the Administrative Agent for the benefit of the Fronting Banks in the Credit-Linked Deposit Account will be perfected by control.

We point out to you that we are issuing this opinion solely in our capacity as special New York counsel to the Administrative Agent, and we do not express any opinion as to the effect on the opinions and statements made herein of the laws of any jurisdiction other than the laws of the State of New York.

This opinion is rendered solely to, and is intended solely for the benefit of, the Administrative Agent and its successors in connection with the transactions contemplated in the Credit Agreement. This opinion may not be relied upon by any other person, firm or corporation for any purpose without our prior written consent.

Very truly yours,

Exhibit 10.2.F

EXHIBIT C-1 to the

Credit Agreement

FORM OF LOAN FACILITY ASSIGNMENT AND ASSUMPTION AGREEMENT

AGREEMENT dated as of                      , 200     among [ASSIGNOR] (the “Assignor”), [ASSIGNEE] (the “Assignee”), THE AES CORPORATION (the “Borrower”), and MERRILL LYNCH CAPITAL CORPORATION, as Administrative Agent (the “Administrative Agent”).

W I T N E S S E T H

WHEREAS, this Assignment and Assumption Agreement (the “Agreement”) relates to the Credit Agreement (the “Credit Agreement”) dated as of March 29, 2006 among the Borrower, the Banks party thereto and the Administrative Agent; and

WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Funding Amount thereunder in an amount equal to $             (the “Assigned Amount”), together with a corresponding portion of its outstanding Loans and participating interests in outstanding Letter of Credit Liabilities, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms;

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows:

1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement.

2. Assignment. The Assignor hereby assigns and sells to the Assignee all or a proportionate part of all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, in each case in an amount not less than $1,000,000 (or such lesser amount as may be agreed to by the Borrower and the Agent) (except in the case of an assignment which will result in a group of Banks which are managed by the Assignor holding a Funding Amount of not less than $1,000,000), and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Loans made by the Assignor outstanding at the date hereof and the corresponding portion of participating interests purchased by the Assignor in Letter of Credit Liabilities outstanding on the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee and, as required pursuant to the terms of the Credit Agreement, the Borrower and the Administrative Agent, and the payment of the amounts specified in Section 3 hereof required to be paid on the date hereof, (i) the Assignee shall, as of the date hereof, succeed to the rights

Loan Facility Assignment and Assumption Agreement

and be obligated to perform the obligations of a Bank Party under the Credit Agreement with a Funding Amount in an amount equal to the Assigned Amount and (ii) the Funding Amount of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor shall be released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee.

3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in lawful money of the United States of America the amount heretofore agreed between them.¹ It is understood that commitment fees and/or letter of credit commissions accrued to the date hereof are for the account of the Assignor, and each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party’s interest therein and shall promptly pay the same to such other party.

4. Consent of the Borrower and the Administrative Agent. This Agreement is conditioned upon the consent of, as required pursuant to the terms of the Credit Agreement, the Borrower and the Administrative Agent. The execution of this Agreement by, as required pursuant to the terms of the Credit Agreement, the Borrower and the Administrative Agent is evidence of this consent.

5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Borrower, or the validity and enforceability of the Obligations of the Borrower in respect of the Credit Agreement. The Assignee acknowledges that it has, independently and without reliance on the Assignor, any other Bank or the Administrative Agent, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower.

6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

¹ Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum.

Loan Facility Assignment and Assumption Agreement

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IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption Agreement to be executed and delivered by their duly authorized officers as of the date first above written.

[ASSIGNOR]

By:

Title:

[ASSIGNEE]

By:

Title:

[EACH REVOLVING FRONTING BANK]

By:

Title:

[MERRILL LYNCH CAPITAL CORPORATION, as Agent

By:

Title:]²

[THE AES CORPORATION, as Borrower

By:

Title:]²

² As required pursuant to the terms of the Credit Agreement.

Loan Facility Assignment and Assumption Agreement

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Exhibit 10.2.G

EXHIBIT C-2 to the

Credit Agreement

FORM OF FRONTING BANK ASSIGNMENT

AND ASSUMPTION AGREEMENT

AGREEMENT dated as of                  , 200   among [ASSIGNOR] (the “Assignor”), [ASSIGNEE] (the “Assignee”), THE AES CORPORATION (the “Borrower”) and MERRILL LYNCH CAPITAL CORPORATION, as Administrative Agent (the “Administrative Agent”).

W I T N E S S E T H

WHEREAS, this Assignment and Assumption Agreement (the “Agreement”) relates to the Credit Agreement (the “Credit Agreement”) dated as of March 29, 2006 among the Borrower, the Banks party thereto, and the Administrative Agent; and

WHEREAS, the Assignor proposes to assign to the Assignee all (and not less than all) of the rights and obligations of the Assignor, in its capacity as a Fronting Bank, under the Credit Agreement (the “Assigned Amount”) and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms;

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows:

1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement.

2. Assignment. The Assignor hereby assigns and sells to the Assignee all but not less than all of the rights of the Assignor, in its capacity as a Fronting Bank, under the Credit Agreement and any documents entered into in connection with the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor, in its capacity as a Fronting Bank, under the Credit Agreement and any documents entered into in connection with the Credit Agreement to the extent of the Assigned Amount. Upon the execution and delivery hereof by the Assignor, the Assignee, the Borrower and the Administrative Agent, and the payment of the amounts specified in Section 3 hereof required to be paid on the date hereof, (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Fronting Bank under the Credit Agreement with L/C Exposure in an amount equal to the Assigned Amount and (ii) L/C Exposure of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor shall be released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee.

3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in lawful money of

Third Party Fronting Bank Assignment and Assumption Agreement

the United States of America the amount heretofore agreed between them.¹ It is understood that commitment fees and/or letter of credit commissions accrued to the date hereof are for the account of the Assignor, and each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party’s interest therein and shall promptly pay the same to such other party.

4. Consent of the Borrower and the Administrative Agent. This Agreement is conditioned upon the consent of the Borrower and the Administrative Agent. The execution of this Agreement by the Borrower and the Administrative Agent is evidence of this consent.

5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Borrower, or the validity and enforceability of the Obligations of the Borrower in respect of the Credit Agreement and any documents entered into in connection with the Credit Agreement. The Assignee acknowledges that it has, independently and without reliance on the Assignor, any other Bank or the Administrative Agent, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower.

6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[SIGNATURE PAGES IMMEDIATELY FOLLOW]

¹ Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum.

Third Party Fronting Bank Assignment and Assumption Agreement

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IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption Agreement to be executed and delivered by their duly authorized officers as of the date first above written.

[ASSIGNOR]

By:

Title:

[ASSIGNEE]

By:

Title:

THE AES CORPORATION, as Borrower

By:

Title:

MERRILL LYNCH CAPITAL CORPORATION, as Administrative Agent

By:

Title:

Third Party Fronting Bank Assignment and Assumption Agreement

Exhibit 10.2.H

EXHIBIT D to the

Credit Agreement

FORM OF FRONTING BANK AGREEMENT

                    , 200    

Merrill Lynch Capital Corporation

4 World Financial Center

250 Vesey Street

New York, New York 10080

Attention:

Ladies and Gentlemen:

Reference is hereby made to the Credit Agreement dated as of March 29, 2006 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) among The AES Corporation, a Delaware corporation (the “Borrower”), the Banks party thereto and Merrill Lynch Capital Corporation, as Administrative Agent. The capitalized terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined.

Section 1. Obligations Under the Credit Agreement. The undersigned hereby agrees, as of the date first above written, to be bound as a Fronting Bank by all of the terms and conditions of the Credit Agreement to the same extent as each of the other Fronting Banks thereunder and agrees to issue letters of credit in an aggregate amount not to exceed $[            ] at any time outstanding pursuant to and in accordance with Section 2.05 of the Credit Agreement. The undersigned further agrees, as of the date first above written, that each reference in the Credit Agreement to a “Fronting Bank” shall also mean and be a reference to the undersigned.

Section 2. Representations and Warranties. The undersigned hereby represents and warrants that it (i) is a Bank under the Credit Agreement or (ii) meets the definition of a “Fronting Bank”, as defined in the Credit Agreement.

Section 3. Delivery by Telecopier. Delivery of an executed counterpart of a signature page to this Fronting Bank Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Fronting Bank Agreement.

Section 4. Non-Reliance. The undersigned acknowledges that it has, independently and without reliance on any Fronting Bank, any other Bank and the Agent, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower.

Fronting Bank Agreement

Section 5. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc. This Fronting Bank Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

Very truly yours,

[NAME OF FRONTING BANK]

By:

Name:

Title:

Address:

Fax:

Acknowledged on the date hereof by:

MERRILL LYNCH CAPITAL CORPORATION, as Administrative Agent

By

Name:

Title:

Fronting Bank Agreement

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Exhibit 10.2.I

EXHIBIT E to the

Credit Agreement

FORM OF REQUEST FOR LOAN

1. This REQUEST FOR LOAN is executed and delivered by The AES Corporation (“Borrower”) to Merrill Lynch Capital Corporation (“MLCC”), as Administrative Agent (“Administrative Agent”), pursuant to the Credit Agreement dated as of March 29, 2006 by and among Borrower, the Banks party thereto and MLCC, as Administrative Agent and Collateral Agent (as the same may be amended, amended and restated, renewed, extended or otherwise modified form time to time, the “Credit Agreement”). Any capitalized terms used herein and not defined herein shall have the meanings set forth for such terms in the Credit Agreement.

2. The Borrower hereby requests that the Banks make a Loan to it pursuant to the Credit Agreement as follows:

(a) AMOUNT OF REQUESTED LOAN: $                    

(b) DATE OF REQUESTED LOAN:                     

(c) TYPE OF REQUESTED LOAN:

(Check one box only)

¨ BASE RATE LOAN

¨ EURODOLLAR LOAN

(d) WIRED TO THE FOLLOWING ACCOUNT:

[The AES Corporation]

[Bank]

[City, State]

Account No.:

ABA No.:

3. In connection with the request, the Borrower certifies that:

(a) Now and as of the date of the requested Loan, the representations and warranties of the Borrower and set forth in the Credit Agreement are and will be true and correct in all material respects on and as of the date of such Loan (or to the extent qualified by materiality, true and correct);

(b) At the time of and immediately after giving effect to such Loan, no Default or Event of Default has or will have occurred and be continuing;

(c) At the time of and immediately after such Extension of Credit, after giving effect to such Loan, after giving effect to all direct and indirect applications of the proceeds of such Loan made substantially simultaneously with the extension

thereof, (i) the aggregate Total Exposure of the Banks will not exceed the total Funding Amounts and (ii) the L/C Exposure will not exceed the balance of the Credit-Linked Deposit Account (excluding any portion of the Credit-Linked Deposit Account attributable to interest); and

(d) The making of such Loan is permitted under the terms of the Debt of the Borrower outstanding as of the date of such Loan.

4. This Request for Loan is executed on              by an authorized officer of the Borrower. The undersigned, solely in such capacity and not in a personal capacity, hereby certifies each and every matter contained herein to be true and correct.

THE AES CORPORATION

By:

Name:

Title:

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Exhibit 10.2.J

EXHIBIT F to the

Credit Agreement

FORM OF INTEREST ELECTION REQUEST

1. This INTEREST ELECTION REQUEST is executed and delivered by The AES Corporation (“Borrower”) to Merrill Lynch Capital Corporation (“MLCC”), as Administrative Agent (“Administrative Agent”), pursuant to the Credit Agreement dated as of March 29, 2006 by and among Borrower, the Banks party thereto and MLCC, as Administrative Agent, and Collateral Agent (as the same may be amended, amended and restated, renewed, extended or otherwise modified form time to time, the “Credit Agreement”). Any capitalized terms used herein and not defined herein shall have the meanings set forth for such terms in the Credit Agreement.

2. The Borrower hereby elects an interest rate in connection with an existing Loan pursuant to the Credit Agreement as follows:

(a) AMOUNT OF LOAN: $                    

(b) DATE OF MATURITY:                     

(c) CURRENT INTEREST ELECTION:                     

(d) INTEREST ELECTION:

(i) PORTION OF EXISTING LOAN ALLOCATED: $                    

(ii) REQUESTED INTEREST RATE: (Check one box only)

¨ BASE RATE

¨ EURODOLLAR

3. In connection with the request, the Borrower certifies that at the time of and immediately after giving effect to such Loan, no Event of Default has or will have occurred and be continuing.

4. This Interest Election Request is executed on             ,         , by an authorized officer of the Borrower. The undersigned, solely in such capacity and not in a personal capacity, hereby certifies each and every matter contained herein to be true and correct.

THE AES CORPORATION

By:

Name:

Title:

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EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Paul Hanrahan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The AES Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 6, 2009

/s/ PAUL HANRAHAN

Name: Paul Hanrahan

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Victoria D. Harker, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The AES Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 6, 2009

/s/ VICTORIA D. HARKER

Name: Victoria D. Harker

Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PERIODIC FINANCIAL REPORTS

I, Paul Hanrahan, President and Chief Executive Officer of The AES Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Interim Report on Form 10-Q for the quarter ended June 30, 2009 (the “Periodic Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of The AES Corporation.

August 6, 2009

/s/ PAUL HANRAHAN

Paul Hanrahan

Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF PERIODIC FINANCIAL REPORTS

I, Victoria D. Harker, Executive Vice President and Chief Financial Officer of The AES Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that:

(1) the Interim Report on Form 10-Q for the quarter ended June 30, 2009 (the “Periodic Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of The AES Corporation.

August 6, 2009

/s/ VICTORIA D. HARKER

Name: Victoria D. Harker

Executive Vice President and Chief Financial Officer