AES Subsidiary Fails to Obtain Additional Deferral in Respect of Common Stock Payment for Eletropaulo.

Business & Energy Editors

ARLINGTON, Va.--(BUSINESS WIRE)--Jan. 31, 2003

The AES Corporation (NYSE:AES) announced today that its subsidiary AES ELPA S.A. (AES ELPA) had failed to make a payment of approximately $85 million due to the Brazil National Bank for Economic and Social Development (BNDES) under a financing agreement for the acquisition by AES ELPA of common shares of Eletropaulo Metropolitana Eletricidade de Sao Paulo S.A. (Eletropaulo), the electric distribution company serving the City of Sao Paulo, Brazil.

The approximately $542 million of outstanding debt under this financing agreement is secured by the common shares of Eletropaulo owned by the subsidiary and by certain other AES businesses in Brazil. Under this financing agreement, BNDES has the right to call due such outstanding debt as a result of the failure to pay the amount due.

AES stated that it is in discussions with BNDES to seek to restructure this debt. As a result of a cross default provision, BNDES also now has the right to call due approximately $231 million loaned to Eletropaulo under the program in Brazil established to alleviate the effects of rationing on electricity companies.

Due to existing financial covenant and other defaults under Eletropaulo loan agreements, Eletropaulo's lenders have had the right to call due approximately $608 million of indebtedness. The right of BNDES to accelerate amounts under the rationing loan permits other Eletropaulo lenders to accelerate additional loans aggregating approximately $228 million.

Earlier this week, BNDES and other former holders of Eletropaulo preferred shares accepted the offer of another AES subsidiary, AES TRANSGAS EMPREENDIMENTOS LTDA. (AES TRANSGAS), to defer until February 28, 2003 approximately $336 million due by the subsidiary in connection with the purchase of Eletropaulo preferred shares.

The failure of AES ELPA to pay the amount due to BNDES will not constitute an event of default under AES's parent company indebtedness. In addition, neither AES ELPA nor AES TRANSGAS is a material subsidiary for purposes of bankruptcy related events of default contained in AES's parent company indebtedness. However, Eletropaulo is a material subsidiary for such purposes.

Given that a bankruptcy proceeding would generally be an unattractive remedy for Eletropaulo's lenders as it would result in a termination of Eletropaulo's concession and that Eletropaulo is in negotiations with its lenders to restructure its defaulted indebtedness, AES believes such an outcome is unlikely. However, there can be no assurance that such an outcome will not occur, that such negotiations will be successful or that AES will not have to write off additional amounts related to its investment in Eletropaulo.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This news release may contain "forward-looking statements" regarding The AES Corporation's business. These statements are not historical facts, but statements that involve risks and uncertainties. Actual results could differ materially from those projected in these forward-looking statements. For a discussion of such risks and uncertainties, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.

AES is a leading global power company comprised of contract generation, competitive supply, large utilities and growth distribution businesses.

The company's generating assets include interests in 176 facilities totaling over 60 gigawatts of capacity, in 33 countries. AES's electricity distribution network sells 108,000 gigawatt hours per year to over 16 million end-use customers.

For more general information visit our web site at www.aes.com or contact investor relations at [e-mail].