| Capital Resources and
Liquidity
AES's business is capital intensive and requires
significant investments to develop or acquire new operations.
Occasionally, AES will also seek to refinance certain outstanding
project financing loans or other notes payable. Continued
access to capital on competitive and acceptable terms is therefore
a significant factor in the Company's ability to expand further.
AES has, to the extent practicable, utilized project financing
loans to fund a significant portion of the capital expenditures
and investments required to construct and acquire its electric
power plants, distribution companies and related assets. Project
financing borrowings are substantially non-recourse to other
subsidiaries and affiliates and to AES as the parent company
and are generally secured by the capital stock, physical assets,
contracts and cash flow of the related subsidiary or affiliate.
The
Company intends to continue to seek, where possible, such
non-recourse project financing in connection with the assets
or businesses that the Company or its affiliates may develop,
construct or acquire. However, depending on market conditions
and the unique characteristics of individual businesses, the
Company's providers of project financing, particularly multinational
commercial banks or public market bond investors, may seek
higher borrowing spreads and increased equity contributions.
Furthermore,
because of the reluctance of commercial lending institutions
to provide non-recourse project financing (including financial
guarantees) for businesses in certain less developed economies,
the Company, in such locations, has and will continue to seek
direct or indirect (through credit support or guarantees)
project financing from a limited number of government sponsored,
multilateral or bilateral inter- national financial institutions
or agencies. As a pre- condition to making such project financing
available, these institutions may also require governmental
guarantees of certain project and sovereign related risks.
Depending on the policies of specific governments, such guarantees
may not be offered, and as a result, AES may determine that
sufficient financing will ultimately not be available to fund
the related business, and may cease development or acquisition
of such business, or alternatively AES may choose to develop
or acquire such business with higher levels of corporate support
than it has historically provided.
In
addition to the project financing loans, if avail- able, AES
as the parent company provides a portion, or in certain instances
all, of the remaining long-term financing required to fund
development, construction or acquisition. These investments
have generally taken the form of equity investments or loans,
which are subordinated to the project financing loans. The
funds for these investments have been provided by
|
|
cash flows from operations and by the proceeds
from issuances of debt, common stock and other securities issued
by the Company. Similarly, in certain of its distribution supply
businesses, the 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 the Company's subsidiaries. In such circumstances, were
a subsidiary to default on a payment or supply obligation, the
Company would be responsible for its subsidiary's obligations
up to the amount provided for in the relevant guarantee or other
credit support.
Interim
needs for shorter-term and working capital financing at the
parent company have been met with borrowings under AES's Revolver
and Letter of Credit Facility. The Company currently maintains
a $600 million credit line under the Revolver and, in 1999 entered
into a $2'50 million Letter includes financial covenants related
to net worth, cash flow, investments of Credit Facility. The
Revolver also, financial leverage and certain other obligations
and limitations on cash dividends. At December 31, 1999, cash
borrowings and letters of credit outstanding under the Revolver
amounted to $335 million and $200 million, respectively and
letters of credit out- standing under the Letter of Credit Facility
amounted to $214 million. The Company may also seek from time
to time to meet some of its short-term and interim funding needs
with additional commitments from banks and other financial institutions
at the parent or subsidiary level.
The
ability of AES's subsidiaries and affiliates to declare and
pay dividends to AES is restricted under the terms of existing
project financing debt agreements. See Note 6 to the consolidated
financial statements for additional information. In connection
with its project financings and related contracts, AES has expressly
undertaken certain limited obligations and contingent liabilities,
most of which will only be effective or will be terminated upon
the occurrence of future events. AES's obligations and contingent
liabilities in certain cases take the form of, or are support-
ed by, letters of credit. These obligations and contingent liabilities,
excluding future commitments to invest and those collateralized
with letter of credit obligations under the Revolver, were limited
by their terms as of December 31, 1999, to an aggregate of approximately
$585 million. The Company is obligated under other contingent
liabilities which are limited to amounts, or percentages of
amounts, received by AES as distributions from its project subsidiaries.
These contingent liabilities aggregated $33 million as of December
31, 1999. In addition, AES has expressly undertaken certain
other contingent obligations which the Company does not expect
to have a material adverse effect on its results of operations
or financial position, but which by their terms are not capped
at a |
|
