874761--4/4/2006--AES

related topics

{debt, indebtedness, cash}

{operation, international, foreign}

{acquisition, growth, future}

{operation, natural, condition}

{regulation, change, law}

{gas, price, oil}

{cost, contract, operation}

{competitive, industry, competition}

{capital, credit, financial}

{cost, regulation, environmental}

{financial, litigation, operation}

{customer, product, revenue}

{control, financial, internal}

{condition, economic, financial}

The Company s disclosure controls and procedures and internal control over financial reporting were determined not to be effective as of December 31, 2005 and December 31, 2004, due to the material weaknesses that existed in our internal control over financial reporting. 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 control over financial reporting. Our high level of indebtedness, and the security provided for this indebtedness, could adversely affect our business and our ability to fulfill our obligations. We have significant cash requirements and limited sources of liquidity. Existing and potential future defaults by project subsidiaries could adversely affect our results of operations and financial condition. Our competitive supply and Latin American operations represent a substantial portion of our assets and have caused and are expected to continue to cause significant volatility in our results of operations and cash flows. We do a significant amount of our business outside the United States which presents significant risks. Our financial position and results of operations may fluctuate significantly due to fluctuations in currency exchange rates. Our business is subject to substantial development uncertainties. Our acquisitions may not perform as expected. Most of our contract generation businesses are dependent to a large degree on one or a limited number of customers and a limited number of fuel suppliers. Most of our contract generation businesses Competition is increasing and could adversely affect us. Our distribution businesses are highly regulated. Our ability to raise capital on favorable terms, to refinance existing corporate or subsidiary indebtedness or to fund operations, capital expenditures, future acquisitions, construction of greenfield projects could adversely affect our results of operations. Our business and results of operations could be adversely affected by changes in our operating performance or cost structure. We 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 businesses, particularly our businesses in our competitive supply segment, may incur substantial costs and liabilities and be exposed to price volatility as a result of risks associated with the wholesale electricity markets. We are a holding company and our ability to make payments on our outstanding indebtedness at the parent company level is dependent upon the receipt of funds from our subsidiaries by way of dividends, fees, interest, loans, or otherwise. We may not be able to raise sufficient capital to fund greenfield projects in certain less developed economies. A downgrade in our or our subsidiaries credit ratings could adversely affect our ability to access the capital markets which could increase our interest costs or adversely affect our liquidity and cash flow. 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. We are subject to material litigation and regulatory proceedings. Our business is subject to stringent environmental laws and regulations. Catastrophic events could adversely affect our facilities and operations. Our business is sensitive to variations in weather and seasonal variations. Some of our subsidiaries participate in defined benefit pension plans and their net pension plan obligations may require additional significant contributions. The operation of power generation facilities involves significant risks that could adversely affect our financial results. We may not fully hedge our exposure against changes in commodity prices.

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874761--4/4/2006--AES_CORP