874761--3/17/2008--AES

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Risks Associated with our Disclosure Controls and Internal Control over Financial Reporting Due to material weaknesses in our internal control over financial reporting, our disclosure controls and procedures and internal control over financial reporting were determined not to be effective for each fiscal quarter since December 31, 2004 through December 31, 2007. Our disclosure controls and procedures and internal control over financial reporting may not be effective in future periods as a result of existing or newly identified material weaknesses in internal controls. Our identification of material weaknesses in internal control over financial reporting caused us to miss deadlines for certain SEC filings and if further filing delays occur, they could result in negative attention and/or legal consequences for the Company. Risks Related to our High Level of Indebtedness We have a significant amount of debt, a large percentage of which is secured, which could adversely affect our business and the ability to fulfill our obligations. The AES Corporation is a holding company and its ability to make payments on its outstanding indebtedness, including its public debt securities, is dependent upon the receipt of funds from its subsidiaries by way of dividends, fees, interest, loans or otherwise. Even though The AES Corporation is a holding company, existing and potential future defaults by subsidiaries or affiliates could adversely affect The AES Corporation. Risks Associated with our Ability to Raise Needed Capital The AES Corporation has significant cash requirements and limited sources of liquidity. Our ability to grow our business could be materially adversely affected if we were unable to raise capital on favorable terms. A downgrade in the credit ratings of The AES Corporation or its subsidiaries could adversely affect our ability to access the capital markets which could increase our interest costs or adversely affect our liquidity and cash flow. We may not be able to raise sufficient capital to fund "greenfield" projects in certain less developed economies which could change or in some cases adversely affect our growth strategy. External Risks Associated with Revenue and Earnings Volatility Our financial position and results of operations may fluctuate significantly due to fluctuations in currency exchange rates experienced at our foreign operations. Our businesses may incur substantial costs and liabilities and be exposed to price volatility as a result of risks associated with the wholesale electricity markets, which could have a material adverse effect on our financial performance. We may not be adequately hedged against our exposure to changes in commodity prices. Certain of our businesses are sensitive to variations in weather. Risks Associated with our Operations We do a significant amount of business outside the United States which presents significant risks. The operation of power generation and distribution facilities involves significant risks that could adversely affect our financial results. Our ability to attract and retain skilled people could have a material adverse effect on our operations. We have contractual obligations to certain customers to provide full requirements service, which makes it difficult to predict and plan for load requirements and may result in increased operating costs to certain of our businesses. Much of our generation business is dependent on one or a limited number of customers and a limited number of fuel suppliers. Competition is increasing and could adversely affect us. Our business and results of operations could be adversely affected by changes in our operating performance or cost structure. Our business is subject to substantial development uncertainties. Our acquisitions may not perform as expected. In some of our joint venture projects, we have granted protective rights to minority holders or we own less than a majority of the equity in the project and do not manage or otherwise control the project, which entails certain risks. Our Alternative Energy businesses face uncertain operational risks. Our Alternative Energy businesses may experience higher levels of volatility. Risks associated with Governmental Regulation and Laws Our operations are subject to significant government regulation and our business and results of operations could be adversely affected by changes in the law or regulatory schemes. Our Generation business in the United States is subject to the provisions of various laws and regulations administered in whole or in part by the FERC, including the Public Utility Regulatory Policies Act of 1978 ("PURPA") and the Federal Power Act. The recently enacted Energy Policy Act of 2005 ("EPAct 2005") made a number of changes to these and other laws that may affect our business. Actions by the FERC and by state utility commissions can have a material effect on our operations. Our businesses are subject to stringent environmental laws and regulations. Regulators, politicians, non-governmental organizations and other private parties have expressed concern about greenhouse gas, or GHG, emissions and are taking actions which, in addition to the potential physical risks associated with climate change, could have a material adverse impact on our consolidated results of operations, financial condition and cash flows. We and our affiliates are subject to material litigation and regulatory proceedings. The SEC is conducting an informal inquiry relating to our restatements.

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874761--3/17/2008--AES_CORP