SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

                       PURSUANT TO SECTION 13 OR 15 (D) OF

                       THE SECURITIES EXCHANGE ACT OF 1934

         Date of Report (date of earliest event reported): June 18, 1997

                               THE AES CORPORATION
             (exact name of registrant as specified in its charter)

       DELAWARE                   333-15487                    54-1163725
     (State  of               (Commission File No.)           (IRS Employer 
    Incorporation)                                         Identification No.)

                       1001 North 19th Street, Suite 2000
                            Arlington, Virginia 22209
          (Address of principal executive offices, including zip code)

               Registrant's telephone number, including area code:
                                 (703) 522-1315

                                 NOT APPLICABLE

          (Former Name or Former Address, if changed since last report)


<PAGE>
ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS

On June 18, 1997,  AES together  with The Southern  Company and The  Opportunity
Fund,  a  Brazilian  investment  fund,  (collectively,  the  "AES  Consortium"),
acquired 14.41% of Companhia Energtica de Minas Gerais ("CEMIG"),  an integrated
electric  utility  serving  the  State of Minas  Gerais in  Brazil,  for a total
purchase price of  approximately  $1.056 billion,  $654 million of the financing
for which was in the form of non-recourse  financing  provided by Banco Nacional
de Desenvolvimento  Economico e Social ("BNDES").  AES's portion of the purchase
price was approximately $364 million after  consideration of the BNDES facility.
The shares of CEMIG,  which represent  approximately 33% of the voting interest,
have been purchased from the State of Minas Gerais in a partial privatization of
CEMIG.  Initially,  AES and The  Opportunity  Fund  will have a 90.6% and a 9.4%
economic interest in the AES Consortium,  respectively. The Southern Company has
an option  until  January 9, 1998 to  purchase  up to a 25%  interest in the AES
Consortium  from AES.  Pursuant  to a  shareholders  agreement  between  the AES
Consortium and the State of Minas Gerais,  AES will have  significant  operating
influence,  including the right to appoint the chief operating officer of CEMIG,
and will otherwise share control of CEMIG with the State of Minas Gerais.  CEMIG
owns  approximately  5,000 MW of generating  plants and serves  approximately  4
million  customers.   The  foregoing  transaction  and  the  financing  therefor
described below are referred to herein as the "CEMIG Acquisition".

On June 30, 1997, AES acquired the international  assets of Destec Energy,  Inc.
("Destec"),  a large  independent  energy producer with headquarters in Houston,
Texas,  at a total price to AES of  approximately  $436 million,  which price is
subject to  adjustment  to reflect net cash flow  adjustments.  NGC  Corporation
("NGC"),  working in conjunction with AES, was selected as the winning bidder in
an auction for all of Destec at a total acquisition price of $1.27 billion.  AES
acquired  the  international  assets  of  Destec  immediately   following  NGC's
acquisition of Destec.  Destec's  international  assets  acquired by AES include
ownership  interests in the  following  five  electric  generating  plants (with
ownership  percentages in  parentheses):  (i) a 110 MW gas-fired  combined cycle
plant in Kingston,  Canada (50 percent);  (ii) a 405 MW gas-fired combined cycle
plant in Terneuzen,  Netherlands (50 percent);  (iii) a 140 MW gas-fired  simple
cycle plant in Cornwall,  England (100 percent);  (iv) a 235 MW oil-fired simple
cycle plant in Santo Domingo,  Dominican Republic (99 percent);  and (v) a 1,600
MW coal-fired plant ("Hazelwood") in Victoria,  Australia (20 percent).  Each of
such plants is currently in operation,  except for the plant in Terneuzen  which
is under construction.  The acquisition by AES of Destec's  international assets
also includes Destec's non-U.S.  developmental  stage power projects,  including
projects in Taiwan, England,  Germany, the Philippines,  Australia and Colombia.
The  foregoing  transaction  and the  financing  therefor  described  below  are
referred to herein as the "Destec Acquisition".

On May 27,  1997,  a  subsidiary  of  AES,  and its  partner,  Community  Energy
Alternatives  ("CEA"),  acquired an aggregate  of 90% (AES  acquired 60% and CEA
acquired  30%) of two  distribution  companies  of Empresa  Social de Energia de
Buenos Aires S.A.  ("ESEBA")  serving certain portions of the Province of Buenos
Aires,  Argentina for an aggregate purchase price of $565 million. AES's portion
of the purchase price after consideration of non-recourse debt was $244 million.
The  remaining  10% will be owned by the  employees  of each of the two acquired
companies.  The  foregoing  transaction  is  referred  to herein  as the  "ESEBA
Acquisition".

AES funded its  acquisition of Destec through cash on hand and borrowings  under
its $425 million revolving credit facility (the "Revolver"). The net proceeds of
approximately  $387 million from the  Company's  issuance and sale of its common
stock,  par value $.01 per share (the "AES  Common  Stock"),  and  $2.6875  Term
Convertible  Securities,  Series  A  ("TECONS")  in March  1997 was  temporarily
applied to repay  amounts  outstanding  under the  Revolver.  AES  financed  its
acquisitions of CEMIG and ESEBA through: (i) $450 million in non-recourse bridge
financing,  comprised of a $250 million bridge loan (the "CEMIG  Bridge") to AES
CEMIG Funding Corporation,  a wholly-owned subsidiary of AES, by Morgan Guaranty
Trust  Company of New York ("Morgan  Guaranty"),  and a syndicate of banks and a
$200 million bridge loan (the "ESEBA Bridge") to AESEBA Funding  Corporation,  a
wholly-owned  subsidiary  of AES by Morgan  Guaranty,  and a syndicate of banks;
(ii) a $200  million  subordinated  bridge loan to AES (the "AES  Bridge  Loan")
co-led by Morgan  Guaranty,  DLJ Bridge  Finance,  Inc.,  and  Salomon  Brothers
Holding Inc.; (iii) non-recourse  project debt; (iv) borrowings under AES's $425
million  Revolver  provided by  Morgan Guaranty and a syndicate of banks and (v)
cash on hand.

AES intends to repay the ESEBA Bridge and the CEMIG Bridge through a combination
of proceeds from: (i) the sale of AES's interest in Hazelwood;  (ii)  additional
borrowings at one or more AES projects;  (iii) the  replacement of cash reserves
with  letters of credit at certain  AES  projects;  and (iv) if  exercised,  the
proceeds from the exercise of The Southern  Company's option to purchase up to a
25% interest in the AES  Consortium  from AES. None of the foregoing  sources of
funds is committed. Accordingly, there can be no assurances that such sources or
any other sources will be available to repay the ESEBA Bridge and CEMIG Bridge.

The  CEMIG  Bridge  and  ESEBA  Bridge mature in May 1998 or, in the case of the
ESEBA  Bridge,  earlier  if  AES  sells  its interest in Hazelwood. The interest
rates  on  both  the  CEMIG  Bridge and the ESEBA Bridge will initially be LIBOR
plus  2.5% and will increase by 1.0% each month beginning January 1, 1998. These
loans  are  secured  by  a  pledge  of  shares  of  AES Common Stock issued to a
subsidiary of AES.

<PAGE>

ITEM 5. OTHER EVENTS

     This  Current  Report on Form 8-K includes the 1996 and the unaudited first
quarter 1997 consolidated financial statements filed under Item 7, together with
the Independent  Auditors' Report on the financial statements for the year ended
December 31, 1996.

ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS

a.(i) Financial statements of Businesses Acquired

     The  required audited  financial  statements  of CEMIG  will be filed on or
prior to August 31, 1997.


a.(ii)  The Company's  consolidated  balance sheets as of December 31, 1996, and
1995,  and March 1997  (unaudited)  and the related  consolidated  statements of
operations  and cash flows for each of the three years ended  December 31, 1996,
1995 and 1994, and for the three months ended March 31, 1997 and 1996 (quarterly
unaudited), and related notes thereto.


<PAGE>
                          INDEPENDENT AUDITORS' REPORT



To the Stockholders
Of The AES Corporation:

We  have  audited  the  accompanying  consolidated  balance  sheets  of The  AES
Corporation  and  subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations and cash flows for each of the three years
in the period ended  December  31,  1996.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material   respects,   the  financial   position  of  The  AES  Corporation  and
subsidiaries at December 31, 1996 and 1995, and the results of their  operations
and their cash flows for each of the three  years in the period  ended  December
31, 1996 in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP



Washington, DC

January 30, 1997, except for the penultimate paragraph of Note 6 as to which the
date is March 13, 1997 as to which the date is June 30, 1997

<PAGE>
                      The AES Corporation and Subsidiaries
                          Consolidated Balance Sheets


<TABLE>
<CAPTION>

                                                                             ------------------------------------

                                                                                 December 31,        March 31,
                                                                             ---------------------   ------------
In millions, except par values                                                 1996        1995        1997
                                                                             ---------   ---------   ------------
                                                                                                     (unaudited)
<S>                                                                          <C>         <C>         <C>
Assets
Current Assets:
 Cash and cash equivalents   .............................................     $   185     $   239      $   423
 Short-term investments   ................................................          20          58           26
 Accounts receivable, net ................................................          95          54           86
 Inventory ...............................................................          81          36           71
 Receivable from affiliates  .............................................           9          11           12
 Deferred income taxes ...................................................          65          21           49
 Prepaid expenses and other current assets  ..............................          47          27           63
                                                                                -------     -------       -------
Total current assets   ...................................................         502         446          730
Property, Plant and Equipment:
 Land   ..................................................................          30           9           30
 Electric and steam generating facilities   ..............................       1,884       1,594        1,889
 Furniture and office equipment ..........................................          14          11           14
 Accumulated depreciation and amortization  ..............................        (282)       (222)        (295)
 Construction in progress ................................................         574         158          666
                                                                                -------     -------       -------
Property, plant and equipment, net .......................................       2,220       1,550        2,304
Other Assets:
 Deferred costs, net   ...................................................          47          32           59
 Project development costs   .............................................          53          41           59
 Investments in and advances to affiliates  ..............................         491          48          590
 Debt service reserves and other deposits   ..............................         175         168          207
 Goodwill & other intangible assets, net .................................          52          37           52
                                                                                -------     -------       -------
 Other assets ............................................................          82          19           77
                                                                                -------     -------       -------
Total other assets  ......................................................         900         345        1,044
                                                                                -------     -------       -------
Total   ..................................................................     $ 3,622     $ 2,341      $ 4,078
                                                                                =======     =======       =======
Liabilities and Stockholders' Equity
Current Liabilities:
 Accounts payable   ......................................................     $    64     $    33      $    61
 Income taxes payable  ...................................................                                    4
 Accrued interest   ......................................................          25          12           31
 Accrued and other liabilities  ..........................................          95          49           70
 Other notes payable - current portion   .................................          88          50            -
 Project financing debt - current portion   ..............................         110          84          110
                                                                                -------     -------       -------
Total current liabilities ................................................         382         228          276
Long-Term Liabilities:
 Project financing debt   ................................................       1,558       1,098        1,841
 Other notes payable   ...................................................         450         125          325
 Deferred income taxes ...................................................         243         170          228
 Other long-term liabilities .............................................          55          13           56
                                                                                -------     -------       -------
Total long-term liabilities  .............................................       2,306       1,406        2,450
Minority Interest   ......................................................         213         158          211
Commitments and Contingencies   ..........................................           -           -            -
Company-obligated Mandatorily Redeemable Preferred Securities of
 AES .....................................................................           -           -          250
Stockholders' Equity:
Preferred stock (no par value; 1 million shares authorized; none issued).            -           -            -
Common stock ($.01 par value; 100 million shares authorized; shares
 issued and outstanding: 1996 - 77.4 million; 1995 - 74.8 million).                  1           1            1
Additional paid-in capital   .............................................         360         293          509
Retained earnings   ......................................................         396         271          436
Cumulative foreign currency translation adjustment   .....................         (33)        (10)         (52)
Less treasury stock at cost (1996 - .1 million shares; 1995 - 
 .3 million shares) ......................................................          (3)         (6)          (3)
                                                                                -------     -------       -------
Total stockholders' equity   .............................................         721         549          891
                                                                                -------     -------       -------
Total   ..................................................................     $ 3,622     $ 2,341      $ 4,078
                                                                                =======     =======       =======
</TABLE>


                 See Notes to Consolidated Financial Statements.

                                     

<PAGE>


                      The AES Corporation and Subsidiaries
                     Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                          -----------------------------------------------------
                                                                                                Three Months
                                                                                                     Ended
                                                                     December 31,                 March 31,
                                                           ---------------------------------   ----------------
In millions, except per share amounts                        1996        1995        1994      1997      1996
                                                           ---------   ---------   ---------   -------   ------
                                                                                                 (unaudited)
<S>                                                          <C>         <C>         <C>       <C>       <C>
Revenues:
 Sales  ................................................     $  824      $  672      $  514    $258      $171
 Services  .............................................         11           7          19      3        1
                                                              ------      ------      ------    ----     ------
Total revenues   .......................................        835         679         533    261       172
Operating Costs and Expenses:
 Cost of sales   .......................................        495         388         252    165       97
 Cost of services   ....................................          7           6          13      2        1
 Selling, general and administrative expenses  .........         35          32          32      9        9
 Provision to reduce contract receivable ...............         20           -           -      7        -
                                                              ------      ------      ------    ----     ------
Total operating costs and expenses .....................        557         426         297    183        107
                                                              ------      ------      ------   -----     ------
Operating Income .......................................        278         253         236     78       65
Other Income and (Expense):
 Interest expense   ....................................       (144)       (127)       (125)   (44)      (30)
 Interest income .......................................         24          27          22      8        5
 Equity in earnings of affiliates (net of income tax) .          35          14          12     16        5
                                                              ------      ------      ------   -----     ------
Income Before Income Taxes,
 Minority Interest,
 and Extraordinary Item   ..............................        193         167         145     58       45
Income Taxes  ..........................................         60          57          44     16       15
Minority Interest   ....................................          8           3           3      2        1
                                                              ------      ------      ------    ----     ------
Income Before Extraordinary Item   .....................        125         107          98     40       29
Extraordinary item - net gain on extinguishment of
 debt (less applicable income taxes of $1)  ............          -           -           2      -        -
                                                              ------      ------      ------    ----     ------
Net Income .............................................     $  125      $  107      $  100     $40      $29
                                                              ======      ======      ======    ====     ======
Net Income Per Share:
 Before extraordinary gain   ...........................     $ 1.62      $ 1.41      $ 1.30    $0.50     $0.38
 Extraordinary gain ....................................          -           -        0.02      -
                                                              ------      ------      ------    ----      -----
Net Income Per Share   .................................     $ 1.62      $ 1.41      $ 1.32    $0.50     $0.38
                                                              ======      ======      ======   =====     ======
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                   

<PAGE>


                      The AES Corporation and Subsidiaries
                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                           ---------------------------------------------------
                                                                                                Three Months
                                                                  For the Years Ended               Ended
                                                                     December 31,                 March 31,
                                                           ---------------------------------   ---------------
In millions, except per share amounts                          1996       1995       1994      1997      1996
                                                           -----------   --------   --------   -------   -----
                                                                                                 (unaudited)
<S>                                                          <C>           <C>        <C>       <C>      <C>
Operating Activities:
Net income .............................................     $    125      $  107     $  100    $40      $ 29
Adjustments to net income:   ...........................
 Depreciation and amortization  ........................           65          55         43    15         14
 Provision for deferred taxes   ........................           26          48         39     5         14
 Undistributed earnings of affiliates ..................          (20)          3         (3)  (16)        (4)
 Payments for deferred financing costs   ...............          (13)         (3)        (6)
 Other  ................................................            6           4          -   (12)         1
 Changes in working capital  ...........................           (7)        (17)        (9)  (22)        (9)
                                                              --------      ------     ------  ------    -----
Net cash provided by operating activities   ............          182         197        164    10         45
Investing Activities:
Property additions  ....................................         (506)       (171)       (10)  (97)       (45)
Acquisitions, net of cash acquired .....................         (148)       (121)         -     -        (20)
Sale of short-term investments  ........................          103         254        132                8
Purchase of short-term investments .....................          (66)       (218)      (204)   (6)         -
Affiliate advances and investments .....................         (430)        (10)         -   (90)        (1)
Project development costs ..............................          (16)        (22)       (17)   (6)        (2)
Debt service reserves and other assets   ...............          (72)        (55)       (21)   (39)       (6)
                                                              --------      ------     ------  ------    -----
Net cash used in investing activities ..................       (1,135)       (343)      (120)  (238)      (66)
Financing Activities:
Net borrowings (repayments) under the revolver .........          163          50          -   (213)      (19)
Issuance of company-obligated mandatorily
 redeemable preferred securities ("TECONS") ............            -           -          -   244          -
Issuance of project financing debt and other notes pay-
 able                                                             802         133          -    296        20
Repayments of project financing debt  ..................          (75)        (63)       (72)  (12)       (12)
Other liabilities   ....................................           (3)          8          -
Contributions by minority interests   ..................           10           7        152     2         (1)
Sale (repurchase) of common stock  .....................            2          (5)         -    149         1
                                                              --------      ------     ------  ------    -----
Net cash provided by financing activities   ............          899         130         80   466        (11)
Increase/(decrease) in cash and cash
 equivalents  ..........................................          (54)        (16)       124   238        (32)
Cash and cash equivalents, beginning  ..................          239         255        131   185        239
                                                              --------      ------     ------  ------    -----
Cash and cash equivalents, ending  .....................     $    185      $  239     $  255   $423      $207
                                                              ========      ======     ======  ======    =====
Supplemental disclosures:
Cash payments for interest   ...........................     $    134      $  120     $  127    $38      $ 23
Cash payments for income taxes  ........................           32           6          3    11          1
</TABLE>


                 See Notes to Consolidated Financial Statements.

                                      

<PAGE>

                      THE AES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The  AES  Corporation and its subsidiaries and affiliates (collectively "AES" or
the  "Company")  is  a  global  power  company  primarily engaged in developing,
owning and operating electric power generating facilities.

Principles  of  Consolidation  -  The  consolidated  financial statements of the
Company   include   the   accounts  of  AES,  its  subsidiaries  and  controlled
affiliates.  Investments  in 50% or less owned affiliates over which the Company
has  the  ability  to  exercise  significant  influence,  but  not  control, are
accounted  for using the equity method. The accounts of AES China Generating Co.
Ltd.  ("AES  Chigen"),  a  controlled  affiliate,  are consolidated based on its
fiscal  year ended November 30. Intercompany transactions and balances have been
eliminated.

Cash  and  Cash  Equivalents  -  The Company considers cash on hand, deposits in
banks,  certificates  of  deposit  and  short-term marketable securities with an
original maturity of three months or less as cash and cash equivalents.

Investments  -  Securities  that  the  Company  has both the positive intent and
ability  to  hold to maturity are classified as held-to-maturity and are carried
at  historical  cost. Other investments that the Company does not intend to hold
to  maturity  are  classified as available-for-sale, and any unrealized gains or
losses  are  recorded  as a separate component of stockholders' equity. Interest
and  dividends  on  investments  are  reported  in  interest  income. Short-term
investments  consist  of investments with original maturities in excess of three
months  but  less than one year. Debt service reserves and other deposits, which
might  otherwise  be  considered  cash  and  cash  equivalents  are  treated  as
noncurrent assets (see Note 3).

Inventory  - Inventory,  valued  at the lower of cost or market (first in, first
out  method),  consists  of  coal,  raw  materials,  spare  parts, and supplies.
Inventory consists of the following (in millions):

                                              --------------
                                               December 31,
                                              --------------
                                              1996     1995
                                              ----     ----
Coal and other raw materials   ............   $57      $ 24
Spare parts, materials and supplies  ......    24        12
                                              ---      ----
Total  ....................................   $81      $ 36
                                              ===      ====

Property,  Plant and Equipment - Property, plant and equipment is stated at cost
including  the  cost  of  improvements.  Depreciation,  after  consideration  of
salvage  value,  is  computed  using the straight-line method over the estimated
composite  lives  of the assets, which range from 3 to 40 years. Maintenance and
repairs  are  charged  to expense as incurred. Emergency and rotable spare parts
inventories  are  included  in  electric and steam generating facilities and are
depreciated over the useful life of the related components.

Intangible  Assets  - Goodwill  and  other  intangible assets are amortized on a
straight-line  basis  over their estimated periods of benefit or their estimated
lives,  which  range from 30 to 40 years. Intangible assets at December 31, 1996
and   1995   are  shown  net  of  accumulated  amortization  of  $3 million  and
$1 million,  respectively.  The Company will review its goodwill and intangibles
for  impairment  whenever  events  or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.

Construction  in  Progress  - Construction progress payments, engineering costs,
insurance  costs,  wages,  interest  and other costs relating to construction in
progress  are  capitalized. Construction in progress balances are transferred to
electric  and  steam  generating  facilities when the assets are ready for their
intended  use.  Interest capitalized during development and construction totaled
$27 million, $8 million and $2 million in 1996, 1995 and 1994, respectively.

Deferred   Costs   - Financing  costs  are  deferred  and  amortized  using  the
straight-line  method  over  the related financing period, which does not differ
materially  from  the  effective interest method of amortization. Deferred costs
are  shown  net  of  accumulated amortization of $36 million and $31 million for
1996 and 1995, respectively.

                                     

<PAGE>

Project  Development Costs - The Company capitalizes the costs of developing new
projects.  These  costs  represent  amounts  incurred for professional services,
salaries,  permits,  options,  capitalized  interest  and  other  related direct
costs.  These  costs are included in investments in affiliates, or property when
financing  is  obtained,  or  expensed at the time the Company determines that a
particular  project will no longer be developed. The continued capitalization is
subject  to  on-going  risks  related  to successful completion, including those
related  to  political, siting, financing, construction, permitting and contract
compliance.  Certain reimbursable costs related to one of the projects have been
classified as other assets at December 31, 1996.

Foreign  Currency  Translation  - Foreign  subsidiaries and affiliates translate
their  assets and liabilities into U.S. dollars at the current exchange rates in
effect  at  the  end  of the fiscal period. The gains or losses that result from
this  process,  and  gains  and  losses  on  intercompany transactions which are
long-term  in  nature,  and  which the Company does not intend to repatriate are
shown  in  the cumulative foreign currency translation adjustment balance in the
stockholders'  equity  section  of  the  balance  sheet. The revenue and expense
accounts   of   foreign   subsidiaries   and   affiliates  are  translated  into
U.S. dollars at the average exchange rates that prevailed during the period.

Revenue  Recognition  and  Concentration - Revenues from the sale of electricity
and  steam  are  recorded  based  upon output delivered and capacity provided at
rates  as  specified  under  contract  terms. Most of the Company's power plants
rely  primarily  on  one  power  sales  contract  with a single customer for the
majority  of  its  revenues. Five customers accounted for 20%, 16%, 16%, 11% and
10%  of  revenues in 1996, four customers accounted for 24%, 18%, 18% and 13% of
revenues  in  1995,  and  four  customers accounted for 31%, 23%, 22% and 11% of
revenues  in  1994.  The  prolonged failure of any of these customers to fulfill
its  contractual  obligations  could have a substantial negative impact on AES's
revenues  and  profits. However, the Company does not anticipate non-performance
by the customers under these contracts.

Interest  Rate  Swap  and Cap Agreements - The Company enters into interest rate
swap  and  cap  agreements as a hedge against interest rate exposure on floating
rate  project  financing debt. The transactions are accounted for as a hedge and
interest  is  expensed  or  capitalized,  as  appropriate,  using  the effective
interest  rates.  Any fees or payments are amortized as yield adjustments. These
derivative financial instruments are classified as other than trading.

Net  Income  Per  Share  - Net income per share is based on the weighted average
number  of  common  stock and common stock equivalents outstanding, after giving
effect  to  stock  splits  and  stock dividends. Common stock equivalents result
from  dilutive  stock  options, warrants and deferred compensation arrangements.
The  effect of such common stock equivalents on net income per share is computed
using  the  treasury  stock  method. The shares used in computing net income per
share  were  77.3 million,  75.9 million,  and  75.8 million  for 1996, 1995 and
1994,   respectively.   Primary   and  fully  diluted  earnings  per  share  are
approximately the same.

New  Accounting  Pronouncements  -  Statement  of Financial Accounting Standards
(SFAS)  No.  128 "Earnings Per Share," was issued in early 1997. SFAS No. 128 is
effective  for  periods ending after December 15, 1997 and early adoption is not
permitted.  SFAS  No.  128 requires the Company to compute and present basic and
diluted  earnings  per  share.  Had  the  Company computed earnings per share in
accordance  with  SFAS  No. 128 the basic and diluted amounts would have been as
follows:

                                     -------------------------------------------
                                                                  Quarters Ended
                                      Years ended December 31,      March 31,
                                     --------------------------  ---------------
                                     1996      1995      1994    1997      1996
                                     -------   -------   ------  -------   -----
                                                                   (unaudited)
Basic earnings per share .........   $1.65     $1.43     $1.34   $0.52     $0.38
Diluted earnings per share  ......   $1.59     $1.40     $1.31   $0.50     $0.37


Use  of  Estimates  - The preparation of financial statements in conformity with
generally  accepted  accounting principles requires the use of estimates. Actual
results could differ from those estimates.

Reclassifications  - Certain  reclassifications  have  been made to prior period
amounts to conform with the 1996 presentation.

                                      

<PAGE>

Unaudited  quarterly  data - Such data, includes all such adjustments considered
necessary  for  a  fair  presentation. Such information is not indicative of the
results for a full year.

2. ACQUISITIONS

In  March 1996,  the  Company,  through  a subsidiary acquired a 98% interest in
Hidrotermica  San  Juan, S.A., ("AES San Juan"), which is the owner and operator
of  a  78 megawatt Power Supply Business in the province of San Juan, Argentina.
The  facility,  which sells electricity into the Argentine spot market, includes
a  45 megawatt hydroelectric power plant and a 33 megawatt gas combustion plant.
As  a  result  of  this  acquisition,  the Company acquired intangible assets of
$17 million  which  are  being  amortized  over  the  life  of the hydroelectric
concession of 30 years.

In  May 1996,  AES,  through  certain  subsidiaries,  acquired for approximately
$393 million,  common  shares  representing an 11.35% interest in Light Servicos
de  Electricidade  S. A.  ("Light"),  a publicly-held Brazilian corporation that
operates  as  the  concessionaire  of an approximately 3,800 megawatt integrated
electric  power  generation,  transmission  and distribution system which serves
Rio  de  Janeiro,  Brazil. The AES subsidiary which owns an interest in Light is
participating  in  a  consortium  established  through a shareholders' agreement
that  owns  a  50.44%  controlling  interest.  As  a result, the Company has the
ability  to  exert  significant  influence  over  the operation of Light, and is
recording its investment using the equity method.

In  August 1996,  the  Company,  through  a  subsidiary,  acquired a controlling
interest  in  three  power  plants totaling 1,281 MW and a coal mine through the
purchase  of  an  81%  share  of  Tiszai Eromu Rt. ("AES Tiszai") an electricity
generation  company  in  Hungary for $110 million, and in December 1996 acquired
an additional 13% for $17 million.

Also,  in  August 1996,  the  Company acquired, through a subsidiary, a majority
controlling  interest  in  a  4,000 megawatt  coal-fired  facility in Kazakstan,
("AES  Ekibastuz"),  for approximately $3 million. The facility sells power to a
government-owned  utility  under  a  35 year  power  purchase agreement. Through
December 31,  1996,  approximately  $35  million (excluding VAT) has been billed
under  the power sales contract for electricity delivered of which the purchaser
has  paid  approximately  $5 million.  The  Company  has recorded a provision of
$20 million  to  reduce  the  carrying  value  of  the  contract  receivable  at
December 31,  1996  to  $10 million.  As of December 31, 1996, the net assets of
the  project  were  $24 million,  a  portion  of  which  was  represented by the
contract  receivable  referred  to  above.  There  can be no assurance as to the
ultimate  collectibility  of  amounts  owed  to  AES  as of December 31, 1996 or
additional  amounts  related to future deliveries of electricity under the power
sales contract.

In  January 1995, a subsidiary of the Company acquired the remaining outstanding
debt  of  AES  Deepwater,  a 140 megawatt cogeneration plant in Pasadena, Texas,
for  $65 million  from  a  syndicate of lenders. Prior to that date, the Company
did  not  maintain  or  exercise  control  or  significant  influence  over  the
utilization  of  the  AES  Deepwater  facility,  and  accordingly,  recorded its
investment  using  the  cost method. The acquisition resulted in the creation of
goodwill  of  approximately  $24 million  which  is  being  amortized  over  the
remaining estimated life of the plant.

In  June  and  July 1995,  a  subsidiary  of the Company increased its ownership
interest  in  Central  Termica  San  Nicolas,  S. A. ("AES  San Nicolas"), a 650
megawatt  power  plant  located in San Nicolas, Argentina from approximately 34%
to  approximately  69%  by  purchasing  the  interests  of  two  former minority
shareholders.  The  1995  purchase  price  was  $24  million.  The  net  results
attributable  to  the  Company's  non-owned  portion  of  earnings  from AES San
Nicolas in 1995 is reflected as minority interest.

In  addition,  in  December 1995,  another  subsidiary  of the Company purchased
Hidroelectrica   Rio  Juramento  S.A.  ("AES  Rio  Juramento")  a  112  megawatt
hydroelectric  system  in the province of Salta, Argentina for $43 million. As a
result   of   this  acquisition,  the  Company  acquired  intangible  assets  of
$14 million  which  are  being  amortized  over  the  life  of the hydroelectric
concession of 30 years.

These   acquisitions  were  accounted  for  as  purchases.  The  purchase  price
allocations  for  Light,  AES  Tiszai and AES Ekibastuz have been completed on a
preliminary  basis,  subject  to  adjustments  resulting  from new or additional
facts  that  may  come  to  light when the engineering, environmental, and legal
analyses  are completed during the allocation period. The accompanying financial
statements  include the operating results of AES Tiszai from August 1, 1996, the
operating  results  of  AES Ekibastuz from August 10, 1996, equity earnings from
Light  from  June 10,  1996,  and  the  operating  results of AES Deepwater from
January 20,  1995, the operating results of AES San Nicolas from January 1, 1995
and  the  operating  results

                                     

<PAGE>

of AES Rio  Juramento  from  December  1, 1995.  The  following  table  presents
supplemental  unaudited proforma operating results as if all of the acquisitions
had occurred at the beginning of 1995 (in millions, except per share amounts):

                                           -------------------
                                           For the Years Ended
                                               December 31,
                                           -------------------
                                             1996       1995
                                           --------    -------
Revenues ..............................     $1,013       $892
Net income ............................        100         91
Earnings per share  ...................      $1.29      $1.20


The  pro  forma  results  are  based  upon  assumptions  and estimates which the
Company  believes  are  reasonable.  The  pro forma results do not purport to be
indicative  of  the  results  that  actually  would  have  been obtained had the
acquisitions  occurred  on  January 1,  1995,  nor  are  they  intended  to be a
projection of future results.

3. INVESTMENTS

At December 31, 1996 AND 1995,  the  Company's  investments  were  classified as
either held-to-maturity or available-for-sale.  The amortized cost and estimated
fair value of the  investments at December 31, 1996 and 1995 classified as held-
to-maturity and available-for-sale were approximately the same.

The  short-term  investments  and  debt service reserves and other deposits were
invested as follows (in millions):

                                                                  --------------
                                                                    December 31,
                                                                  --------------
                                                                   1996     1995
                                                                  -------  -----
Restricted cash and cash equivalents   ..........................  $104     $144
Held-to-maturity US treasury and government agency securities  ..     1       33
Foreign certificates of deposit  ................................     -        3
Commercial paper  ...............................................    39        3
Floating rate notes  ............................................     -        6
                                                                   -----    ----
Subtotal ........................................................    40       45
Available-for-sale:
US treasury and government agency securities ....................    43       30
Certificates of deposit .........................................     3        4
Commercial paper  ...............................................     5        -
Foreign certificates of deposit  ................................     -        3
                                                                   -----    ----
Subtotal ........................................................    51       37
                                                                   -----    ----
Total ...........................................................  $195     $226
                                                                   =====    ====


Short-term  investments  classified  as  held-to-maturity and available-for-sale
were  $9 and $11 million, respectively, at December 31, 1996 and $44 million and
$14 million, respectively, at December 31, 1995.

                                     

<PAGE>

4. Investments In and Advances To Affiliates

The  following table presents summarized financial information (in millions) for
equity  method  affiliates  on  a combined 100% basis. Amounts presented include
the  accounts  of  NIGEN,  Ltd. (47% owned UK affiliate), Medway Power Ltd. (25%
owned  UK  affiliate), Light (11.35% owned Brazilian affiliate) and AES Chigen's
affiliates  at  December 31,  1996, and for the year then ended, the accounts of
NIGEN,  Ltd. and  Medway  Power  Ltd. at  December 31, 1995 and 1994 and for the
years  then  ended,  and  the  accounts  of  San  Nicolas  (34%  owned Argentine
affiliate) at December 31, 1994 and for the year then ended.

                                 ---------------------------
                                  1996       1995      1994
                                 --------   -------   ------
Sales ........................   $1,960        $276   $ 335
Operating income  ............      498          86      75
Net income  ..................      383          49      33
Current assets ...............      891         171     156
Noncurrent assets ............    4,928         949   1,030
Current liabilities  .........      868          70     133
Noncurrent liabilities  ......    2,111         973     945
Stockholders' equity .........    2,840          77     108


In  1994,  NIGEN, Ltd. refinanced its outstanding project financing loan through
a  public  debenture  offering.  The  extinguishment of such debt resulted in an
extraordinary  loss  of  $7 million.  The  Company's  share,  $2 million, net of
taxes,  is included in the accompanying financial statements as an extraordinary
loss.

The  Company's  share  of  undistributed  earnings  of  affiliates  included  in
consolidated  retained  earnings was $33 million and $13 million at December 31,
1996  and 1995, respectively. The Company charged and recognized management fees
and  interest  on  advances  to  its  affiliates  which  aggregated  $9 million,
$8 million  and  $18 million for each of the years ended December 31, 1996, 1995
and 1994, respectively.

5. DEBT

Project  Financing  Debt  - Project financing debt at December 31, 1996 and 1995
consisted of the following (in millions):

<TABLE>
<CAPTION>
                                           Interest
                                             Rate
                                           @ 12/31/96     Final Maturity       1996       1995
                                           ------------   ----------------   ---------   --------
<S>                                        <C>            <C>                <C>         <C>
Senior Debt-floating
AES Beaver Valley  .....................          7.4%        1998             $    21    $   33
AES Thames   ...........................          6.8%        2004                 163       181
AES Shady Point ........................          7.4%        2004                 306       320
AES Barbers Point  .....................          6.5%        2007                 325       340
AES Lal Pir  ...........................          5.0%        2008                 135        28
AES Pak Gen  ...........................          5.1%        2010                  90         -
AES Coral Reef  ........................         10.1%        2003                 168         -
AES Warrior Run ........................          6.7%        2014                  37        22
Other  .................................         10.4%        2001                   8         -
Senior Debt-fixed
AES Placerita-capital lease ............          8.1%        2009                 105       111
AES Warrior Run-tax exempt bonds  ......          7.4%        2019                  74        74
AES Pak Gen  ...........................          4.3%        2007                  85         -
AES San Nicolas ........................         10.4%        2000                  80         -
Subordinated Debt  .....................         13.6%        2010                  71        73
                                                                                -------   -------
Subtotal  ..............................                                         1,668      1182
Less current maturities  ...............                                          (110)      (84)
                                                                                -------   -------
Total  .................................                                       $ 1,558    $1,098
                                                                                =======   =======
</TABLE>

                                      

<PAGE>


Project  financing  debt  borrowings are primarily collateralized by the capital
stock  of  the  project subsidiary, the physical assets of such facility and all
project agreements associated with such facility.

In  1994,  the Company purchased and retired subordinated project financing debt
and  accrued interest at AES Placerita, resulting in an extraordinary gain of $4
million, net of taxes.

The Company has interest rate swap agreements in an aggregate notional principal
amount of $550  million at December 31, 1996.  The swap  agreements  effectively
change the  interest  rate on the  portion of the debt  covered by the  notional
amounts,  to a weighted  average fixed rate ranging from  approximately  9.5% to
10.5%.  The  agreements  expire at various  dates from 1997 through 2007. In the
event of nonperformance by the  counterparties,  the subsidiaries may be exposed
to  increased  interest  rates,   however,   the  Company  does  not  anticipate
nonperformance  by  the  counterparties,   which  are  multinational   financial
institutions.  At December 31, 1996,  subsidiaries  of the Company have interest
rate cap agreements at a ceiling of  approximately  12.5% with  remaining  terms
ranging from three to six years in an aggregate notional amount of $280 million.

AES  Shady Point and AES Barbers Point have issued commercial paper supported by
irrevocable  letters  of  credit issued by multinational financial institutions.
In  the  event  of nonperformance or credit deterioration of these institutions,
the  Company  may be exposed to the risk of higher effective interest rates. The
Company  does  not  believe  that such nonperformance or credit deterioration is
likely.

Other  Notes  Payable  - Other  notes  payable  at  December 31,  1996  and 1995
consisted of the following (in millions):

<TABLE>
<CAPTION>
                                              Interest Rate
                                              @ 12/31/96       Final Maturity     1996      1995
                                              --------------   ----------------  -------   ------
<S>                                           <C>              <C>                 <C>      <C>
Corporate revolving bank loan(1)  .........          7.40%         1998            $ 213    $ 50
Senior subordinated notes   ...............          9.75%         2000               75      75
Convertible subordinated debentures  ......          6.50%         2002                -      50
Senior subordinated notes   ...............         10.25%         2006              250       -
                                                                                    -----   -----
 Subtotal .................................                                          538     175
Less current maturities  ..................                                          (88)    (50)
                                                                                    -----   -----
 Total ....................................                                        $ 450    $125
                                                                                    =====   =====
</TABLE>

----------

(1) Floating rate loan.

Under the terms of the $425 million corporate  revolving bank loan and letter of
credit facility  ("Revolver"),  the Company must reduce its direct borrowings to
$125  million  for 30  consecutive  days  annually to obtain  additional  loans.
Commitment  fees on the unused portion at December 31, 1996 are .375% per annum,
and as of that date $89  million  was  available.  The  Company's  9 3/4% senior
subordinated  notes due 2000 ("9 3/4%  Notes)  and 10 1/4%  senior  subordinated
notes  due 2006 ("10 1/4%  Notes")  are  general  unsecured  obligations  of the
Company. The 9 3/4% Notes are redeemable at the Company's option, in whole or in
part,  beginning  June  1997  at  redemption  prices  in  excess  of par and are
redeemable at par beginning  June 1999.  The 10 1/4% Notes are redeemable at the
Company's option, in whole or in part,  beginning July 2001 at redemption prices
in excess of par and are  redeemable at par beginning  July 2003.  The Company's
convertible  subordinated  debentures  ("Debentures") were converted into common
stock of the Company at the rate of $26.16 per common share on August 30, 1996.

                                      

<PAGE>


Future  Maturities  of  Debt  - Scheduled  maturities of total long-term debt at
December 31, 1996 are (in millions):

         1997  ....................................   $  198
         1998  ....................................      132
         1999  ....................................      303
         2000  ....................................      269
         2001  ....................................      202
         Thereafter  ..............................    1,102
                                                      -------
         Total ....................................   $2,206
                                                      =======

Covenants - The terms of the Company's  Revolver,  9 3/4% Notes,  10 1/4% Notes,
and project financing debt agreements  contain certain covenants and provisions.
The covenants  provide for, among other items,  maintenance of certain reserves,
and  require  that  minimum  levels of working  capital,  net worth and  certain
financial ratio tests are met. The most  restrictive of these covenants  include
limitations  on  incurring  additional  debt and on the payment of  dividends to
shareholders.

The  project financing debt limitations of AES's subsidiaries permit the payment
of  dividends  to  the  parent  company  out of current cash flow for quarterly,
semi-annual  or  annual  periods  only at the end of such periods and only after
payment  of  principal  and  interest  on  project  loans due at the end of such
periods.  As of December 31, 1996, approximately $63 million was available under
project loan documents for distribution by U.S. subsidiaries.

AES Chigen  Notes - Subsequent  to its fiscal year end,  AES Chigen  issued $180
million of 10 1/8% Notes due 2006.

6. COMMITMENTS AND CONTINGENCIES

As of December  31,  1996,  the Company and its  consolidated  subsidiaries  are
obligated under long-term  non-cancelable operating leases, primarily for office
rental and site leases.  Rental expense for operating leases was $4 million,  $3
million and $2 million in the years ended 1996, 1995 and 1994, respectively. The
future minimum lease commitments under these leases are $6 million each year for
1997 and 1998, $5 million for 1999, $2 million each year for 2000 and 2001,  and
$56 million for the years thereafter.

Operating  subsidiaries  of  the  Company enter into various long-term contracts
for  the  purchase  of  fuel  subject  to  termination  only  in certain limited
circumstances. These contracts have remaining terms of 3 to 11 years.

Guarantees  - In  connection with certain of its project financing, acquisition,
disposition,  and  power  purchase  agreements,  AES  has  expressly  undertaken
limited  obligations  and  commitments  most  of which will only be effective or
will  be  terminated upon the occurrence of future events. These obligations and
commitments,  excluding  letter  of  credit  obligations  discussed  below, were
limited  as  of  December 31,  1996,  by  the  terms  of  the  agreements, to an
aggregate  of  approximately  $176 million.  The Company is also obligated under
other  commitments  which  are  limited  to  amounts, or percentages of amounts,
received  by  AES  as distributions from its project subsidiaries. These amounts
aggregated $33 million as of December 31, 1996.

Letters  of Credit - At December 31, 1996 and 1995, the Company had $123 million
and  $56 million,  respectively,  of  letters  of  credit  outstanding under its
credit  facility  which  operate  to  guarantee  performance relating to certain
project  development  activities  and  subsidiary operations. The Company pays a
letter of credit fee of 1.75% on the outstanding amounts.

Litigation  - On  February 25, 1993, an action was filed, jointly and severally,
in  the  10th  Judicial  District  Court,  Galveston  County,  Texas against the
Company,  over  25  other  corporations  (including  major  oil  refineries  and
chemical  companies)  and  utilities,  a  utility  district,  four Texas cities,
McGinnes  Industrial  Maintenance  Corporation,  Roland  McGinnes  and  Lawrence
McGinnes,   claiming  personal  injuries,  property,  and  punitive  damages  of
$20 billion,  arising from alleged releases of hazardous and toxic substances to
air,  soil  and  water  at the McGinnes waste disposal site located in Galveston
County.   This   matter  was  consolidated  with  two  other  related  cases  in
December 1993.  The  complaint  sets  forth numerous causes of action, including
fraud,   negligence   and  strict  liability,  including,  among  other  things,
allegations  that the defendants sent hazardous, toxic and noxious chemicals and
other  waste  products  to  the  McGinnes  site for disposal. In March 1995, the
Company  entered  into  a settlement agreement with certain plaintiffs, pursuant
to  which  the  Company  paid seven thousand dollars in return for withdrawal of
their  claims  against  the Company. Based on the Company's investigation

                                     

<PAGE>

of the case to date, the Company  believes it has  meritorious  defenses to each
and every  cause of  action  stated in the  complaint  and this  action is being
vigorously  defended.  The Company believes that the outcome of this matter will
not have a material  adverse  effect on its results of  operations  or financial
position.

On December 17, 1996, AES was named  defendant in a complaint filed in the Court
of Chancery in Delaware. The suit was brought by the holder of 750 shares of AES
Chigen Class A Common Stock  individually  and on behalf of a purported class of
public  shareholders  of AES Chigen in response to an amalgamation to be entered
into between AES Chigen and AES. The complaint alleges, among other things, that
AES breached its alleged  fiduciary  duty as a controlling  shareholder to treat
the class with fairness,  and questions the sufficiency of the  consideration to
be paid to AES Chigen shareholders.  The complaint sought damages and injunctive
relief.  AES Chigen was not named in the suit. On March 13, 1997  settlement was
reached subject to court approval.

The  Company is involved in certain other legal proceedings in the normal course
of  business.  It  is  the  opinion  of  the  Company  that  none of the pending
litigation  is  expected  to  have  a  material adverse effect on its results of
operations or financial position.

7. STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                           -----------------------------
                                                                             1996       1995       1994
                                                                           --------   --------   -------
In millions
<S>                                                                        <C>        <C>        <C>
Common stock
 Balance at January 1 and December 31  .................................    $    1     $    1     $   1
                                                                             ======     ======     =====
Additional paid-in capital
 Balance at January 1   ................................................    $  293     $  240     $ 203
 Issuance of common stock under benefit plans and exercise of stock op-
  tions and warrants                                                             3          2         2
 Tax benefit associated with the exercise of options  ..................        15          -         -
 Issuance of common stock on conversion of 6.5% subordinated deben-
  tures, net ($26.16 per share)                                                 49          -         -
 Common stock dividends (1994-3% per share)  ...........................         -          -        47
 AES Chigen Class A redeemable common stock  ...........................         -         51       (12)
                                                                             ------     ------     -----
Balance at December 31  ................................................    $  360     $  293     $ 240
                                                                             ======     ======     =====
Retained earnings
 Balance at January 1   ................................................    $  271     $  164     $ 111
 Net income for the year   .............................................       125        107       100
 Common stock dividends (1994-3% per share)  ...........................         -          -       (47)
                                                                             ------     ------     -----
Balance at December 31  ................................................    $  396     $  271     $ 164
                                                                             ======     ======     =====
Cumulative foreign currency translation adjustment
 Balance at December 31 ................................................    $  (33)    $  (10)    $  (3)
                                                                             ======     ======     =====
Treasury stock
 Balance at December 31 ................................................    $   (3)    $   (6)    $   -
                                                                             ======     ======     =====
</TABLE>


Stock  Split  and  Stock  Dividend - On December 7, 1993, the Board of Directors
authorized  a  three-for-two  split,  effected  in the form of a stock dividend,
payable  to  stockholders  of  record  on  January 15,  1994.  Additionally,  on
February 17,  1994,  the  Company  declared  a  3%  stock  dividend,  payable to
stockholders  of  record  on March 10, 1994. Accordingly, all outstanding share,
per  share  and stock option data in all periods presented have been restated to
reflect the split and the 3% stock dividend.

                                      

<PAGE>

On  July 30, 1996, the Company exercised its right to redeem the Debentures at a
redemption  price  equal  to  approximately  104% of the principal amount of the
debentures,  together with accrued interest through the date of redemption. As a
result,  $49.7 million  of the debentures were converted into 1.9 million shares
of common stock of the Company at a conversion price of $26.16 per share.


Stock  Options  and  Warrants  - The  Company  has granted options for shares of
common  stock  under  its  stock option plans. Under the terms of the plans, the
Company  may issue options to purchase shares of the Company's common stock at a
price  equal  to 100% of the market price at the date the option is granted. The
options  become  eligible  for exercise under various schedules. At December 31,
1996,  there  were  approximately  2 million  shares  reserved for future grants
under  the  plans.  A  summary  of  the option activity follows (in thousands of
shares):


<TABLE>
<CAPTION>
                                                                         December 31,
                                            ------------------------------------------------------------------------
                                                              1996                     1995                     1994
                                            ----------------------   ----------------------   ----------------------
                                                       Weighted-                Weighted-                Weighted-
                                                       Average                  Average                  Average
                                                       Exercise                 Exercise                 Exercise
                                            Shares     Price         Shares     Price         Shares     Price
                                            --------   -----------   --------   -----------   --------   -----------
<S>                                            <C>     <C>              <C>      <C>            <C>       <C>  
Options outstanding-beginning of year  ..      4,063   $14.56           3,540    $12.07         2,999     $9.78
Exercised during the year   .............       (480)   10.69            (355)    17.71         (187)      2.65
Forfeitures during the year  ............       (216)   20.55             (57)    18.36          (12)     13.17
Granted during the year   ...............        643    38.78             935     20.04          740      18.91
                                              ------   -------         ------   -------       ------     ------
Outstanding-end of year   ...............      4,010    18.59           4,063     14.56        3,540      12.07
                                              ------   -------         ------   -------       ------     ------
                                                       $
Eligible for exercise-end of year  ......      2,132    12.86           1,209     $9.03        1,059      $6.02
                                              ======   =======         ======   =======       ======     ======
</TABLE> 


The  following  table  summarizes information about stock options outstanding at
December 31, 1996 (in thousands of shares):


<TABLE>
<CAPTION>
                                             Options Outstanding                            Options Exercisable
                           ------------------------------------------------------- --------------------------------------
                                                Remaining Life   Weighted-Average                      Weighted-Average
 Range of Exercise Prices  Total Outstanding        (in years)     Exercise Price  Total Exercisable     Exercise Price
-------------------------- ------------------- ---------------- ------------------ ------------------- -----------------
<S>                                 <C>                 <C>             <C>                 <C>                <C>
$1.55 to $6.47............          1,013               3.3             $5.14               1,011              $5.14
$11.65 to $19.75 .........          1,261               6.9             17.54                 492              17.44
$20.00 to $28.88 .........          1,248               8.3             20.97                 593              20.79
$31.75 to $44.13 .........            488              10.0             43.14                  36              36.31
                                   ------                                                  ------
Total   ..................          4,010                                                   2,132
                                   ======                                                  ======
</TABLE>


The  Company  accounts  for its stock-based compensation plans under APB No. 25,
and  as a result, no compensation expense has been recognized in connection with
the  options,  as  all  options  have been granted only to AES people, including
Directors,  with  an  exercise  price equal to the market price of the Company's
common  stock  on  the  date  of  grant.  The  Company  adopted SFAS No. 123 for
disclosure  purposes  in 1996. For SFAS No. 123 purposes, the fair value of each
option  grant has been estimated as of the date of grant using the Black-Scholes
option  pricing model with the following weighted average assumptions: risk-free
interest  rate  of 6.5%, 5.5%, and 7.5% and expected volatility of 28%, 24%, and
22%  for  the  years  ended 1996, 1995 and 1994, respectively, a dividend payout
rate  of  zero for each year and an expected option life of 7 years. Using these
assumptions,  the  weighted  average  fair value of the stock options granted is
$17.61  and  $8.17  for  1996  and 1995, respectively. There were no adjustments
made  in  calculating  the  fair  value to account for vesting provisions or for
non-transferability or risk of forfeiture.

                                      

<PAGE>

Had   compensation  expense  been  determined  consistent  with  SFAS  No.  123,
utilizing  the assumptions detailed above, the Company's net income and earnings
per  share  for  the year ended December 31, 1996, 1995 and 1994 would have been
reduced to the following pro forma amounts (in millions):

                                                  For the Years Ended
                                                      December 31,
                                               --------------------------
                                                1996      1995      1994
                                               -------   -------   ------
Net Income:
 As Reported  ..............................    $ 125     $ 107     $ 100
 Pro forma .................................      121       106       100
Net income per common share:
 As Reported  ..............................    $1.62     $1.41     $1.32
 Pro forma .................................     1.57      1.40      1.32


The  use  of  such  amounts  and  assumptions  are  not intended to forecast any
possible  future appreciation of the Company's stock price or change in dividend
policy.

In  addition  to  the  options  described  above,  the  Company  has outstanding
warrants  to purchase up to 0.7 million shares of its common stock at $29.43 per
share   through  July 2000,  which  were  issued  as  partial  settlement  of  a
shareholder  class  action  suit  and  were expensed in 1995. Warrants exercised
under this settlement were not significant at December 31, 1996.

AES  China  Generating  Co.  Ltd. - During 1994, AES Chigen completed an initial
public  offering  for  the  sale  of  10.2 million  shares of Class A redeemable
common  stock.  Prior to the offering, AES contributed $50 million to AES Chigen
for  7.5 million  shares  of  Class B  common  stock.  AES,  as the sole Class B
holder,  is  entitled to elect one-half of the board of directors of AES Chigen.
As  of  December 22,  1995,  AES  Chigen had entered into binding commitments to
invest  in  excess  of $50 million in power projects in the People's Republic of
China  and  the  previously  held  right  of Class A Shareholders to require AES
Chigen  to  repurchase  their  shares  has expired. As a result, the Company has
allocated  the  net  proceeds  from  the  issuance  of  the  Class A  shares  to
additional  paid-in capital and minority interest during 1995. In November 1996,
the  Company  and  AES  Chigen  signed a definitive agreement for the Company to
acquire  the approximately 8.2 million outstanding Class A shares of AES Chigen.
The  acquisition  will  be accomplished by amalgamating AES Chigen with a wholly
owned  subsidiary  of  the  Company.  Subject  to approval of the holders of the
Class A  common  stock,  AES  Chigen  shareholders  will  receive  shares of the
Company  common stock at an exchange rate of 0.29 shares of the Company's common
stock for each share of AES Chigen common stock.

8. INCOME TAXES

Income   Tax   Provision  - The  provision  for  income  taxes  attributable  to
continuing operations consists of the following (in millions):

                                                  --------------------------
                                                     For the Years Ended
                                                         December 31,
                                                  --------------------------
                                                   1996      1995      1994
                                                  -------   -------   ------
Federal
 Current   ....................................     $ 19        $ 4    $ 2
 Deferred  ....................................       27         47     35
State
 Current   ....................................       12          5      4
 Deferred  ....................................       (2)         1      3
Foreign
 Current   ....................................        3          -      -
 Deferred  ....................................        1          -      -
                                                     ----      ----    ----
Total   .......................................     $ 60        $57    $44
                                                     ====      ====    ====


                                      

<PAGE>

Effective   and   Statutory   Rate  Reconciliation  - A  reconciliation  of  the
U.S. statutory  federal income tax rate to the Company's effective tax rate as a
percentage  of income before taxes (excluding earnings and taxes from affiliates
accounted for on the equity method, and minority interests) is as follows:


                                                  --------------------------
                                                     For the Years Ended
                                                         December 31,
                                                  --------------------------
                                                   1996      1995      1994
                                                  -------   -------   ------
Statutory federal tax rate   ..................       35%       35%       35%
Change in valuation allowance   ...............       (2)       (6)       (2)
State taxes, net of federal tax benefit  ......        6         6         5
Foreign taxes .................................        2         -         -
Other-net  ....................................       (1)        3        (4)
                                                    ----      ----      ----
Effective tax rate  ...........................       40%       38%       34%
                                                    ====      ====      ====

Deferred  Income Taxes - Deferred income taxes relate principally to accelerated
depreciation  methods used for tax purposes and certain other expenses which are
deducted  for  income  tax  purposes,  but not for financial reporting purposes.
Deferred  income  taxes reflect the net tax effects of (a) temporary differences
between  the  carrying amounts of assets and liabilities for financial reporting
purposes  and  the  amounts used for income tax purposes, and (b) operating loss
and  tax  credit  carryforwards. These items are stated at the enacted tax rates
that  are  expected  to  be in effect when taxes are actually paid or recovered.
Deferred tax assets and deferred tax liabilities are as follows (in millions):


<TABLE>
<CAPTION>
                                                                 ---------------------------------
                                                                        For the Years Ended
                                                                           December 31,
                                                                 ---------------------------------
                                                                   1996        1995        1994
                                                                 ---------   ---------   ---------
<S>                                                              <C>         <C>         <C>
Differences between book and tax basis of property and total
 deferred tax liability   ....................................     $  379      $  379      $  219
Operating loss carryforwards .................................       (124)       (167)       (231)
Tax credit carryforwards  ....................................        (97)        (71)        (68)
Other deductible temporary differences   .....................        (13)         (1)        (15)
                                                                    ------      ------      ------
Total gross deferred tax asset  ..............................       (234)       (239)       (314)
Less: valuation allowance ....................................         33           9         168
                                                                    ------      ------      ------
Total net deferred tax asset .................................       (201)       (230)       (146)
                                                                    ------      ------      ------
Net deferred tax liability   .................................     $  178      $  149      $   73
                                                                    ======      ======      ======
</TABLE>


As   of   December 31,   1996,  the  Company  had  federal  net  operating  loss
carryforwards  for tax purposes of approximately $295 million expiring from 2001
through  2010,  federal  investment tax credit carryforwards for tax purposes of
approximately  $54 million  expiring  in  years  2001  through 2006, foreign tax
credit  carryforwards  of  $3 million  expiring  in 2001 and federal alternative
minimum  tax  credits  of  approximately  $30 million which carryforward without
expiration.

The  valuation  allowance  increased  during  the  current year by approximately
$24 million   to  $33 million  at  December 31,  1996.  This  increase  resulted
primarily  from  the  acquisition  of foreign entities with certain pre-existing
deferred  tax  assets, the ultimate realization of which cannot be determined on
a  more  likely  than  not basis. The valuation allowance for these pre-existing
deferred  tax  assets  was recorded as acquisition adjustments and had no effect
on  the  current year income tax expense. The $33 million valuation allowance at
December 31,  1996  relates  primarily  to  state and foreign tax credits, state
operating  losses, and deferred tax assets, the ultimate realization of which is
uncertain.  The  Company  believes  that  it  is  more  likely than not that the
remaining deferred tax assets will be realized.

                                     

<PAGE>

The  valuation  allowance decreased during 1995 by approximately $159 million to
$9 million.  The  primary reason for this decrease was the Company's purchase of
the  outstanding debt of AES Deepwater on January 20, 1995, which had the effect
of  reducing  certain  of  the  Company's  deferred  tax  assets. The $9 million
valuation  allowance at December 31, 1995 related primarily to state tax credits
and  foreign  operating  losses, the ultimate realization of which is uncertain.
The  Company  believes  that  it  is  more  likely  than  not that the remaining
deferred tax assets will be realized.

Undistributed  earnings  of certain foreign affiliates aggregated $85 million on
December 31,  1996.  The  Company  considers  these  earnings to be indefinitely
reinvested  outside  of  the  U.S. and, accordingly, no U.S. deferred taxes have
been  recorded  with respect to the earnings. Should the earnings be remitted as
dividends,  the  Company  may  be  subject  to  additional  U.S. taxes,  net  of
allowable  foreign  tax credits. It is not practicable to estimate the amount of
any additional taxes which may be payable on the undistributed earnings.

9. PROFIT SHARING AND DEFERRED COMPENSATION PLANS

Profit  Sharing  and Stock Ownership Plan - The Company has a profit sharing and
stock  ownership plan, qualified under section 401 of the Internal Revenue Code,
which  is  available  to  all  AES  people. The profit sharing plan provides for
Company  matching  contributions,  other Company contributions at the discretion
of  the  Compensation Committee of the Board of Directors, and discretionary tax
deferred  contributions  from the participants. Participants are fully vested in
their  own  contributions and the Company's matching contributions. Participants
vest   in   other   Company  contributions  over  a  five-year  period.  Company
contributions  to  the  plan  were  $4 million for each of the years ended 1996,
1995 and 1994.

Deferred  Compensation  Plans  - The  Company  has  a deferred compensation plan
under  which  directors  of  the  Company  may elect to have a portion or all of
their  compensation  deferred.  The  amounts  allocated  to  each  participant's
deferred  compensation  account  may  be converted into common stock units. Upon
termination  or  death  of a participant, the Company is required to distribute,
under  various methods, cash or the number of shares of common stock accumulated
within  the  participant's  deferred compensation account. Distribution of stock
is  to  be  made  from  common  stock  held  in  treasury or from authorized but
previously  unissued  shares.  The  plan  terminates  and  full  distribution is
required  to  be  made  to  all  participants upon any changes of control of the
Company (as defined therein).

In  addition, the Company has an executive officers' deferred compensation plan.
At  the  election  of  an  executive  officer,  the  Company  will  establish an
unfunded,  non-qualified  compensation  arrangement for each officer who chooses
to  terminate  participation  in the Company's profit sharing and employee stock
ownership  plan.  The  participant may elect to forego payment of any portion of
his  or  her  compensation  and have an equal amount allocated to a contribution
account.  In addition, the Company will credit the participant's account with an
amount  equal  to the Company's contributions (both matching and profit sharing)
that  would  have  been  made  on  such officer's behalf if he or she had been a
participant  in  the  profit sharing plan. The participant may elect to have all
or  a  portion  of  the  Company's  contribution  converted  into  stock  units.
Dividends  paid  on  common  stock are allocated to the participant's account in
the  form  of  stock units. The participant's account balances are distributable
upon termination of employment or death.

During  1995,  the  Company  adopted  a  supplemental  retirement  plan covering
certain  AES  people.  The plan provides incremental profit sharing and matching
contributions  to  participants  that  would have been paid to their accounts in
the  Company's  profit  sharing  plan  if it were not for limitations imposed by
income  tax  regulations. All contributions to the plan are vested in the manner
provided   in   the   Company's   profit  sharing  plan,  and  once  vested  are
nonforfeitable.  The  participant's  account  balances  are  distributable  upon
termination of employment or death.

The  Company is not obligated under any post-retirement benefit plans other than
the profit sharing and deferred compensation plans described in this Note.

                                      

<PAGE>

10. QUARTERLY DATA (UNAUDITED)

The  following table summarizes the unaudited quarterly statements of operations
(in millions, except per share amounts):

                               ----------------------------------------
                                         Quarters Ended 1996
                               ----------------------------------------
                               Mar 31     Jun 30     Sep 30     Dec 31
                               --------   --------   --------   -------
Sales and services .........    $ 172      $ 174      $ 205      $ 284
Gross margin ...............       74         76         85         98
Net income   ...............       29         28         32         36
Net income per share  ......    $0.38      $0.37      $0.42      $0.46


                               ----------------------------------------
                                         Quarters Ended 1995
                               ----------------------------------------
                               Mar 31     Jun 30     Sep 30     Dec 31
                               --------   --------   --------   -------
Sales and services .........    $ 169      $ 166      $ 173      $ 171
Gross margin ...............       69         69         73         74
Net income   ...............       25         27         27         28
Net income per share  ......    $0.33      $0.35      $0.36      $0.37


11. GEOGRAPHIC SEGMENTS

Information  about  the Company's operations in different geographic areas is as
follows (in millions):

                        -----------------------
                          For the Years Ended
                             December 31,
                        -----------------------
                        1996     1995     1994
                        ------   ------   -----
Revenues
North America  ......    $554     $542    $523
South America  ......     146      131       2
Asia  ...............      45        1       -
Europe   ............      90        5       8
                         -----    -----   -----
Total ...............    $835     $679    $533
                         =====    =====   =====


                        --------------------------
                           For the Years Ended
                               December 31,
                        --------------------------
                        1996     1995      1994
                        ------   ------   --------
Operating Income
North America  ......    $258     $251      $ 245
South America  ......      21       14          -
Asia  ...............      (9)      (8)       (11)
Europe   ............       8       (4)         2
                         -----    -----      -----
Total ...............    $278     $253      $ 236
                         =====    =====      =====


                                      

<PAGE>


                        -----------------------------
                             For the Years Ended
                                December 31,
                        -----------------------------
                         1996       1995      1994
                        --------   --------   -------
Identifiable Assets
North America  ......    $1,831     $1,693    $1,569
South America  ......       683        230        46
Asia  ...............       744        328       221
Europe   ............       364         90        79
                         -------    -------   -------
Total ...............    $3,622     $2,341    $1,915
                         =======    =======   =======

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

The  estimated  fair  values  of  the Company's assets and liabilities have been
determined   using   available   market   information.  The  estimates  are  not
necessarily  indicative  of  the  amounts the Company could realize in a current
market  exchange.  The  use  of  different  market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.

The  fair  value  of current financial assets, current liabilities, debt service
reserves  and  other deposits, and other assets are assumed to be equal to their
reported  carrying  amounts.  The  fair  value  of  project  financing  debt  is
estimated  differently  based  upon  the  type of loan. For variable rate loans,
carrying  value approximates fair value. For fixed rate loans, the fair value is
estimated  using  discounted  cash  flow analyses based on the Company's current
incremental  borrowing  rates  at  which similar borrowing arrangements would be
made  under  current conditions, or by the estimated discount rate a prospective
seller  would  pay to a credit-worthy third party to assume the obligations. The
carrying  value  and  fair  value  of  the AES Placerita capital lease have been
excluded  from  this  disclosure.  The  fair  value  of  swap  agreements is the
estimated  net  amount that the Company would pay to terminate the agreements at
the  balance  sheet  date.  The estimated fair values of the Debentures, 93|M/4%
Notes  and  101|M/4% Notes are based on the quoted market prices at December 31,
1996 and 1995.

The   estimated   fair   values   of  the  Company's  financial  instruments  at
December 31, 1996 and 1995 are as follows (in millions):

                               -------------------------------------------------
                                         1996                     1995
                               ------------------------- -----------------------
                               Carrying                  Carrying
                                Amount      Fair Value   Amount      Fair Value
                               ----------   ------------ ---------   -----------
Project financing debt  ....      $1,562        $1,562      $1,071       $1,078
Other notes payable  .......         538           560         175          180
Interest rate swaps  .......           -            68           -          137


The  fair  value  estimates  presented herein are based on pertinent information
available  as  of  December 31,  1996  and 1995. The Company is not aware of any
factors  that  would significantly affect the estimated fair value amounts since
that date.

13. SUBSEQUENT EVENTS

On  June  30, 1997, AES acquired the international assets of Destec Energy, Inc.
("Destec")  for a total of $436 million. The purchase will include five electric
generating  plants  and a number of power projects in development. The plants to
be  acquired by AES (with ownership percentages in parenthesis) include a 110 MW
gas-fired  combined  cycle  plant  in Kingston, Canada (50%); a 405 MW gas-fired
combined  cycle plant in Terneuzen, Netherlands (50%); a 140 MW gas-fired simple
cycle  plant  in Cornwall, England (100%); a 235 MW oil-fired simple cycle plant
in  Santo  Domingo,  Dominican Republic (99%); and a 1600 MW coal-fired plant in
Victoria, Australia (20%).

In  May 1997, the Company and its partner, CEA acquired an aggregate of 90% (AES
acquired  60%  and  CEA acquired 30%) of two integrated electricity companies of
ESEBA  serving  certain  portions of the province of Buenos Aires, Argentina for
an  aggregate purchase price of $565 million. The remaining 10% will be owned by
the employees of each of the two acquired companies.

                                      

<PAGE>

On  May  8,  1997,  AES completed its amalgamation with AES China Generating Co.
Ltd.   (see  Note  7).  As  a  result  of  the  amalgation  the  Company  issued
approximately  2.5 million shares of AES Common Stock in exchange for all of the
outstanding AES Chigen Class A Common Stock.

In  May  1997,  AES  through a consortium agreed to acquire approximately 13% of
CEMIG,  an  integrated electric utility service in the State of Minas Gerais for
approximately  $1  billion. These shares also represent a 33% voting interest in
CEMIG.

  (b)  Unaudited Pro Forma Consolidated Financial Information

The following tables and related notes present financial  information at and for
the  periods  presented  herein  to give  effect  on a pro  forma  basis  to the
Company's  acquisitions  of Destec's  international  assets and the  interest in
CEMIG. The following pro forma information also gives effect to the financing of
the ESEBA Acquisition but does not give effect to the ESEBA  Acquisition  itself
because separate historical financial results of the two distribution  companies
acquired by the Company  pursuant to the ESEBA  Acquisition  are not  separately
available. There can be no assurance that inclusion of such historical financial
information  would not have had a material  adverse  effect on the following pro
forma financial information.  The Company believes that the historical operating
results of ESEBA are not indicative of the future  operating  results of the two
distribution  companies acquired in the ESEBA Acquisition  because,  among other
things (i) these  distribution  companies will be operated as separate  entities
rather than as part of a unified  company and (ii) in connection  with the ESEBA
Acquisition  AES  negotiated  new  labor  and  concessionary  arrangements.  The
unaudited pro forma adjustments are based upon available information and certain
assumptions  and estimates which the Company  believes are reasonable  under the
circumstances.  The  unaudited pro forma results do not purport to be indicative
of the results that would have been  obtained had the  acquisitions  occurred at
the beginning of the periods presented, nor are they intended to be a projection
of future results. The unaudited pro forma financial  information should be read
in conjunction with the notes herein.

The   following  unaudited  pro  forma  consolidated  statements  of  operations
information  combine the results of AES's investment in CEMIG and Destec and the
ESEBA  financing  for  the  year  ended  December 31, 1996 and the quarter ended
March  31,  1997 as if the acquisitions had occurred on January 1, 1996.


<TABLE>
<CAPTION>
                                                       Year Ended December 31, 1996(1)(2)
                                        -------------------------------------------------------------------
                                                                  Adjustments                  Pro Forma
                                                  Adjustments   for the ESEBA   Adjustments    for certain
                                        Actual      for CEMIG       financing    for Destec   acquisitions
                                        -------- ------------- ---------------  ------------  -------------
<S>                                     <C>          <C>           <C>           <C>           <C>     
In millions, except per share data                                                                     
Statements of Operations Data:                                                                         
Total revenues ........................  $  835      $     -       $      -      $  441(4)     $ 1,276 
Total operating cost and expenses   ...     557            -              -         421(4)         978 
                                         -------     -------       --------      --------      ------- 
Operating income  .....................     278            -                         20            298 
Other income and (expense):                                                                            
Interest expense  .....................    (144)         (56)           (35)        (10)          (245)
Interest income   .....................      24            -              -           -             24 
Equity in earnings of affiliates ......      35           50              -           -             85 
                                         -------     -------       --------      --------      ------- 
Income (loss) before income taxes and                                                                  
 minority interest   ..................     193           (6)           (35)         10            162 
Income tax (benefit) ..................      60          (22)           (14)          1             25 
Minority interest .....................       8            5              -           -             13 
                                         -------     -------       --------      --------      ------- 
Net income (loss) .....................  $  125      $    11       $    (21)     $    9        $   124 
                                         =======     =======       ========      ========      ======= 
Net income (loss) per share(3)   ......  $ 1.62      $  0.14       $  (0.27)     $ 0.11        $  1.55 
                                         =======     =======       ========      ========      ======= 
</TABLE>


<PAGE>



<TABLE>
<CAPTION>
                                                            Quarter Ended March 31, 1997(1)(2)
                                           -------------------------------------------------------------------
                                                                   Adjustments
                                                                       for the                    Pro Forma  
                                                     Adjustments         ESEBA     Adjustments    for certain
                                           Actual      for CEMIG     financing      for Destec   acquisitions
                                           -------- ------------- -------------    ------------  -------------
<S>                                         <C>        <C>           <C>            <C>            <C>   
In millions, except per share data                                                                       
Statements of Operations Data:                                                                           
Total revenues ...........................  $  261     $       -     $       -      $   39         $  300
Total operating cost and expenses   ......     183             -             -          36            219
                                            -------      --------      --------     ------         ------
Operating income  ........................      78             -             -           3             81
Other income and (expense):                                                                              
Interest expense  ........................     (44)          (13)           (8)         (3)           (68)
Interest income   ........................       8             -             -           -              8
Equity (loss) in earnings of affiliates         16             3             -           1             20
                                            -------      --------      ---------    ------         ------
Income (loss) before income taxes and                                                                    
 minority interest   .....................      58           (10)           (8)          1             41
Income taxes (benefit)  ..................      16            (5)           (3)         (1)             7
Minority interest ........................       2             -             -           -              2
                                            -------      --------      ---------    ------         ------
Net income (loss) ........................  $   40     $      (5)    $      (5)     $    2         $   32
                                            =======      ========      =========    ======         ======
Net income (loss) per share(3)   .........  $ 0.50     $   (0.06)    $   (0.06)     $ 0.02         $ 0.39
                                            =======      ========      =========    ======         ======
</TABLE>


The  following  unaudited  pro  forma  consolidated  balance  sheet  information
represents  AES's  financial  position  at  March  31,  1997  as  if  the recent
acquisitions described above had occurred on that date.


<TABLE>
<CAPTION>
                                                        As of March 31, 1997(1)(2)
                                     ------------------------------------------------------------------
                                                             Adjustments
                                                                 for the                   Pro Forma   
                                               Adjustments         ESEBA    Adjustments    for certain 
                                      Actual     for CEMIG     financing     for Destec   acquisitions 
                                     -------- ------------- -------------   ------------  -------------
<S>                                   <C>          <C>          <C>         <C>            <C>    
In millions                                                                                       
Balance Sheet Data:                                                                               
Current assets .....................  $  730       $    -       $    -      $  (103)       $   627
Non-current assets   ...............   3,348        1,038          390          388          5,164
                                      -------      -------      -----       -------        -------
Total assets   .....................  $4,078       $1,038         $390      $   285        $ 5,791
                                      =======      =======      =====       =======        =======
Current liabilities  ...............  $  276       $  343         $242      $    56        $   917
Long-term liabilities   ............   2,450          656          148          229          3,483
Minority interest ..................     211           39            -            -            250
Company-obligated mandatorily                                                                     
 redeemable preferred securities                                                                  
 of AES Trust I   ..................     250            -            -            -            250
Shareholders' equity ...............     891            -            -            -            891
                                      -------      -------      -----       -------        -------
Total liabilities and shareholders'                                                               
 equity  ...........................  $4,078       $1,038         $390      $   285        $ 5,791
                                      =======      =======      =====       =======        =======
</TABLE>


<PAGE>


(1) Basis of presentation:

     The  Company's  acquisition  of  the  Destec  international assets is being
accounted  for as a purchase. The purchase price allocation has been prepared on
a  preliminary basis pending completion of engineering, environmental, legal and
valuation  analyses,  all of which are ongoing. The excess of the purchase price
over  the  net  assets  acquired  will  be  amortized over 40 years. The Company
intends  to  sell  its  interest  in  the Hazelwood project and as a result, the
financing  costs  and equity in earnings related to such interest are treated as
adjustments to the Destec purchase price allocation.

     The  Company's  purchase  of  an  economic interest of approximately 13% in
CEMIG,  which  also  represents  an approximate voting interest of 30%, has been
recorded  as  an investment in subsidiaries, and will be accounted for using the
equity   method.   The  purchase  price  allocation  has  been  prepared,  on  a
preliminary  basis  pending  completion of engineering, environmental, legal and
valuation  analyses,  all of which are ongoing. The excess of the purchase price
over the net assets acquired will be amortized over 40 years.

     The  following pro forma information also gives effect to the financing for
the  ESEBA  Acquisition but does not give effect to the ESEBA Acquisition itself
because  separate historical financial results of the two distribution companies
acquired  by  the  Company  pursuant to the ESEBA Acquisition are not separately
available.

     The  summary  unaudited  pro  forma financial information has been prepared
based  on  the Company's estimate of CEMIG's and Destec's financial position and
results of operations in conformity with U.S. GAAP.

     Equity  in  earnings  of  CEMIG has been translated at the average exchange
rate  during  the  year  of R$1.04 to U.S.$1.00. The statement of operations for
the  quarter  ended  March  31, 1997 has been translated at the average exchange
rate during the quarter of R$1.07 to U.S.$1.00.

     Income  taxes  have  been recorded based on the historical rates in effect,
adjusted as necessary, to reflect any incremental U.S. federal income taxes.

(2) Financing  -  For  purposes of the unaudited pro forma financial information
presented   herein,   the  acquisitions  are  assumed  to  be  funded,  and  the
adjustments are calculated, as follows:

     (a) The  acquisition  of  the  Destec international assets is assumed to be
funded  through  the  use of the proceeds from the $250 million TECONS offering,
the  net  proceeds  of  the $150 million offering of AES Common Stock, and funds
available under the Company's Revolver.

     (b) The  ESEBA  financing  is  assumed  to be funded through the use of the
ESEBA  Bridge  of  $200  million,  project  financing debt of $148 million at an
interest  rate  of  7.4%  related  to the ESEBA Acquisition, and the drawdown of
funds available under the Company's Revolver.

     (c) The  acquisition  of  the  Company's  interest in CEMIG has been funded
assuming  the  use  of  the  CEMIG Bridge of $250 million at an interest rate of
8.25%,  the  AES  Bridge  Loan of $200 million at an interest rate of 7.75%, and
project  financing  of  $126  million  at an interest rate of 9.75%, provided by
BNDES,  the  State  Development  Bank  of  Brazil.  The remaining portion of the
purchase   price  amounting  to  approximately  $527  million  is  deferred,  by
contract,  for  a  period of one year. Such obligation bears no interest and has
been  guaranteed by BNDES for a fee of 1% per year which is included in interest
expense.  No  additional  subsequent  financing  costs  are assumed in these pro
formas.

(3)  Earnings  per  share  for the Destec pro forma adjustment columns and those
columns  that  include  Destec adjustments are calculated including 2.55 million
shares  of  AES  Common  Stock issued to finance that acquisition as though they
were  issued  January  1,  1996, but are not adjusted to reflect the issuance of
approximately  2.50  million  shares  of AES Common Stock in connection with the
Chigen Amalgamation in May 1997.

(4)  Includes $384 million and $370 million of revenues and costs, respectively,
in  the  fiscal year ended 1996 and $9 million and $8 million, respectively, for
the   quarter  ended  March  31,  1997,  related  to  services  performed  under
construction  contracts  for  the Elsta, Kingston, and Hazelwood projects. These
projects  will  be  substantially  complete in the near future and, as a result,
such  revenue  and  costs  will  not  continue  after  contract  completion. The
Company's  share  of profits (based on its ownership interest in each respective
project)  resulting  from  services  performed under these contracts is deferred
and amortized over the life of the respective project.

(c) Exhibits:

10.1 Amendment  No.1  dated  May 22,  1997 to the  Credit  Agreement  among  the
     Company,  the banks party thereto,  the fronting  banks party thereto,  and
     Morgan Guaranty Trust Company of New York, as Agent.

23.1 Consent of Deloitte & Touche LLP.

<PAGE>

                                   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 hereunto duly authorized.


                                            THE AES CORPORATION
                                            -------------------
                                                (Registrant)

Date: July 3, 1997                          By /s/ Barry J. Sharp
                                              ---------------------------
                                               Barry J. Sharp
                                               Chief Financial Officer
[{"type": "8-K", "sequence": "1", "description": "FORM 8-K", "secsgml_size_bytes": 110868}]
{"company-data": {"conformed-name": "AES CORPORATION", "cik": "0000874761", "assigned-sic": "4991", "irs-number": "541163725", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-12291", "film-number": "97636391"}, "business-address": {"street1": "1001 N 19TH ST", "city": "ARLINGTON", "state": "VA", "zip": "22209", "phone": "7035221315"}}
SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

                       PURSUANT TO SECTION 13 OR 15 (D) OF

                       THE SECURITIES EXCHANGE ACT OF 1934

         Date of Report (date of earliest event reported): June 18, 1997

                               THE AES CORPORATION
             (exact name of registrant as specified in its charter)

       DELAWARE                   333-15487                    54-1163725
     (State  of               (Commission File No.)           (IRS Employer 
    Incorporation)                                         Identification No.)

                       1001 North 19th Street, Suite 2000
                            Arlington, Virginia 22209
          (Address of principal executive offices, including zip code)

               Registrant's telephone number, including area code:
                                 (703) 522-1315

                                 NOT APPLICABLE

          (Former Name or Former Address, if changed since last report)
ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS

On June 18, 1997,  AES together  with The Southern  Company and The  Opportunity
Fund,  a  Brazilian  investment  fund,  (collectively,  the  "AES  Consortium"),
acquired 14.41% of Companhia Energtica de Minas Gerais ("CEMIG"),  an integrated
electric  utility  serving  the  State of Minas  Gerais in  Brazil,  for a total
purchase price of  approximately  $1.056 billion,  $654 million of the financing
for which was in the form of non-recourse  financing  provided by Banco Nacional
de Desenvolvimento  Economico e Social ("BNDES").  AES's portion of the purchase
price was approximately $364 million after  consideration of the BNDES facility.
The shares of CEMIG,  which represent  approximately 33% of the voting interest,
have been purchased from the State of Minas Gerais in a partial privatization of
CEMIG.  Initially,  AES and The  Opportunity  Fund  will have a 90.6% and a 9.4%
economic interest in the AES Consortium,  respectively. The Southern Company has
an option  until  January 9, 1998 to  purchase  up to a 25%  interest in the AES
Consortium  from AES.  Pursuant  to a  shareholders  agreement  between  the AES
Consortium and the State of Minas Gerais,  AES will have  significant  operating
influence,  including the right to appoint the chief operating officer of CEMIG,
and will otherwise share control of CEMIG with the State of Minas Gerais.  CEMIG
owns  approximately  5,000 MW of generating  plants and serves  approximately  4
million  customers.   The  foregoing  transaction  and  the  financing  therefor
described below are referred to herein as the "CEMIG Acquisition".

On June 30, 1997, AES acquired the international  assets of Destec Energy,  Inc.
("Destec"),  a large  independent  energy producer with headquarters in Houston,
Texas,  at a total price to AES of  approximately  $436 million,  which price is
subject to  adjustment  to reflect net cash flow  adjustments.  NGC  Corporation
("NGC"),  working in conjunction with AES, was selected as the winning bidder in
an auction for all of Destec at a total acquisition price of $1.27 billion.  AES
acquired  the  international  assets  of  Destec  immediately   following  NGC's
acquisition of Destec.  Destec's  international  assets  acquired by AES include
ownership  interests in the  following  five  electric  generating  plants (with
ownership  percentages in  parentheses):  (i) a 110 MW gas-fired  combined cycle
plant in Kingston,  Canada (50 percent);  (ii) a 405 MW gas-fired combined cycle
plant in Terneuzen,  Netherlands (50 percent);  (iii) a 140 MW gas-fired  simple
cycle plant in Cornwall,  England (100 percent);  (iv) a 235 MW oil-fired simple
cycle plant in Santo Domingo,  Dominican Republic (99 percent);  and (v) a 1,600
MW coal-fired plant ("Hazelwood") in Victoria,  Australia (20 percent).  Each of
such plants is currently in operation,  except for the plant in Terneuzen  which
is under construction.  The acquisition by AES of Destec's  international assets
also includes Destec's non-U.S.  developmental  stage power projects,  including
projects in Taiwan, England,  Germany, the Philippines,  Australia and Colombia.
The  foregoing  transaction  and the  financing  therefor  described  below  are
referred to herein as the "Destec Acquisition".

On May 27,  1997,  a  subsidiary  of  AES,  and its  partner,  Community  Energy
Alternatives  ("CEA"),  acquired an aggregate  of 90% (AES  acquired 60% and CEA
acquired  30%) of two  distribution  companies  of Empresa  Social de Energia de
Buenos Aires S.A.  ("ESEBA")  serving certain portions of the Province of Buenos
Aires,  Argentina for an aggregate purchase price of $565 million. AES's portion
of the purchase price after consideration of non-recourse debt was $244 million.
The  remaining  10% will be owned by the  employees  of each of the two acquired
companies.  The  foregoing  transaction  is  referred  to herein  as the  "ESEBA
Acquisition".

AES funded its  acquisition of Destec through cash on hand and borrowings  under
its $425 million revolving credit facility (the "Revolver"). The net proceeds of
approximately  $387 million from the  Company's  issuance and sale of its common
stock,  par value $.01 per share (the "AES  Common  Stock"),  and  $2.6875  Term
Convertible  Securities,  Series  A  ("TECONS")  in March  1997 was  temporarily
applied to repay  amounts  outstanding  under the  Revolver.  AES  financed  its
acquisitions of CEMIG and ESEBA through: (i) $450 million in non-recourse bridge
financing,  comprised of a $250 million bridge loan (the "CEMIG  Bridge") to AES
CEMIG Funding Corporation,  a wholly-owned subsidiary of AES, by Morgan Guaranty
Trust  Company of New York ("Morgan  Guaranty"),  and a syndicate of banks and a
$200 million bridge loan (the "ESEBA Bridge") to AESEBA Funding  Corporation,  a
wholly-owned  subsidiary  of AES by Morgan  Guaranty,  and a syndicate of banks;
(ii) a $200  million  subordinated  bridge loan to AES (the "AES  Bridge  Loan")
co-led by Morgan  Guaranty,  DLJ Bridge  Finance,  Inc.,  and  Salomon  Brothers
Holding Inc.; (iii) non-recourse  project debt; (iv) borrowings under AES's $425
million  Revolver  provided by  Morgan Guaranty and a syndicate of banks and (v)
cash on hand.

AES intends to repay the ESEBA Bridge and the CEMIG Bridge through a combination
of proceeds from: (i) the sale of AES's interest in Hazelwood;  (ii)  additional
borrowings at one or more AES projects;  (iii) the  replacement of cash reserves
with  letters of credit at certain  AES  projects;  and (iv) if  exercised,  the
proceeds from the exercise of The Southern  Company's option to purchase up to a
25% interest in the AES  Consortium  from AES. None of the foregoing  sources of
funds is committed. Accordingly, there can be no assurances that such sources or
any other sources will be available to repay the ESEBA Bridge and CEMIG Bridge.

The  CEMIG  Bridge  and  ESEBA  Bridge mature in May 1998 or, in the case of the
ESEBA  Bridge,  earlier  if  AES  sells  its interest in Hazelwood. The interest
rates  on  both  the  CEMIG  Bridge and the ESEBA Bridge will initially be LIBOR
plus  2.5% and will increase by 1.0% each month beginning January 1, 1998. These
loans  are  secured  by  a  pledge  of  shares  of  AES Common Stock issued to a
subsidiary of AES.
ITEM 5. OTHER EVENTS

     This  Current  Report on Form 8-K includes the 1996 and the unaudited first
quarter 1997 consolidated financial statements filed under Item 7, together with
the Independent  Auditors' Report on the financial statements for the year ended
December 31, 1996.

ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS

a.(i) Financial statements of Businesses Acquired

     The  required audited  financial  statements  of CEMIG  will be filed on or
prior to August 31, 1997.

a.(ii)  The Company's  consolidated  balance sheets as of December 31, 1996, and
1995,  and March 1997  (unaudited)  and the related  consolidated  statements of
operations  and cash flows for each of the three years ended  December 31, 1996,
1995 and 1994, and for the three months ended March 31, 1997 and 1996 (quarterly
unaudited), and related notes thereto.
INDEPENDENT AUDITORS' REPORT

To the Stockholders
Of The AES Corporation:

We  have  audited  the  accompanying  consolidated  balance  sheets  of The  AES
Corporation  and  subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations and cash flows for each of the three years
in the period ended  December  31,  1996.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material   respects,   the  financial   position  of  The  AES  Corporation  and
subsidiaries at December 31, 1996 and 1995, and the results of their  operations
and their cash flows for each of the three  years in the period  ended  December
31, 1996 in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Washington, DC

January 30, 1997, except for the penultimate paragraph of Note 6 as to which the
date is March 13, 1997 as to which the date is June 30, 1997
The AES Corporation and Subsidiaries
                          Consolidated Balance Sheets
------------------------------------

                                                                                 December 31,        March 31,
                                                                             ---------------------   ------------
In millions, except par values                                                 1996        1995        1997
                                                                             ---------   ---------   ------------
                                                                                                     (unaudited)
Assets
Current Assets:
 Cash and cash equivalents   .............................................     $   185     $   239      $   423
 Short-term investments   ................................................          20          58           26
 Accounts receivable, net ................................................          95          54           86
 Inventory ...............................................................          81          36           71
 Receivable from affiliates  .............................................           9          11           12
 Deferred income taxes ...................................................          65          21           49
 Prepaid expenses and other current assets  ..............................          47          27           63
                                                                                -------     -------       -------
Total current assets   ...................................................         502         446          730
Property, Plant and Equipment:
 Land   ..................................................................          30           9           30
 Electric and steam generating facilities   ..............................       1,884       1,594        1,889
 Furniture and office equipment ..........................................          14          11           14
 Accumulated depreciation and amortization  ..............................        (282)       (222)        (295)
 Construction in progress ................................................         574         158          666
                                                                                -------     -------       -------
Property, plant and equipment, net .......................................       2,220       1,550        2,304
Other Assets:
 Deferred costs, net   ...................................................          47          32           59
 Project development costs   .............................................          53          41           59
 Investments in and advances to affiliates  ..............................         491          48          590
 Debt service reserves and other deposits   ..............................         175         168          207
 Goodwill & other intangible assets, net .................................          52          37           52
                                                                                -------     -------       -------
 Other assets ............................................................          82          19           77
                                                                                -------     -------       -------
Total other assets  ......................................................         900         345        1,044
                                                                                -------     -------       -------
Total   ..................................................................     $ 3,622     $ 2,341      $ 4,078
                                                                                =======     =======       =======
Liabilities and Stockholders' Equity
Current Liabilities:
 Accounts payable   ......................................................     $    64     $    33      $    61
 Income taxes payable  ...................................................                                    4
 Accrued interest   ......................................................          25          12           31
 Accrued and other liabilities  ..........................................          95          49           70
 Other notes payable - current portion   .................................          88          50            -
 Project financing debt - current portion   ..............................         110          84          110
                                                                                -------     -------       -------
Total current liabilities ................................................         382         228          276
Long-Term Liabilities:
 Project financing debt   ................................................       1,558       1,098        1,841
 Other notes payable   ...................................................         450         125          325
 Deferred income taxes ...................................................         243         170          228
 Other long-term liabilities .............................................          55          13           56
                                                                                -------     -------       -------
Total long-term liabilities  .............................................       2,306       1,406        2,450
Minority Interest   ......................................................         213         158          211
Commitments and Contingencies   ..........................................           -           -            -
Company-obligated Mandatorily Redeemable Preferred Securities of
 AES .....................................................................           -           -          250
Stockholders' Equity:
Preferred stock (no par value; 1 million shares authorized; none issued).            -           -            -
Common stock ($.01 par value; 100 million shares authorized; shares
 issued and outstanding: 1996 - 77.4 million; 1995 - 74.8 million).                  1           1            1
Additional paid-in capital   .............................................         360         293          509
Retained earnings   ......................................................         396         271          436
Cumulative foreign currency translation adjustment   .....................         (33)        (10)         (52)
Less treasury stock at cost (1996 - .1 million shares; 1995 - 
 .3 million shares) ......................................................          (3)         (6)          (3)
                                                                                -------     -------       -------
Total stockholders' equity   .............................................         721         549          891
                                                                                -------     -------       -------
Total   ..................................................................     $ 3,622     $ 2,341      $ 4,078
                                                                                =======     =======       =======
See Notes to Consolidated Financial Statements.
The AES Corporation and Subsidiaries
                     Consolidated Statements of Operations
-----------------------------------------------------
                                                                                                Three Months
                                                                                                     Ended
                                                                     December 31,                 March 31,
                                                           ---------------------------------   ----------------
In millions, except per share amounts                        1996        1995        1994      1997      1996
                                                           ---------   ---------   ---------   -------   ------
                                                                                                 (unaudited)
Revenues:
 Sales  ................................................     $  824      $  672      $  514    $258      $171
 Services  .............................................         11           7          19      3        1
                                                              ------      ------      ------    ----     ------
Total revenues   .......................................        835         679         533    261       172
Operating Costs and Expenses:
 Cost of sales   .......................................        495         388         252    165       97
 Cost of services   ....................................          7           6          13      2        1
 Selling, general and administrative expenses  .........         35          32          32      9        9
 Provision to reduce contract receivable ...............         20           -           -      7        -
                                                              ------      ------      ------    ----     ------
Total operating costs and expenses .....................        557         426         297    183        107
                                                              ------      ------      ------   -----     ------
Operating Income .......................................        278         253         236     78       65
Other Income and (Expense):
 Interest expense   ....................................       (144)       (127)       (125)   (44)      (30)
 Interest income .......................................         24          27          22      8        5
 Equity in earnings of affiliates (net of income tax) .          35          14          12     16        5
                                                              ------      ------      ------   -----     ------
Income Before Income Taxes,
 Minority Interest,
 and Extraordinary Item   ..............................        193         167         145     58       45
Income Taxes  ..........................................         60          57          44     16       15
Minority Interest   ....................................          8           3           3      2        1
                                                              ------      ------      ------    ----     ------
Income Before Extraordinary Item   .....................        125         107          98     40       29
Extraordinary item - net gain on extinguishment of
 debt (less applicable income taxes of $1)  ............          -           -           2      -        -
                                                              ------      ------      ------    ----     ------
Net Income .............................................     $  125      $  107      $  100     $40      $29
                                                              ======      ======      ======    ====     ======
Net Income Per Share:
 Before extraordinary gain   ...........................     $ 1.62      $ 1.41      $ 1.30    $0.50     $0.38
 Extraordinary gain ....................................          -           -        0.02      -
                                                              ------      ------      ------    ----      -----
Net Income Per Share   .................................     $ 1.62      $ 1.41      $ 1.32    $0.50     $0.38
                                                              ======      ======      ======   =====     ======
See Notes to Consolidated Financial Statements.
The AES Corporation and Subsidiaries
                     Consolidated Statements of Cash Flows
---------------------------------------------------
                                                                                                Three Months
                                                                  For the Years Ended               Ended
                                                                     December 31,                 March 31,
                                                           ---------------------------------   ---------------
In millions, except per share amounts                          1996       1995       1994      1997      1996
                                                           -----------   --------   --------   -------   -----
                                                                                                 (unaudited)
Operating Activities:
Net income .............................................     $    125      $  107     $  100    $40      $ 29
Adjustments to net income:   ...........................
 Depreciation and amortization  ........................           65          55         43    15         14
 Provision for deferred taxes   ........................           26          48         39     5         14
 Undistributed earnings of affiliates ..................          (20)          3         (3)  (16)        (4)
 Payments for deferred financing costs   ...............          (13)         (3)        (6)
 Other  ................................................            6           4          -   (12)         1
 Changes in working capital  ...........................           (7)        (17)        (9)  (22)        (9)
                                                              --------      ------     ------  ------    -----
Net cash provided by operating activities   ............          182         197        164    10         45
Investing Activities:
Property additions  ....................................         (506)       (171)       (10)  (97)       (45)
Acquisitions, net of cash acquired .....................         (148)       (121)         -     -        (20)
Sale of short-term investments  ........................          103         254        132                8
Purchase of short-term investments .....................          (66)       (218)      (204)   (6)         -
Affiliate advances and investments .....................         (430)        (10)         -   (90)        (1)
Project development costs ..............................          (16)        (22)       (17)   (6)        (2)
Debt service reserves and other assets   ...............          (72)        (55)       (21)   (39)       (6)
                                                              --------      ------     ------  ------    -----
Net cash used in investing activities ..................       (1,135)       (343)      (120)  (238)      (66)
Financing Activities:
Net borrowings (repayments) under the revolver .........          163          50          -   (213)      (19)
Issuance of company-obligated mandatorily
 redeemable preferred securities ("TECONS") ............            -           -          -   244          -
Issuance of project financing debt and other notes pay-
 able                                                             802         133          -    296        20
Repayments of project financing debt  ..................          (75)        (63)       (72)  (12)       (12)
Other liabilities   ....................................           (3)          8          -
Contributions by minority interests   ..................           10           7        152     2         (1)
Sale (repurchase) of common stock  .....................            2          (5)         -    149         1
                                                              --------      ------     ------  ------    -----
Net cash provided by financing activities   ............          899         130         80   466        (11)
Increase/(decrease) in cash and cash
 equivalents  ..........................................          (54)        (16)       124   238        (32)
Cash and cash equivalents, beginning  ..................          239         255        131   185        239
                                                              --------      ------     ------  ------    -----
Cash and cash equivalents, ending  .....................     $    185      $  239     $  255   $423      $207
                                                              ========      ======     ======  ======    =====
Supplemental disclosures:
Cash payments for interest   ...........................     $    134      $  120     $  127    $38      $ 23
Cash payments for income taxes  ........................           32           6          3    11          1
See Notes to Consolidated Financial Statements.
THE AES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The  AES  Corporation and its subsidiaries and affiliates (collectively "AES" or
the  "Company")  is  a  global  power  company  primarily engaged in developing,
owning and operating electric power generating facilities.

Principles  of  Consolidation  -  The  consolidated  financial statements of the
Company   include   the   accounts  of  AES,  its  subsidiaries  and  controlled
affiliates.  Investments  in 50% or less owned affiliates over which the Company
has  the  ability  to  exercise  significant  influence,  but  not  control, are
accounted  for using the equity method. The accounts of AES China Generating Co.
Ltd.  ("AES  Chigen"),  a  controlled  affiliate,  are consolidated based on its
fiscal  year ended November 30. Intercompany transactions and balances have been
eliminated.

Cash  and  Cash  Equivalents  -  The Company considers cash on hand, deposits in
banks,  certificates  of  deposit  and  short-term marketable securities with an
original maturity of three months or less as cash and cash equivalents.

Investments  -  Securities  that  the  Company  has both the positive intent and
ability  to  hold to maturity are classified as held-to-maturity and are carried
at  historical  cost. Other investments that the Company does not intend to hold
to  maturity  are  classified as available-for-sale, and any unrealized gains or
losses  are  recorded  as a separate component of stockholders' equity. Interest
and  dividends  on  investments  are  reported  in  interest  income. Short-term
investments  consist  of investments with original maturities in excess of three
months  but  less than one year. Debt service reserves and other deposits, which
might  otherwise  be  considered  cash  and  cash  equivalents  are  treated  as
noncurrent assets (see Note 3).

Inventory  - Inventory,  valued  at the lower of cost or market (first in, first
out  method),  consists  of  coal,  raw  materials,  spare  parts, and supplies.
Inventory consists of the following (in millions):

                                              --------------
                                               December 31,
                                              --------------
                                              1996     1995
                                              ----     ----
Coal and other raw materials   ............   $57      $ 24
Spare parts, materials and supplies  ......    24        12
                                              ---      ----
Total  ....................................   $81      $ 36
                                              ===      ====

Property,  Plant and Equipment - Property, plant and equipment is stated at cost
including  the  cost  of  improvements.  Depreciation,  after  consideration  of
salvage  value,  is  computed  using the straight-line method over the estimated
composite  lives  of the assets, which range from 3 to 40 years. Maintenance and
repairs  are  charged  to expense as incurred. Emergency and rotable spare parts
inventories  are  included  in  electric and steam generating facilities and are
depreciated over the useful life of the related components.

Intangible  Assets  - Goodwill  and  other  intangible assets are amortized on a
straight-line  basis  over their estimated periods of benefit or their estimated
lives,  which  range from 30 to 40 years. Intangible assets at December 31, 1996
and   1995   are  shown  net  of  accumulated  amortization  of  $3 million  and
$1 million,  respectively.  The Company will review its goodwill and intangibles
for  impairment  whenever  events  or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.

Construction  in  Progress  - Construction progress payments, engineering costs,
insurance  costs,  wages,  interest  and other costs relating to construction in
progress  are  capitalized. Construction in progress balances are transferred to
electric  and  steam  generating  facilities when the assets are ready for their
intended  use.  Interest capitalized during development and construction totaled
$27 million, $8 million and $2 million in 1996, 1995 and 1994, respectively.

Deferred   Costs   - Financing  costs  are  deferred  and  amortized  using  the
straight-line  method  over  the related financing period, which does not differ
materially  from  the  effective interest method of amortization. Deferred costs
are  shown  net  of  accumulated amortization of $36 million and $31 million for
1996 and 1995, respectively.
Project  Development Costs - The Company capitalizes the costs of developing new
projects.  These  costs  represent  amounts  incurred for professional services,
salaries,  permits,  options,  capitalized  interest  and  other  related direct
costs.  These  costs are included in investments in affiliates, or property when
financing  is  obtained,  or  expensed at the time the Company determines that a
particular  project will no longer be developed. The continued capitalization is
subject  to  on-going  risks  related  to successful completion, including those
related  to  political, siting, financing, construction, permitting and contract
compliance.  Certain reimbursable costs related to one of the projects have been
classified as other assets at December 31, 1996.

Foreign  Currency  Translation  - Foreign  subsidiaries and affiliates translate
their  assets and liabilities into U.S. dollars at the current exchange rates in
effect  at  the  end  of the fiscal period. The gains or losses that result from
this  process,  and  gains  and  losses  on  intercompany transactions which are
long-term  in  nature,  and  which the Company does not intend to repatriate are
shown  in  the cumulative foreign currency translation adjustment balance in the
stockholders'  equity  section  of  the  balance  sheet. The revenue and expense
accounts   of   foreign   subsidiaries   and   affiliates  are  translated  into
U.S. dollars at the average exchange rates that prevailed during the period.

Revenue  Recognition  and  Concentration - Revenues from the sale of electricity
and  steam  are  recorded  based  upon output delivered and capacity provided at
rates  as  specified  under  contract  terms. Most of the Company's power plants
rely  primarily  on  one  power  sales  contract  with a single customer for the
majority  of  its  revenues. Five customers accounted for 20%, 16%, 16%, 11% and
10%  of  revenues in 1996, four customers accounted for 24%, 18%, 18% and 13% of
revenues  in  1995,  and  four  customers accounted for 31%, 23%, 22% and 11% of
revenues  in  1994.  The  prolonged failure of any of these customers to fulfill
its  contractual  obligations  could have a substantial negative impact on AES's
revenues  and  profits. However, the Company does not anticipate non-performance
by the customers under these contracts.

Interest  Rate  Swap  and Cap Agreements - The Company enters into interest rate
swap  and  cap  agreements as a hedge against interest rate exposure on floating
rate  project  financing debt. The transactions are accounted for as a hedge and
interest  is  expensed  or  capitalized,  as  appropriate,  using  the effective
interest  rates.  Any fees or payments are amortized as yield adjustments. These
derivative financial instruments are classified as other than trading.

Net  Income  Per  Share  - Net income per share is based on the weighted average
number  of  common  stock and common stock equivalents outstanding, after giving
effect  to  stock  splits  and  stock dividends. Common stock equivalents result
from  dilutive  stock  options, warrants and deferred compensation arrangements.
The  effect of such common stock equivalents on net income per share is computed
using  the  treasury  stock  method. The shares used in computing net income per
share  were  77.3 million,  75.9 million,  and  75.8 million  for 1996, 1995 and
1994,   respectively.   Primary   and  fully  diluted  earnings  per  share  are
approximately the same.

New  Accounting  Pronouncements  -  Statement  of Financial Accounting Standards
(SFAS)  No.  128 "Earnings Per Share," was issued in early 1997. SFAS No. 128 is
effective  for  periods ending after December 15, 1997 and early adoption is not
permitted.  SFAS  No.  128 requires the Company to compute and present basic and
diluted  earnings  per  share.  Had  the  Company computed earnings per share in
accordance  with  SFAS  No. 128 the basic and diluted amounts would have been as
follows:

                                     -------------------------------------------
                                                                  Quarters Ended
                                      Years ended December 31,      March 31,
                                     --------------------------  ---------------
                                     1996      1995      1994    1997      1996
                                     -------   -------   ------  -------   -----
                                                                   (unaudited)
Basic earnings per share .........   $1.65     $1.43     $1.34   $0.52     $0.38
Diluted earnings per share  ......   $1.59     $1.40     $1.31   $0.50     $0.37

Use  of  Estimates  - The preparation of financial statements in conformity with
generally  accepted  accounting principles requires the use of estimates. Actual
results could differ from those estimates.

Reclassifications  - Certain  reclassifications  have  been made to prior period
amounts to conform with the 1996 presentation.
Unaudited  quarterly  data - Such data, includes all such adjustments considered
necessary  for  a  fair  presentation. Such information is not indicative of the
results for a full year.

2. ACQUISITIONS

In  March 1996,  the  Company,  through  a subsidiary acquired a 98% interest in
Hidrotermica  San  Juan, S.A., ("AES San Juan"), which is the owner and operator
of  a  78 megawatt Power Supply Business in the province of San Juan, Argentina.
The  facility,  which sells electricity into the Argentine spot market, includes
a  45 megawatt hydroelectric power plant and a 33 megawatt gas combustion plant.
As  a  result  of  this  acquisition,  the Company acquired intangible assets of
$17 million  which  are  being  amortized  over  the  life  of the hydroelectric
concession of 30 years.

In  May 1996,  AES,  through  certain  subsidiaries,  acquired for approximately
$393 million,  common  shares  representing an 11.35% interest in Light Servicos
de  Electricidade  S. A.  ("Light"),  a publicly-held Brazilian corporation that
operates  as  the  concessionaire  of an approximately 3,800 megawatt integrated
electric  power  generation,  transmission  and distribution system which serves
Rio  de  Janeiro,  Brazil. The AES subsidiary which owns an interest in Light is
participating  in  a  consortium  established  through a shareholders' agreement
that  owns  a  50.44%  controlling  interest.  As  a result, the Company has the
ability  to  exert  significant  influence  over  the operation of Light, and is
recording its investment using the equity method.

In  August 1996,  the  Company,  through  a  subsidiary,  acquired a controlling
interest  in  three  power  plants totaling 1,281 MW and a coal mine through the
purchase  of  an  81%  share  of  Tiszai Eromu Rt. ("AES Tiszai") an electricity
generation  company  in  Hungary for $110 million, and in December 1996 acquired
an additional 13% for $17 million.

Also,  in  August 1996,  the  Company acquired, through a subsidiary, a majority
controlling  interest  in  a  4,000 megawatt  coal-fired  facility in Kazakstan,
("AES  Ekibastuz"),  for approximately $3 million. The facility sells power to a
government-owned  utility  under  a  35 year  power  purchase agreement. Through
December 31,  1996,  approximately  $35  million (excluding VAT) has been billed
under  the power sales contract for electricity delivered of which the purchaser
has  paid  approximately  $5 million.  The  Company  has recorded a provision of
$20 million  to  reduce  the  carrying  value  of  the  contract  receivable  at
December 31,  1996  to  $10 million.  As of December 31, 1996, the net assets of
the  project  were  $24 million,  a  portion  of  which  was  represented by the
contract  receivable  referred  to  above.  There  can be no assurance as to the
ultimate  collectibility  of  amounts  owed  to  AES  as of December 31, 1996 or
additional  amounts  related to future deliveries of electricity under the power
sales contract.

In  January 1995, a subsidiary of the Company acquired the remaining outstanding
debt  of  AES  Deepwater,  a 140 megawatt cogeneration plant in Pasadena, Texas,
for  $65 million  from  a  syndicate of lenders. Prior to that date, the Company
did  not  maintain  or  exercise  control  or  significant  influence  over  the
utilization  of  the  AES  Deepwater  facility,  and  accordingly,  recorded its
investment  using  the  cost method. The acquisition resulted in the creation of
goodwill  of  approximately  $24 million  which  is  being  amortized  over  the
remaining estimated life of the plant.

In  June  and  July 1995,  a  subsidiary  of the Company increased its ownership
interest  in  Central  Termica  San  Nicolas,  S. A. ("AES  San Nicolas"), a 650
megawatt  power  plant  located in San Nicolas, Argentina from approximately 34%
to  approximately  69%  by  purchasing  the  interests  of  two  former minority
shareholders.  The  1995  purchase  price  was  $24  million.  The  net  results
attributable  to  the  Company's  non-owned  portion  of  earnings  from AES San
Nicolas in 1995 is reflected as minority interest.

In  addition,  in  December 1995,  another  subsidiary  of the Company purchased
Hidroelectrica   Rio  Juramento  S.A.  ("AES  Rio  Juramento")  a  112  megawatt
hydroelectric  system  in the province of Salta, Argentina for $43 million. As a
result   of   this  acquisition,  the  Company  acquired  intangible  assets  of
$14 million  which  are  being  amortized  over  the  life  of the hydroelectric
concession of 30 years.

These   acquisitions  were  accounted  for  as  purchases.  The  purchase  price
allocations  for  Light,  AES  Tiszai and AES Ekibastuz have been completed on a
preliminary  basis,  subject  to  adjustments  resulting  from new or additional
facts  that  may  come  to  light when the engineering, environmental, and legal
analyses  are completed during the allocation period. The accompanying financial
statements  include the operating results of AES Tiszai from August 1, 1996, the
operating  results  of  AES Ekibastuz from August 10, 1996, equity earnings from
Light  from  June 10,  1996,  and  the  operating  results of AES Deepwater from
January 20,  1995, the operating results of AES San Nicolas from January 1, 1995
and  the  operating  results
of AES Rio  Juramento  from  December  1, 1995.  The  following  table  presents
supplemental  unaudited proforma operating results as if all of the acquisitions
had occurred at the beginning of 1995 (in millions, except per share amounts):

                                           -------------------
                                           For the Years Ended
                                               December 31,
                                           -------------------
                                             1996       1995
                                           --------    -------
Revenues ..............................     $1,013       $892
Net income ............................        100         91
Earnings per share  ...................      $1.29      $1.20

The  pro  forma  results  are  based  upon  assumptions  and estimates which the
Company  believes  are  reasonable.  The  pro forma results do not purport to be
indicative  of  the  results  that  actually  would  have  been obtained had the
acquisitions  occurred  on  January 1,  1995,  nor  are  they  intended  to be a
projection of future results.

3. INVESTMENTS

At December 31, 1996 AND 1995,  the  Company's  investments  were  classified as
either held-to-maturity or available-for-sale.  The amortized cost and estimated
fair value of the  investments at December 31, 1996 and 1995 classified as held-
to-maturity and available-for-sale were approximately the same.

The  short-term  investments  and  debt service reserves and other deposits were
invested as follows (in millions):

                                                                  --------------
                                                                    December 31,
                                                                  --------------
                                                                   1996     1995
                                                                  -------  -----
Restricted cash and cash equivalents   ..........................  $104     $144
Held-to-maturity US treasury and government agency securities  ..     1       33
Foreign certificates of deposit  ................................     -        3
Commercial paper  ...............................................    39        3
Floating rate notes  ............................................     -        6
                                                                   -----    ----
Subtotal ........................................................    40       45
Available-for-sale:
US treasury and government agency securities ....................    43       30
Certificates of deposit .........................................     3        4
Commercial paper  ...............................................     5        -
Foreign certificates of deposit  ................................     -        3
                                                                   -----    ----
Subtotal ........................................................    51       37
                                                                   -----    ----
Total ...........................................................  $195     $226
                                                                   =====    ====

Short-term  investments  classified  as  held-to-maturity and available-for-sale
were  $9 and $11 million, respectively, at December 31, 1996 and $44 million and
$14 million, respectively, at December 31, 1995.
4. Investments In and Advances To Affiliates

The  following table presents summarized financial information (in millions) for
equity  method  affiliates  on  a combined 100% basis. Amounts presented include
the  accounts  of  NIGEN,  Ltd. (47% owned UK affiliate), Medway Power Ltd. (25%
owned  UK  affiliate), Light (11.35% owned Brazilian affiliate) and AES Chigen's
affiliates  at  December 31,  1996, and for the year then ended, the accounts of
NIGEN,  Ltd. and  Medway  Power  Ltd. at  December 31, 1995 and 1994 and for the
years  then  ended,  and  the  accounts  of  San  Nicolas  (34%  owned Argentine
affiliate) at December 31, 1994 and for the year then ended.

                                 ---------------------------
                                  1996       1995      1994
                                 --------   -------   ------
Sales ........................   $1,960        $276   $ 335
Operating income  ............      498          86      75
Net income  ..................      383          49      33
Current assets ...............      891         171     156
Noncurrent assets ............    4,928         949   1,030
Current liabilities  .........      868          70     133
Noncurrent liabilities  ......    2,111         973     945
Stockholders' equity .........    2,840          77     108

In  1994,  NIGEN, Ltd. refinanced its outstanding project financing loan through
a  public  debenture  offering.  The  extinguishment of such debt resulted in an
extraordinary  loss  of  $7 million.  The  Company's  share,  $2 million, net of
taxes,  is included in the accompanying financial statements as an extraordinary
loss.

The  Company's  share  of  undistributed  earnings  of  affiliates  included  in
consolidated  retained  earnings was $33 million and $13 million at December 31,
1996  and 1995, respectively. The Company charged and recognized management fees
and  interest  on  advances  to  its  affiliates  which  aggregated  $9 million,
$8 million  and  $18 million for each of the years ended December 31, 1996, 1995
and 1994, respectively.

5. DEBT

Project  Financing  Debt  - Project financing debt at December 31, 1996 and 1995
consisted of the following (in millions):
Interest
                                             Rate
                                           @ 12/31/96     Final Maturity       1996       1995
                                           ------------   ----------------   ---------   --------
Senior Debt-floating
AES Beaver Valley  .....................          7.4%        1998             $    21    $   33
AES Thames   ...........................          6.8%        2004                 163       181
AES Shady Point ........................          7.4%        2004                 306       320
AES Barbers Point  .....................          6.5%        2007                 325       340
AES Lal Pir  ...........................          5.0%        2008                 135        28
AES Pak Gen  ...........................          5.1%        2010                  90         -
AES Coral Reef  ........................         10.1%        2003                 168         -
AES Warrior Run ........................          6.7%        2014                  37        22
Other  .................................         10.4%        2001                   8         -
Senior Debt-fixed
AES Placerita-capital lease ............          8.1%        2009                 105       111
AES Warrior Run-tax exempt bonds  ......          7.4%        2019                  74        74
AES Pak Gen  ...........................          4.3%        2007                  85         -
AES San Nicolas ........................         10.4%        2000                  80         -
Subordinated Debt  .....................         13.6%        2010                  71        73
                                                                                -------   -------
Subtotal  ..............................                                         1,668      1182
Less current maturities  ...............                                          (110)      (84)
                                                                                -------   -------
Total  .................................                                       $ 1,558    $1,098
                                                                                =======   =======
Project  financing  debt  borrowings are primarily collateralized by the capital
stock  of  the  project subsidiary, the physical assets of such facility and all
project agreements associated with such facility.

In  1994,  the Company purchased and retired subordinated project financing debt
and  accrued interest at AES Placerita, resulting in an extraordinary gain of $4
million, net of taxes.

The Company has interest rate swap agreements in an aggregate notional principal
amount of $550  million at December 31, 1996.  The swap  agreements  effectively
change the  interest  rate on the  portion of the debt  covered by the  notional
amounts,  to a weighted  average fixed rate ranging from  approximately  9.5% to
10.5%.  The  agreements  expire at various  dates from 1997 through 2007. In the
event of nonperformance by the  counterparties,  the subsidiaries may be exposed
to  increased  interest  rates,   however,   the  Company  does  not  anticipate
nonperformance  by  the  counterparties,   which  are  multinational   financial
institutions.  At December 31, 1996,  subsidiaries  of the Company have interest
rate cap agreements at a ceiling of  approximately  12.5% with  remaining  terms
ranging from three to six years in an aggregate notional amount of $280 million.

AES  Shady Point and AES Barbers Point have issued commercial paper supported by
irrevocable  letters  of  credit issued by multinational financial institutions.
In  the  event  of nonperformance or credit deterioration of these institutions,
the  Company  may be exposed to the risk of higher effective interest rates. The
Company  does  not  believe  that such nonperformance or credit deterioration is
likely.

Other  Notes  Payable  - Other  notes  payable  at  December 31,  1996  and 1995
consisted of the following (in millions):
Interest Rate
                                              @ 12/31/96       Final Maturity     1996      1995
                                              --------------   ----------------  -------   ------
Corporate revolving bank loan(1)  .........          7.40%         1998            $ 213    $ 50
Senior subordinated notes   ...............          9.75%         2000               75      75
Convertible subordinated debentures  ......          6.50%         2002                -      50
Senior subordinated notes   ...............         10.25%         2006              250       -
                                                                                    -----   -----
 Subtotal .................................                                          538     175
Less current maturities  ..................                                          (88)    (50)
                                                                                    -----   -----
 Total ....................................                                        $ 450    $125
                                                                                    =====   =====
----------

(1) Floating rate loan.

Under the terms of the $425 million corporate  revolving bank loan and letter of
credit facility  ("Revolver"),  the Company must reduce its direct borrowings to
$125  million  for 30  consecutive  days  annually to obtain  additional  loans.
Commitment  fees on the unused portion at December 31, 1996 are .375% per annum,
and as of that date $89  million  was  available.  The  Company's  9 3/4% senior
subordinated  notes due 2000 ("9 3/4%  Notes)  and 10 1/4%  senior  subordinated
notes  due 2006 ("10 1/4%  Notes")  are  general  unsecured  obligations  of the
Company. The 9 3/4% Notes are redeemable at the Company's option, in whole or in
part,  beginning  June  1997  at  redemption  prices  in  excess  of par and are
redeemable at par beginning  June 1999.  The 10 1/4% Notes are redeemable at the
Company's option, in whole or in part,  beginning July 2001 at redemption prices
in excess of par and are  redeemable at par beginning  July 2003.  The Company's
convertible  subordinated  debentures  ("Debentures") were converted into common
stock of the Company at the rate of $26.16 per common share on August 30, 1996.
Future  Maturities  of  Debt  - Scheduled  maturities of total long-term debt at
December 31, 1996 are (in millions):

         1997  ....................................   $  198
         1998  ....................................      132
         1999  ....................................      303
         2000  ....................................      269
         2001  ....................................      202
         Thereafter  ..............................    1,102
                                                      -------
         Total ....................................   $2,206
                                                      =======

Covenants - The terms of the Company's  Revolver,  9 3/4% Notes,  10 1/4% Notes,
and project financing debt agreements  contain certain covenants and provisions.
The covenants  provide for, among other items,  maintenance of certain reserves,
and  require  that  minimum  levels of working  capital,  net worth and  certain
financial ratio tests are met. The most  restrictive of these covenants  include
limitations  on  incurring  additional  debt and on the payment of  dividends to
shareholders.

The  project financing debt limitations of AES's subsidiaries permit the payment
of  dividends  to  the  parent  company  out of current cash flow for quarterly,
semi-annual  or  annual  periods  only at the end of such periods and only after
payment  of  principal  and  interest  on  project  loans due at the end of such
periods.  As of December 31, 1996, approximately $63 million was available under
project loan documents for distribution by U.S. subsidiaries.

AES Chigen  Notes - Subsequent  to its fiscal year end,  AES Chigen  issued $180
million of 10 1/8% Notes due 2006.

6. COMMITMENTS AND CONTINGENCIES

As of December  31,  1996,  the Company and its  consolidated  subsidiaries  are
obligated under long-term  non-cancelable operating leases, primarily for office
rental and site leases.  Rental expense for operating leases was $4 million,  $3
million and $2 million in the years ended 1996, 1995 and 1994, respectively. The
future minimum lease commitments under these leases are $6 million each year for
1997 and 1998, $5 million for 1999, $2 million each year for 2000 and 2001,  and
$56 million for the years thereafter.

Operating  subsidiaries  of  the  Company enter into various long-term contracts
for  the  purchase  of  fuel  subject  to  termination  only  in certain limited
circumstances. These contracts have remaining terms of 3 to 11 years.

Guarantees  - In  connection with certain of its project financing, acquisition,
disposition,  and  power  purchase  agreements,  AES  has  expressly  undertaken
limited  obligations  and  commitments  most  of which will only be effective or
will  be  terminated upon the occurrence of future events. These obligations and
commitments,  excluding  letter  of  credit  obligations  discussed  below, were
limited  as  of  December 31,  1996,  by  the  terms  of  the  agreements, to an
aggregate  of  approximately  $176 million.  The Company is also obligated under
other  commitments  which  are  limited  to  amounts, or percentages of amounts,
received  by  AES  as distributions from its project subsidiaries. These amounts
aggregated $33 million as of December 31, 1996.

Letters  of Credit - At December 31, 1996 and 1995, the Company had $123 million
and  $56 million,  respectively,  of  letters  of  credit  outstanding under its
credit  facility  which  operate  to  guarantee  performance relating to certain
project  development  activities  and  subsidiary operations. The Company pays a
letter of credit fee of 1.75% on the outstanding amounts.

Litigation  - On  February 25, 1993, an action was filed, jointly and severally,
in  the  10th  Judicial  District  Court,  Galveston  County,  Texas against the
Company,  over  25  other  corporations  (including  major  oil  refineries  and
chemical  companies)  and  utilities,  a  utility  district,  four Texas cities,
McGinnes  Industrial  Maintenance  Corporation,  Roland  McGinnes  and  Lawrence
McGinnes,   claiming  personal  injuries,  property,  and  punitive  damages  of
$20 billion,  arising from alleged releases of hazardous and toxic substances to
air,  soil  and  water  at the McGinnes waste disposal site located in Galveston
County.   This   matter  was  consolidated  with  two  other  related  cases  in
December 1993.  The  complaint  sets  forth numerous causes of action, including
fraud,   negligence   and  strict  liability,  including,  among  other  things,
allegations  that the defendants sent hazardous, toxic and noxious chemicals and
other  waste  products  to  the  McGinnes  site for disposal. In March 1995, the
Company  entered  into  a settlement agreement with certain plaintiffs, pursuant
to  which  the  Company  paid seven thousand dollars in return for withdrawal of
their  claims  against  the Company. Based on the Company's investigation
of the case to date, the Company  believes it has  meritorious  defenses to each
and every  cause of  action  stated in the  complaint  and this  action is being
vigorously  defended.  The Company believes that the outcome of this matter will
not have a material  adverse  effect on its results of  operations  or financial
position.

On December 17, 1996, AES was named  defendant in a complaint filed in the Court
of Chancery in Delaware. The suit was brought by the holder of 750 shares of AES
Chigen Class A Common Stock  individually  and on behalf of a purported class of
public  shareholders  of AES Chigen in response to an amalgamation to be entered
into between AES Chigen and AES. The complaint alleges, among other things, that
AES breached its alleged  fiduciary  duty as a controlling  shareholder to treat
the class with fairness,  and questions the sufficiency of the  consideration to
be paid to AES Chigen shareholders.  The complaint sought damages and injunctive
relief.  AES Chigen was not named in the suit. On March 13, 1997  settlement was
reached subject to court approval.

The  Company is involved in certain other legal proceedings in the normal course
of  business.  It  is  the  opinion  of  the  Company  that  none of the pending
litigation  is  expected  to  have  a  material adverse effect on its results of
operations or financial position.

7. STOCKHOLDERS' EQUITY
-----------------------------
                                                                             1996       1995       1994
                                                                           --------   --------   -------
In millions
Common stock
 Balance at January 1 and December 31  .................................    $    1     $    1     $   1
                                                                             ======     ======     =====
Additional paid-in capital
 Balance at January 1   ................................................    $  293     $  240     $ 203
 Issuance of common stock under benefit plans and exercise of stock op-
  tions and warrants                                                             3          2         2
 Tax benefit associated with the exercise of options  ..................        15          -         -
 Issuance of common stock on conversion of 6.5% subordinated deben-
  tures, net ($26.16 per share)                                                 49          -         -
 Common stock dividends (1994-3% per share)  ...........................         -          -        47
 AES Chigen Class A redeemable common stock  ...........................         -         51       (12)
                                                                             ------     ------     -----
Balance at December 31  ................................................    $  360     $  293     $ 240
                                                                             ======     ======     =====
Retained earnings
 Balance at January 1   ................................................    $  271     $  164     $ 111
 Net income for the year   .............................................       125        107       100
 Common stock dividends (1994-3% per share)  ...........................         -          -       (47)
                                                                             ------     ------     -----
Balance at December 31  ................................................    $  396     $  271     $ 164
                                                                             ======     ======     =====
Cumulative foreign currency translation adjustment
 Balance at December 31 ................................................    $  (33)    $  (10)    $  (3)
                                                                             ======     ======     =====
Treasury stock
 Balance at December 31 ................................................    $   (3)    $   (6)    $   -
                                                                             ======     ======     =====
Stock  Split  and  Stock  Dividend - On December 7, 1993, the Board of Directors
authorized  a  three-for-two  split,  effected  in the form of a stock dividend,
payable  to  stockholders  of  record  on  January 15,  1994.  Additionally,  on
February 17,  1994,  the  Company  declared  a  3%  stock  dividend,  payable to
stockholders  of  record  on March 10, 1994. Accordingly, all outstanding share,
per  share  and stock option data in all periods presented have been restated to
reflect the split and the 3% stock dividend.
On  July 30, 1996, the Company exercised its right to redeem the Debentures at a
redemption  price  equal  to  approximately  104% of the principal amount of the
debentures,  together with accrued interest through the date of redemption. As a
result,  $49.7 million  of the debentures were converted into 1.9 million shares
of common stock of the Company at a conversion price of $26.16 per share.

Stock  Options  and  Warrants  - The  Company  has granted options for shares of
common  stock  under  its  stock option plans. Under the terms of the plans, the
Company  may issue options to purchase shares of the Company's common stock at a
price  equal  to 100% of the market price at the date the option is granted. The
options  become  eligible  for exercise under various schedules. At December 31,
1996,  there  were  approximately  2 million  shares  reserved for future grants
under  the  plans.  A  summary  of  the option activity follows (in thousands of
shares):
December 31,
                                            ------------------------------------------------------------------------
                                                              1996                     1995                     1994
                                            ----------------------   ----------------------   ----------------------
                                                       Weighted-                Weighted-                Weighted-
                                                       Average                  Average                  Average
                                                       Exercise                 Exercise                 Exercise
                                            Shares     Price         Shares     Price         Shares     Price
                                            --------   -----------   --------   -----------   --------   -----------
Options outstanding-beginning of year  ..      4,063   $14.56           3,540    $12.07         2,999     $9.78
Exercised during the year   .............       (480)   10.69            (355)    17.71         (187)      2.65
Forfeitures during the year  ............       (216)   20.55             (57)    18.36          (12)     13.17
Granted during the year   ...............        643    38.78             935     20.04          740      18.91
                                              ------   -------         ------   -------       ------     ------
Outstanding-end of year   ...............      4,010    18.59           4,063     14.56        3,540      12.07
                                              ------   -------         ------   -------       ------     ------
                                                       $
Eligible for exercise-end of year  ......      2,132    12.86           1,209     $9.03        1,059      $6.02
                                              ======   =======         ======   =======       ======     ======
The  following  table  summarizes information about stock options outstanding at
December 31, 1996 (in thousands of shares):
Options Outstanding                            Options Exercisable
                           ------------------------------------------------------- --------------------------------------
                                                Remaining Life   Weighted-Average                      Weighted-Average
 Range of Exercise Prices  Total Outstanding        (in years)     Exercise Price  Total Exercisable     Exercise Price
-------------------------- ------------------- ---------------- ------------------ ------------------- -----------------
$1.55 to $6.47............          1,013               3.3             $5.14               1,011              $5.14
$11.65 to $19.75 .........          1,261               6.9             17.54                 492              17.44
$20.00 to $28.88 .........          1,248               8.3             20.97                 593              20.79
$31.75 to $44.13 .........            488              10.0             43.14                  36              36.31
                                   ------                                                  ------
Total   ..................          4,010                                                   2,132
                                   ======                                                  ======
The  Company  accounts  for its stock-based compensation plans under APB No. 25,
and  as a result, no compensation expense has been recognized in connection with
the  options,  as  all  options  have been granted only to AES people, including
Directors,  with  an  exercise  price equal to the market price of the Company's
common  stock  on  the  date  of  grant.  The  Company  adopted SFAS No. 123 for
disclosure  purposes  in 1996. For SFAS No. 123 purposes, the fair value of each
option  grant has been estimated as of the date of grant using the Black-Scholes
option  pricing model with the following weighted average assumptions: risk-free
interest  rate  of 6.5%, 5.5%, and 7.5% and expected volatility of 28%, 24%, and
22%  for  the  years  ended 1996, 1995 and 1994, respectively, a dividend payout
rate  of  zero for each year and an expected option life of 7 years. Using these
assumptions,  the  weighted  average  fair value of the stock options granted is
$17.61  and  $8.17  for  1996  and 1995, respectively. There were no adjustments
made  in  calculating  the  fair  value to account for vesting provisions or for
non-transferability or risk of forfeiture.
Had   compensation  expense  been  determined  consistent  with  SFAS  No.  123,
utilizing  the assumptions detailed above, the Company's net income and earnings
per  share  for  the year ended December 31, 1996, 1995 and 1994 would have been
reduced to the following pro forma amounts (in millions):

                                                  For the Years Ended
                                                      December 31,
                                               --------------------------
                                                1996      1995      1994
                                               -------   -------   ------
Net Income:
 As Reported  ..............................    $ 125     $ 107     $ 100
 Pro forma .................................      121       106       100
Net income per common share:
 As Reported  ..............................    $1.62     $1.41     $1.32
 Pro forma .................................     1.57      1.40      1.32

The  use  of  such  amounts  and  assumptions  are  not intended to forecast any
possible  future appreciation of the Company's stock price or change in dividend
policy.

In  addition  to  the  options  described  above,  the  Company  has outstanding
warrants  to purchase up to 0.7 million shares of its common stock at $29.43 per
share   through  July 2000,  which  were  issued  as  partial  settlement  of  a
shareholder  class  action  suit  and  were expensed in 1995. Warrants exercised
under this settlement were not significant at December 31, 1996.

AES  China  Generating  Co.  Ltd. - During 1994, AES Chigen completed an initial
public  offering  for  the  sale  of  10.2 million  shares of Class A redeemable
common  stock.  Prior to the offering, AES contributed $50 million to AES Chigen
for  7.5 million  shares  of  Class B  common  stock.  AES,  as the sole Class B
holder,  is  entitled to elect one-half of the board of directors of AES Chigen.
As  of  December 22,  1995,  AES  Chigen had entered into binding commitments to
invest  in  excess  of $50 million in power projects in the People's Republic of
China  and  the  previously  held  right  of Class A Shareholders to require AES
Chigen  to  repurchase  their  shares  has expired. As a result, the Company has
allocated  the  net  proceeds  from  the  issuance  of  the  Class A  shares  to
additional  paid-in capital and minority interest during 1995. In November 1996,
the  Company  and  AES  Chigen  signed a definitive agreement for the Company to
acquire  the approximately 8.2 million outstanding Class A shares of AES Chigen.
The  acquisition  will  be accomplished by amalgamating AES Chigen with a wholly
owned  subsidiary  of  the  Company.  Subject  to approval of the holders of the
Class A  common  stock,  AES  Chigen  shareholders  will  receive  shares of the
Company  common stock at an exchange rate of 0.29 shares of the Company's common
stock for each share of AES Chigen common stock.

8. INCOME TAXES

Income   Tax   Provision  - The  provision  for  income  taxes  attributable  to
continuing operations consists of the following (in millions):

                                                  --------------------------
                                                     For the Years Ended
                                                         December 31,
                                                  --------------------------
                                                   1996      1995      1994
                                                  -------   -------   ------
Federal
 Current   ....................................     $ 19        $ 4    $ 2
 Deferred  ....................................       27         47     35
State
 Current   ....................................       12          5      4
 Deferred  ....................................       (2)         1      3
Foreign
 Current   ....................................        3          -      -
 Deferred  ....................................        1          -      -
                                                     ----      ----    ----
Total   .......................................     $ 60        $57    $44
                                                     ====      ====    ====
Effective   and   Statutory   Rate  Reconciliation  - A  reconciliation  of  the
U.S. statutory  federal income tax rate to the Company's effective tax rate as a
percentage  of income before taxes (excluding earnings and taxes from affiliates
accounted for on the equity method, and minority interests) is as follows:

                                                  --------------------------
                                                     For the Years Ended
                                                         December 31,
                                                  --------------------------
                                                   1996      1995      1994
                                                  -------   -------   ------
Statutory federal tax rate   ..................       35%       35%       35%
Change in valuation allowance   ...............       (2)       (6)       (2)
State taxes, net of federal tax benefit  ......        6         6         5
Foreign taxes .................................        2         -         -
Other-net  ....................................       (1)        3        (4)
                                                    ----      ----      ----
Effective tax rate  ...........................       40%       38%       34%
                                                    ====      ====      ====

Deferred  Income Taxes - Deferred income taxes relate principally to accelerated
depreciation  methods used for tax purposes and certain other expenses which are
deducted  for  income  tax  purposes,  but not for financial reporting purposes.
Deferred  income  taxes reflect the net tax effects of (a) temporary differences
between  the  carrying amounts of assets and liabilities for financial reporting
purposes  and  the  amounts used for income tax purposes, and (b) operating loss
and  tax  credit  carryforwards. These items are stated at the enacted tax rates
that  are  expected  to  be in effect when taxes are actually paid or recovered.
Deferred tax assets and deferred tax liabilities are as follows (in millions):
---------------------------------
                                                                        For the Years Ended
                                                                           December 31,
                                                                 ---------------------------------
                                                                   1996        1995        1994
                                                                 ---------   ---------   ---------
Differences between book and tax basis of property and total
 deferred tax liability   ....................................     $  379      $  379      $  219
Operating loss carryforwards .................................       (124)       (167)       (231)
Tax credit carryforwards  ....................................        (97)        (71)        (68)
Other deductible temporary differences   .....................        (13)         (1)        (15)
                                                                    ------      ------      ------
Total gross deferred tax asset  ..............................       (234)       (239)       (314)
Less: valuation allowance ....................................         33           9         168
                                                                    ------      ------      ------
Total net deferred tax asset .................................       (201)       (230)       (146)
                                                                    ------      ------      ------
Net deferred tax liability   .................................     $  178      $  149      $   73
                                                                    ======      ======      ======
As   of   December 31,   1996,  the  Company  had  federal  net  operating  loss
carryforwards  for tax purposes of approximately $295 million expiring from 2001
through  2010,  federal  investment tax credit carryforwards for tax purposes of
approximately  $54 million  expiring  in  years  2001  through 2006, foreign tax
credit  carryforwards  of  $3 million  expiring  in 2001 and federal alternative
minimum  tax  credits  of  approximately  $30 million which carryforward without
expiration.

The  valuation  allowance  increased  during  the  current year by approximately
$24 million   to  $33 million  at  December 31,  1996.  This  increase  resulted
primarily  from  the  acquisition  of foreign entities with certain pre-existing
deferred  tax  assets, the ultimate realization of which cannot be determined on
a  more  likely  than  not basis. The valuation allowance for these pre-existing
deferred  tax  assets  was recorded as acquisition adjustments and had no effect
on  the  current year income tax expense. The $33 million valuation allowance at
December 31,  1996  relates  primarily  to  state and foreign tax credits, state
operating  losses, and deferred tax assets, the ultimate realization of which is
uncertain.  The  Company  believes  that  it  is  more  likely than not that the
remaining deferred tax assets will be realized.
The  valuation  allowance decreased during 1995 by approximately $159 million to
$9 million.  The  primary reason for this decrease was the Company's purchase of
the  outstanding debt of AES Deepwater on January 20, 1995, which had the effect
of  reducing  certain  of  the  Company's  deferred  tax  assets. The $9 million
valuation  allowance at December 31, 1995 related primarily to state tax credits
and  foreign  operating  losses, the ultimate realization of which is uncertain.
The  Company  believes  that  it  is  more  likely  than  not that the remaining
deferred tax assets will be realized.

Undistributed  earnings  of certain foreign affiliates aggregated $85 million on
December 31,  1996.  The  Company  considers  these  earnings to be indefinitely
reinvested  outside  of  the  U.S. and, accordingly, no U.S. deferred taxes have
been  recorded  with respect to the earnings. Should the earnings be remitted as
dividends,  the  Company  may  be  subject  to  additional  U.S. taxes,  net  of
allowable  foreign  tax credits. It is not practicable to estimate the amount of
any additional taxes which may be payable on the undistributed earnings.

9. PROFIT SHARING AND DEFERRED COMPENSATION PLANS

Profit  Sharing  and Stock Ownership Plan - The Company has a profit sharing and
stock  ownership plan, qualified under section 401 of the Internal Revenue Code,
which  is  available  to  all  AES  people. The profit sharing plan provides for
Company  matching  contributions,  other Company contributions at the discretion
of  the  Compensation Committee of the Board of Directors, and discretionary tax
deferred  contributions  from the participants. Participants are fully vested in
their  own  contributions and the Company's matching contributions. Participants
vest   in   other   Company  contributions  over  a  five-year  period.  Company
contributions  to  the  plan  were  $4 million for each of the years ended 1996,
1995 and 1994.

Deferred  Compensation  Plans  - The  Company  has  a deferred compensation plan
under  which  directors  of  the  Company  may elect to have a portion or all of
their  compensation  deferred.  The  amounts  allocated  to  each  participant's
deferred  compensation  account  may  be converted into common stock units. Upon
termination  or  death  of a participant, the Company is required to distribute,
under  various methods, cash or the number of shares of common stock accumulated
within  the  participant's  deferred compensation account. Distribution of stock
is  to  be  made  from  common  stock  held  in  treasury or from authorized but
previously  unissued  shares.  The  plan  terminates  and  full  distribution is
required  to  be  made  to  all  participants upon any changes of control of the
Company (as defined therein).

In  addition, the Company has an executive officers' deferred compensation plan.
At  the  election  of  an  executive  officer,  the  Company  will  establish an
unfunded,  non-qualified  compensation  arrangement for each officer who chooses
to  terminate  participation  in the Company's profit sharing and employee stock
ownership  plan.  The  participant may elect to forego payment of any portion of
his  or  her  compensation  and have an equal amount allocated to a contribution
account.  In addition, the Company will credit the participant's account with an
amount  equal  to the Company's contributions (both matching and profit sharing)
that  would  have  been  made  on  such officer's behalf if he or she had been a
participant  in  the  profit sharing plan. The participant may elect to have all
or  a  portion  of  the  Company's  contribution  converted  into  stock  units.
Dividends  paid  on  common  stock are allocated to the participant's account in
the  form  of  stock units. The participant's account balances are distributable
upon termination of employment or death.

During  1995,  the  Company  adopted  a  supplemental  retirement  plan covering
certain  AES  people.  The plan provides incremental profit sharing and matching
contributions  to  participants  that  would have been paid to their accounts in
the  Company's  profit  sharing  plan  if it were not for limitations imposed by
income  tax  regulations. All contributions to the plan are vested in the manner
provided   in   the   Company's   profit  sharing  plan,  and  once  vested  are
nonforfeitable.  The  participant's  account  balances  are  distributable  upon
termination of employment or death.

The  Company is not obligated under any post-retirement benefit plans other than
the profit sharing and deferred compensation plans described in this Note.
10. QUARTERLY DATA (UNAUDITED)

The  following table summarizes the unaudited quarterly statements of operations
(in millions, except per share amounts):

                               ----------------------------------------
                                         Quarters Ended 1996
                               ----------------------------------------
                               Mar 31     Jun 30     Sep 30     Dec 31
                               --------   --------   --------   -------
Sales and services .........    $ 172      $ 174      $ 205      $ 284
Gross margin ...............       74         76         85         98
Net income   ...............       29         28         32         36
Net income per share  ......    $0.38      $0.37      $0.42      $0.46

                               ----------------------------------------
                                         Quarters Ended 1995
                               ----------------------------------------
                               Mar 31     Jun 30     Sep 30     Dec 31
                               --------   --------   --------   -------
Sales and services .........    $ 169      $ 166      $ 173      $ 171
Gross margin ...............       69         69         73         74
Net income   ...............       25         27         27         28
Net income per share  ......    $0.33      $0.35      $0.36      $0.37

11. GEOGRAPHIC SEGMENTS

Information  about  the Company's operations in different geographic areas is as
follows (in millions):

                        -----------------------
                          For the Years Ended
                             December 31,
                        -----------------------
                        1996     1995     1994
                        ------   ------   -----
Revenues
North America  ......    $554     $542    $523
South America  ......     146      131       2
Asia  ...............      45        1       -
Europe   ............      90        5       8
                         -----    -----   -----
Total ...............    $835     $679    $533
                         =====    =====   =====

                        --------------------------
                           For the Years Ended
                               December 31,
                        --------------------------
                        1996     1995      1994
                        ------   ------   --------
Operating Income
North America  ......    $258     $251      $ 245
South America  ......      21       14          -
Asia  ...............      (9)      (8)       (11)
Europe   ............       8       (4)         2
                         -----    -----      -----
Total ...............    $278     $253      $ 236
                         =====    =====      =====
-----------------------------
                             For the Years Ended
                                December 31,
                        -----------------------------
                         1996       1995      1994
                        --------   --------   -------
Identifiable Assets
North America  ......    $1,831     $1,693    $1,569
South America  ......       683        230        46
Asia  ...............       744        328       221
Europe   ............       364         90        79
                         -------    -------   -------
Total ...............    $3,622     $2,341    $1,915
                         =======    =======   =======

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

The  estimated  fair  values  of  the Company's assets and liabilities have been
determined   using   available   market   information.  The  estimates  are  not
necessarily  indicative  of  the  amounts the Company could realize in a current
market  exchange.  The  use  of  different  market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.

The  fair  value  of current financial assets, current liabilities, debt service
reserves  and  other deposits, and other assets are assumed to be equal to their
reported  carrying  amounts.  The  fair  value  of  project  financing  debt  is
estimated  differently  based  upon  the  type of loan. For variable rate loans,
carrying  value approximates fair value. For fixed rate loans, the fair value is
estimated  using  discounted  cash  flow analyses based on the Company's current
incremental  borrowing  rates  at  which similar borrowing arrangements would be
made  under  current conditions, or by the estimated discount rate a prospective
seller  would  pay to a credit-worthy third party to assume the obligations. The
carrying  value  and  fair  value  of  the AES Placerita capital lease have been
excluded  from  this  disclosure.  The  fair  value  of  swap  agreements is the
estimated  net  amount that the Company would pay to terminate the agreements at
the  balance  sheet  date.  The estimated fair values of the Debentures, 93|M/4%
Notes  and  101|M/4% Notes are based on the quoted market prices at December 31,
1996 and 1995.

The   estimated   fair   values   of  the  Company's  financial  instruments  at
December 31, 1996 and 1995 are as follows (in millions):

                               -------------------------------------------------
                                         1996                     1995
                               ------------------------- -----------------------
                               Carrying                  Carrying
                                Amount      Fair Value   Amount      Fair Value
                               ----------   ------------ ---------   -----------
Project financing debt  ....      $1,562        $1,562      $1,071       $1,078
Other notes payable  .......         538           560         175          180
Interest rate swaps  .......           -            68           -          137

The  fair  value  estimates  presented herein are based on pertinent information
available  as  of  December 31,  1996  and 1995. The Company is not aware of any
factors  that  would significantly affect the estimated fair value amounts since
that date.

13. SUBSEQUENT EVENTS

On  June  30, 1997, AES acquired the international assets of Destec Energy, Inc.
("Destec")  for a total of $436 million. The purchase will include five electric
generating  plants  and a number of power projects in development. The plants to
be  acquired by AES (with ownership percentages in parenthesis) include a 110 MW
gas-fired  combined  cycle  plant  in Kingston, Canada (50%); a 405 MW gas-fired
combined  cycle plant in Terneuzen, Netherlands (50%); a 140 MW gas-fired simple
cycle  plant  in Cornwall, England (100%); a 235 MW oil-fired simple cycle plant
in  Santo  Domingo,  Dominican Republic (99%); and a 1600 MW coal-fired plant in
Victoria, Australia (20%).

In  May 1997, the Company and its partner, CEA acquired an aggregate of 90% (AES
acquired  60%  and  CEA acquired 30%) of two integrated electricity companies of
ESEBA  serving  certain  portions of the province of Buenos Aires, Argentina for
an  aggregate purchase price of $565 million. The remaining 10% will be owned by
the employees of each of the two acquired companies.
On  May  8,  1997,  AES completed its amalgamation with AES China Generating Co.
Ltd.   (see  Note  7).  As  a  result  of  the  amalgation  the  Company  issued
approximately  2.5 million shares of AES Common Stock in exchange for all of the
outstanding AES Chigen Class A Common Stock.

In  May  1997,  AES  through a consortium agreed to acquire approximately 13% of
CEMIG,  an  integrated electric utility service in the State of Minas Gerais for
approximately  $1  billion. These shares also represent a 33% voting interest in
CEMIG.

  (b)  Unaudited Pro Forma Consolidated Financial Information

The following tables and related notes present financial  information at and for
the  periods  presented  herein  to give  effect  on a pro  forma  basis  to the
Company's  acquisitions  of Destec's  international  assets and the  interest in
CEMIG. The following pro forma information also gives effect to the financing of
the ESEBA Acquisition but does not give effect to the ESEBA  Acquisition  itself
because separate historical financial results of the two distribution  companies
acquired by the Company  pursuant to the ESEBA  Acquisition  are not  separately
available. There can be no assurance that inclusion of such historical financial
information  would not have had a material  adverse  effect on the following pro
forma financial information.  The Company believes that the historical operating
results of ESEBA are not indicative of the future  operating  results of the two
distribution  companies acquired in the ESEBA Acquisition  because,  among other
things (i) these  distribution  companies will be operated as separate  entities
rather than as part of a unified  company and (ii) in connection  with the ESEBA
Acquisition  AES  negotiated  new  labor  and  concessionary  arrangements.  The
unaudited pro forma adjustments are based upon available information and certain
assumptions  and estimates which the Company  believes are reasonable  under the
circumstances.  The  unaudited pro forma results do not purport to be indicative
of the results that would have been  obtained had the  acquisitions  occurred at
the beginning of the periods presented, nor are they intended to be a projection
of future results. The unaudited pro forma financial  information should be read
in conjunction with the notes herein.

The   following  unaudited  pro  forma  consolidated  statements  of  operations
information  combine the results of AES's investment in CEMIG and Destec and the
ESEBA  financing  for  the  year  ended  December 31, 1996 and the quarter ended
March  31,  1997 as if the acquisitions had occurred on January 1, 1996.
Year Ended December 31, 1996(1)(2)
                                        -------------------------------------------------------------------
                                                                  Adjustments                  Pro Forma
                                                  Adjustments   for the ESEBA   Adjustments    for certain
                                        Actual      for CEMIG       financing    for Destec   acquisitions
                                        -------- ------------- ---------------  ------------  -------------
In millions, except per share data                                                                     
Statements of Operations Data:                                                                         
Total revenues ........................  $  835      $     -       $      -      $  441(4)     $ 1,276 
Total operating cost and expenses   ...     557            -              -         421(4)         978 
                                         -------     -------       --------      --------      ------- 
Operating income  .....................     278            -                         20            298 
Other income and (expense):                                                                            
Interest expense  .....................    (144)         (56)           (35)        (10)          (245)
Interest income   .....................      24            -              -           -             24 
Equity in earnings of affiliates ......      35           50              -           -             85 
                                         -------     -------       --------      --------      ------- 
Income (loss) before income taxes and                                                                  
 minority interest   ..................     193           (6)           (35)         10            162 
Income tax (benefit) ..................      60          (22)           (14)          1             25 
Minority interest .....................       8            5              -           -             13 
                                         -------     -------       --------      --------      ------- 
Net income (loss) .....................  $  125      $    11       $    (21)     $    9        $   124 
                                         =======     =======       ========      ========      ======= 
Net income (loss) per share(3)   ......  $ 1.62      $  0.14       $  (0.27)     $ 0.11        $  1.55 
                                         =======     =======       ========      ========      =======
Quarter Ended March 31, 1997(1)(2)
                                           -------------------------------------------------------------------
                                                                   Adjustments
                                                                       for the                    Pro Forma  
                                                     Adjustments         ESEBA     Adjustments    for certain
                                           Actual      for CEMIG     financing      for Destec   acquisitions
                                           -------- ------------- -------------    ------------  -------------
In millions, except per share data                                                                       
Statements of Operations Data:                                                                           
Total revenues ...........................  $  261     $       -     $       -      $   39         $  300
Total operating cost and expenses   ......     183             -             -          36            219
                                            -------      --------      --------     ------         ------
Operating income  ........................      78             -             -           3             81
Other income and (expense):                                                                              
Interest expense  ........................     (44)          (13)           (8)         (3)           (68)
Interest income   ........................       8             -             -           -              8
Equity (loss) in earnings of affiliates         16             3             -           1             20
                                            -------      --------      ---------    ------         ------
Income (loss) before income taxes and                                                                    
 minority interest   .....................      58           (10)           (8)          1             41
Income taxes (benefit)  ..................      16            (5)           (3)         (1)             7
Minority interest ........................       2             -             -           -              2
                                            -------      --------      ---------    ------         ------
Net income (loss) ........................  $   40     $      (5)    $      (5)     $    2         $   32
                                            =======      ========      =========    ======         ======
Net income (loss) per share(3)   .........  $ 0.50     $   (0.06)    $   (0.06)     $ 0.02         $ 0.39
                                            =======      ========      =========    ======         ======
The  following  unaudited  pro  forma  consolidated  balance  sheet  information
represents  AES's  financial  position  at  March  31,  1997  as  if  the recent
acquisitions described above had occurred on that date.
As of March 31, 1997(1)(2)
                                     ------------------------------------------------------------------
                                                             Adjustments
                                                                 for the                   Pro Forma   
                                               Adjustments         ESEBA    Adjustments    for certain 
                                      Actual     for CEMIG     financing     for Destec   acquisitions 
                                     -------- ------------- -------------   ------------  -------------
In millions                                                                                       
Balance Sheet Data:                                                                               
Current assets .....................  $  730       $    -       $    -      $  (103)       $   627
Non-current assets   ...............   3,348        1,038          390          388          5,164
                                      -------      -------      -----       -------        -------
Total assets   .....................  $4,078       $1,038         $390      $   285        $ 5,791
                                      =======      =======      =====       =======        =======
Current liabilities  ...............  $  276       $  343         $242      $    56        $   917
Long-term liabilities   ............   2,450          656          148          229          3,483
Minority interest ..................     211           39            -            -            250
Company-obligated mandatorily                                                                     
 redeemable preferred securities                                                                  
 of AES Trust I   ..................     250            -            -            -            250
Shareholders' equity ...............     891            -            -            -            891
                                      -------      -------      -----       -------        -------
Total liabilities and shareholders'                                                               
 equity  ...........................  $4,078       $1,038         $390      $   285        $ 5,791
                                      =======      =======      =====       =======        =======
(1) Basis of presentation:

     The  Company's  acquisition  of  the  Destec  international assets is being
accounted  for as a purchase. The purchase price allocation has been prepared on
a  preliminary basis pending completion of engineering, environmental, legal and
valuation  analyses,  all of which are ongoing. The excess of the purchase price
over  the  net  assets  acquired  will  be  amortized over 40 years. The Company
intends  to  sell  its  interest  in  the Hazelwood project and as a result, the
financing  costs  and equity in earnings related to such interest are treated as
adjustments to the Destec purchase price allocation.

     The  Company's  purchase  of  an  economic interest of approximately 13% in
CEMIG,  which  also  represents  an approximate voting interest of 30%, has been
recorded  as  an investment in subsidiaries, and will be accounted for using the
equity   method.   The  purchase  price  allocation  has  been  prepared,  on  a
preliminary  basis  pending  completion of engineering, environmental, legal and
valuation  analyses,  all of which are ongoing. The excess of the purchase price
over the net assets acquired will be amortized over 40 years.

     The  following pro forma information also gives effect to the financing for
the  ESEBA  Acquisition but does not give effect to the ESEBA Acquisition itself
because  separate historical financial results of the two distribution companies
acquired  by  the  Company  pursuant to the ESEBA Acquisition are not separately
available.

     The  summary  unaudited  pro  forma financial information has been prepared
based  on  the Company's estimate of CEMIG's and Destec's financial position and
results of operations in conformity with U.S. GAAP.

     Equity  in  earnings  of  CEMIG has been translated at the average exchange
rate  during  the  year  of R$1.04 to U.S.$1.00. The statement of operations for
the  quarter  ended  March  31, 1997 has been translated at the average exchange
rate during the quarter of R$1.07 to U.S.$1.00.

     Income  taxes  have  been recorded based on the historical rates in effect,
adjusted as necessary, to reflect any incremental U.S. federal income taxes.

(2) Financing  -  For  purposes of the unaudited pro forma financial information
presented   herein,   the  acquisitions  are  assumed  to  be  funded,  and  the
adjustments are calculated, as follows:

     (a) The  acquisition  of  the  Destec international assets is assumed to be
funded  through  the  use of the proceeds from the $250 million TECONS offering,
the  net  proceeds  of  the $150 million offering of AES Common Stock, and funds
available under the Company's Revolver.

     (b) The  ESEBA  financing  is  assumed  to be funded through the use of the
ESEBA  Bridge  of  $200  million,  project  financing debt of $148 million at an
interest  rate  of  7.4%  related  to the ESEBA Acquisition, and the drawdown of
funds available under the Company's Revolver.

     (c) The  acquisition  of  the  Company's  interest in CEMIG has been funded
assuming  the  use  of  the  CEMIG Bridge of $250 million at an interest rate of
8.25%,  the  AES  Bridge  Loan of $200 million at an interest rate of 7.75%, and
project  financing  of  $126  million  at an interest rate of 9.75%, provided by
BNDES,  the  State  Development  Bank  of  Brazil.  The remaining portion of the
purchase   price  amounting  to  approximately  $527  million  is  deferred,  by
contract,  for  a  period of one year. Such obligation bears no interest and has
been  guaranteed by BNDES for a fee of 1% per year which is included in interest
expense.  No  additional  subsequent  financing  costs  are assumed in these pro
formas.

(3)  Earnings  per  share  for the Destec pro forma adjustment columns and those
columns  that  include  Destec adjustments are calculated including 2.55 million
shares  of  AES  Common  Stock issued to finance that acquisition as though they
were  issued  January  1,  1996, but are not adjusted to reflect the issuance of
approximately  2.50  million  shares  of AES Common Stock in connection with the
Chigen Amalgamation in May 1997.

(4)  Includes $384 million and $370 million of revenues and costs, respectively,
in  the  fiscal year ended 1996 and $9 million and $8 million, respectively, for
the   quarter  ended  March  31,  1997,  related  to  services  performed  under
construction  contracts  for  the Elsta, Kingston, and Hazelwood projects. These
projects  will  be  substantially  complete in the near future and, as a result,
such  revenue  and  costs  will  not  continue  after  contract  completion. The
Company's  share  of profits (based on its ownership interest in each respective
project)  resulting  from  services  performed under these contracts is deferred
and amortized over the life of the respective project.

(c) Exhibits:

10.1 Amendment  No.1  dated  May 22,  1997 to the  Credit  Agreement  among  the
     Company,  the banks party thereto,  the fronting  banks party thereto,  and
     Morgan Guaranty Trust Company of New York, as Agent.

23.1 Consent of Deloitte & Touche LLP.
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 hereunto duly authorized.

                                            THE AES CORPORATION
                                            -------------------
                                                (Registrant)

Date: July 3, 1997                          By /s/ Barry J. Sharp
                                              ---------------------------
                                               Barry J. Sharp
                                               Chief Financial Officer