NOTE: In April of 2001 the AES Corporation, Arlington, Virginia, won a bid to purchase 75% control of two large electrical distribution companies in Ukraine, Kievoblenergo and Rivneenergo, for approximately $ 68.9 million. Kievoblenergo was the largest of 20 electrical distribution companies that were going to be sold under Ukraine's privatization program.

AES had originally planned to invest an additional $ 60 million in Kievoblenergo and $ 40-50 million in Rivneenergo over the next five years. AES had some difficulty with the Ukraine government in the fall of 2001 when the government delayed the approval of an increase in electricity tariffs for privitized electric utilities. AES announced at that time there was no way they could go ahead and invest up to $ 100 million more in Ukraine unless electricity tariffs were allowed to be raised.

AES CHANGES LEADERSHIP UNDER WEIGHT OF HEAVY DEBT

AES Corp. yesterday announced the resignation of chief executive Dennis W. Bakke, co-founder of the Arlington-based global energy company whose stock has been battered by economic crises in key South American markets.

Bakke, 55, will be succeeded by Paul T. Hanrahan, 43, a 15-year veteran of the company who was one of four chief operating officers.

Wall Street investors and bondholders have been increasingly insistent on a change in leadership as AES struggled to manage heavy debt commitments in slumping energy markets. AES stock has lost nearly 90 percent of its value in the past year, closing yesterday at $5.02 a share, down 6 cents.

The company, which generates or sells electricity in 32 countries, reported a $313 million loss in the first quarter of this year. It wrote down the value of power plants and other assets in South America, most severely in Brazil, which imposed power rationing after a severe drought last year.

Bakke was the architect and champion of AES's unusual grass-roots operating style that allowed teams of employees to propose and carry out acquisitions and expansion programs with minimal control by a small headquarters staff in Rosslyn.

The approach helped AES through years of breakneck growth, but debt pressures forced a switch to a more disciplined, centralized strategy to refinance loans and cut costs. And some investors found Bakke's brand of corporate idealism -- emphasizing individual responsibility -- too unconventional.

Over the past few months, AES directors considered several moves, including going outside the company for a new CEO. Last week, it accepted Bakke's offer to resign and his suggestion that Hanrahan take over, according to AES director Robert H. Waterman Jr. The selection was made final yesterday.

"Dennis took us through an era of rapid growth and expansion. His instincts go in that direction," said Waterman, a founding director of AES and co-author of the best-selling business book "In Search of Excellence."

"We worked on this very definitely together. In the end, Dennis volunteered to step down," Waterman added.

"The world has changed, especially our industry," Bakke said in an interview. He said he had wrestled with his role at AES since last fall, when the company surprised investors with the magnitude of its losses in South America. "I thought we needed a different kind of leadership," he added.

Bakke, who will remain on the board, was voted a $9 million severance package by the board, payable over the next 15 years. He received no cash compensation as CEO for years, taking his pay in the form of stock options. As of February, he was the company's largest shareholder, with about 6.2 percent of the outstanding stock.

Hanrahan said his top priority will be to generate cash through cost controls, centralized purchasing and asset sales. AES bonds have been selling for about 65 cents on the dollar recently; the company's goal is to bring the price to par over the next year to 18 months. On June 6, Standard & Poor's reduced its rating on AES's corporate credit and senior unsecured debt one notch, to BB-minus, three levels below investment grade.

Last week, AES announced the sale of its AES NewEnergy power retailing company to Baltimore-based Constellation Energy Group Inc. for $240 million.

Excluding asset sales, AES said it expects to generate $1.25 billion in cash this year, enough to support operations, pay $550 million in interest and preferred dividends and retire $448 million in debt maturing in 2002.

Chris Ellinghaus, an analyst at Williams Capital Group, said that forecast is reasonable. The company's ability to manage its debts "looks adequate into 2004."

"We think there will be other asset sales. . . . They've proven pretty deft at handling their finances. I don't think this is a bankruptcy candidate," added Ellinghaus, who has a "buy" recommendation of AES and owns shares of the company personally.

Analysts Mitchell Spiegel and Andrea Cullen at Credit Suisse First Boston reported last week that they see a "downside risk" to AES's debt issues.

ARLINGTON, VA, April 17, 2001 -- The AES Corporation (NYSE: AES) announced today that it has won a bid for approximately $45.9 million to purchase a 75% controlling interest in Kievoblenergo, the distribution company that serves the region that surrounds Kiev, the capital city of the Ukraine. The remaining 25% interest is either publicly traded or owned by the employees of the distribution company. Completion of the acquisition is subject to an official review of the bid by the Ukraine State Property Fund and the execution of Sale and Purchase Agreement. In 2000, Kievoblenergo distributed 3,840 GWh to 763,000 customers. Kievoblenergo is one of six distribution companies that are being privatized this month by the government of the Ukraine. Kievoblenergo is the largest of the 20 distribution companies slated to be sold under Ukraine's privatization program. Mr. Garry Levesley, Vice President of AES, stated, "The acquisition of Kievoblenergo represents our first successful step into the Ukraine energy market.Our experience in operating 13 generating and distribution businesses in Kazakhstan and The Republic of Georgia has prepared us well for entry into this promising market."

Mr. Dennis W. Bakke, President and CEO of AES, stated, "We are pleased with this winning bid in Ukraine, which comes after five years of our involvement in the Ukraine while the government has contemplated opening up the electric sector to private companies and competition. We hope that AES can bring its skills, creativity and its passion to improve the contribution of this business to the people of the Ukraine."

Business development milestones in 2001 include the following:
In April, a subsidiary of AES signed agreements for the financing of its $300 million, 450 MW combined cycle gas-fired Meghnaghat power plant in Bangladesh. In April, a subsidiary of AES completed a $180 million financing for its 360 megawatt gas-fired combined cycle facility Haripur in Bangladesh. In April, AES announced the completion of its acquisition of IPALCO in Indiana. In March, a subsidiary of AES secured the financing for the 720 MW gas-fired Granite Ridge project in New Hampshire. In March, a subsidiary of AES acquired from EniChem SpA an oil-fired 140MW cogeneration facility in the town of Ottana, which is in the province of Nuoro, Sardinia, Italy. In February, a subsidiary of AES entered an agreement to purchase all of the energy assets of Thermo Ecotek Corporation, a wholly owned subsidiary of Thermo Electron Corporation of Waltham, Massachusetts for $195 million. In January, AES announced the start of construction of the $300 million AES Wolf Hollow power plant at a site in Granbury, Texas. In January, a subsidiary of AES acquired a majority interest in a 290MW barge-mounted natural-gas-fired electric generating business in Lagos, Nigeria. In January, AES Huntington Beach submitted a proposal to the California Energy Commission to restart two retired gas-fired units that will add an additional 450 megawatts of generation in the electricity-strapped state of California. In January, AES announced the purchase of an additional 39% ownership interest in Hidroelectrica Alicura, a 1000 MW hydro plant in Argentina. In January, AES announced that it had successfully completed its offer to exchange all American Depositary Shares of Gener S.A. for AES common stock.

AES is a leading global power company comprised of competitive generation, distribution and retail supply businesses in Argentina, Australia, Bangladesh, Brazil, Canada, Chile, China, Colombia, Dominican Republic, El Salvador, Georgia, Hungary, India, Italy, Kazakhstan, the Netherlands, Nigeria, Mexico, Oman, Pakistan, Panama, Sri Lanka, the United Kingdom, the United States and Venezuela.

The company's generating assets include interests in one hundred and sixty facilities totaling over 58 gigawatts of capacity. AES's electricity distribution network has over 920,000 km of conductor and associated rights of way and sells over 126,000 gigawatt hours per year to over 17 million end-use customers. In addition, through its various retail electricity supply businesses, the company sells electricity to over 154,000 end-use customers.

AES is dedicated to providing electricity worldwide in a socially responsible way.

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